Friday, July 17, 2009

Benefits of Defence Spending

Hi friends

It’s been quite sometime since I have done any sensible blogging. One of my friends asked me the other day, telling me that “your job has made you lose interest in the thing you loved to do so much”. Hence I have decided to come back and try to post one article every week. I have decided to write about the things that I read - something that may come in handy to those who are preparing for debates or arguments. I will also provide links to the articles as and when I get any.

This short post of mine is in reference to an article written in the column “Cross Hairs” written by Mr. Raghuraman. This article appeared in the July 16th edition of the newspaper “Mint”. This article is helpful for CAT aspirants and the like, because it presents a very interesting and logical argument as to why we should spend more on defence (contrary to common sense) and on how it is advantageous to us.

One main point that the author puts forth is that wars are inevitable in the modern human community. Resources are scarce and everyone wants to control them. The demand for these resources will increase with the scarcity levels and so will the need to control them – thereby leading to more wars. Hence defence spending is a must to gather new resources or defend the existing resources.

The author puts forth 4 major points as to how wars have helped shape civilization for the better:

1. A war helps mobilize inventions. Although wars and the fear of it may not actually lead to an invention, it helps make the invention available to us in a mass scale. Communications, sonar and radar are just few of the examples that show how spending on defence leads to better innovations that can redefine the current technology. Just look at the prevalence of the Internet, nuclear power and transcontinental communications in our daily lives.

2. The Defence Sector creates opportunities for thousands of young minds, who are trained to become a disciplined set of leaders. On their discharge from service, they contribute back to the society by their leadership in driving the society through different entrepreneurial ventures. Capt. Gopinath is one such example, whose low-cost airlines revolutionized the Indian Aviation Sector. Such men bring with them a national outlook and vision for the betterment of the society.

3. Weapons industry may incur a lot of expenditure, but it also contributes a lot back to the GDP of the country. The Indian Defence Sector recovers as much as 50% of the weapons’ cost by placing contracts that an “offset policy” which makes it compulsory that the arms-seller has to buy or provision up to 50% of the cost of the weapons from Indian manufacturers. This policy usually comes in place in a G-to-G trade as it helps to develop trade between the two countries. This gives incentives for the foreign companies to collaborate with Indian partners to make indigenous equipment to fulfill this offset obligation, thereby facilitating technology transfer into Indian industries – thereby having the following 3 advantages:

a) Sellers will need to transfer technology to make indigenous equipment.
b) In the longer duration, it will lead the seller and his Indian partner down the road into “offshoring” – where the weapons could be built at a lower cost enabling it to become globally competitive and establish India as a global defence production and service hub.
c) Defence spending is largely recession-proof and will help the manufacturing sector stay in business even in bad times.

4. Our defence budget also consists of regular revenue expenditure in the form of salaries, allowances and sustenance costs of maintaining an army. Food has to be bought, roads have to be built, vehicles need to ply and the agricultural produce of several thousand villages goes to maintaining garrisons stationed all over the country. An entire ecosystem thrives on maintaining and mobilizing the defence forces. Cantonment towns are examples of cities which have been fuelled by defence establishments that literally created them. (Taken directly from the article).
We can see that the defence sector has a big role to play in strengthening our country’s economy by virtue of its trade potential and manpower.

Link to the article:

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