Adam Smith, the renowned proponent of economic thought has said, “The first duty of a sovereign, that of protecting the society from violence and invasion of other independent societies, can be performed only by means of military forces.” Implicit in this plain statement is the principle that a nation must maintain a certain level of military strength to meet with its obligations. Also, the protective role is best performed through a capability to not only overwhelm the enemy in the event of a conflict, but more importantly, to be able to project an effective deterrent posture.
Military strength is an important ingredient of national power and an expression or manifestation of its strength. Acquisition of military power is, therefore, synonymous with statehood and sovereignty.
Thus the acquisition of capability to deter and vanquish the enemy is the sacred responsibility of a sovereign state. Military strength is an important ingredient of national power and an expression or manifestation of its strength. Acquisition of military power is, therefore, synonymous with statehood and sovereignty.
While it is the bounden duty of the state to provide the required level of national security, the shape and size of the Armed Forces is influenced by mutually conflicting considerations related to the need for credible defence and affordability. Factors that finally decide the level of military capability of a nation are:
- Strategic view of the role and commitments.
- Threat perception.
- Geopolitical disposition.
- Socio-political considerations.
- Economic status.
While the first four factors define requirements of force levels, the economic status of a nation is usually the most critical limiting factor and could sometimes well be the overriding consideration. History is replete with examples wherein unbridled expenditure on the military and overstretched campaigns has had far reaching economic and political consequences for nations. Collapse of the Soviet Union in the recent past, or earlier on, the shrinking of the British Empire after the Second World War, adverse impact of the napoleonic wars on france or for that matter, decline of the Mughal Empire are all vivid examples of gross imbalance in the appropriation of resources.
Evidence of history notwithstanding, it would be pertinent to examine whether expenditure on the Armed Forces always produces deleterious effects on the economy and consequent adverse influence on the process of national growth. One indisputable fact is that sustainable military capability must be a judicious balance between the needs of security and the resources that can be made available by the nation. Conventional wisdom holds that expenditure on the Armed Forces is an essential and inescapable drain on the nation’s economy and that it has no contribution to positive national growth. It is also commonly postulated that defence expenditure in fact retards economic growth.
How far is this view justified in respect of military aviation, which consumes sizeable portions of the resources allocated to defence? The three major constituents of military aviation in India are the IAF along with the aviation wings of the Army and the Navy, the Indian Aerospace Industry and the Research and Development establishments engaged in aerospace research, including the design and development of aviation related hardware and software. Although organisationally, the three agencies are independent of each other, functionally they are focussed on a common objective and are inexorably linked. The spearhead of the Armed Forces, which provides the most potent deterrence capability, is the Indian Air Force, which also constitutes the bulk of military aviation in the country. Without undermining the contribution of the aviation wings of the sister services, in further discussion, the expression IAF can be assumed to include the Army Aviation and the Naval Air Arm.
The influence of these two sectors on the economy is so dominant that the beneficial effect of expenditure on military aviation may not be able to alter the overall picture on account of the relatively low share of GDP.
While the budgetary allocation to the Armed Forces in the last decade and a half has varied between 2.27 per cent to 3.37 per cent of GDP, of the total allocation to defence, only around 0.6 per cent to 0.8 per cent of GDP has been the share of the IAF. Does the expenditure on the IAF constitute a diversion of resources to non-developmental, unproductive activities resulting in actual withdrawal of resources from economic circulation? In a developing country like India, where investments are low and the rate of unemployment is high, any expenditure stimulates economic growth and so should be the case with expenditure on military aviation. It is also true that expenditure on military aviation could generate inflationary pressures.
However, once again, in a developing economy, inflationary pressure up to a point is beneficial as it provides a growth stimulant and so long as the focus is more on productive investment and less on consumption, one can be reasonably hopeful of a positive impact on the economy. Also, economic growth of a nation is sensitive to performance in a host of other sectors, primarily agriculture and industry. The influence of these two sectors on the economy is so dominant that the beneficial effect of expenditure on military aviation may not be able to alter the overall picture on account of the relatively low share of GDP.
Finally, many of the intangible accruals on account of expenditure on military aviation, are not directly quantifiable and hence the impact on the nation’s well-being is not easily discernible. However, as the intensity of debate between guns and butter rises in direct proportion to defence expenditure, it is necessary to take stock and make an attempt to assess the true impact of allocation of resources to military aviation on national growth.
Concept of National Growth
National growth is generally understood to mean economic growth. However, the overall development of a nation is influenced by a host of non-economic factors as well. While the determinants of economic growth are quantifiable and can be subjected to detailed statistical compilation and an objective analysis, the non-economic factors are relatively intangible and hence their contribution to national growth is somewhat difficult to correlate or fathom. On the subject of expenditure on military aviation vs. economic growth, opinions are generally subverted on account of ignorance or are based merely on prejudiced intuition.
With the outbreak of the Korean War, Japan received large orders for the supply of goods, a large portion of which were weapons. This came as a shot in the arm for the Japanese industry and very soon the economy, rising from the rubble, began to grow.
In the absence of data, relationship between expenditure on military aviation and economic growth could be extrapolated from the results of research on defence expenditure vs. economic growth. On this subject, Emile Benoit refutes the belief that defence expenditure has any adverse effect on economic growth in developing countries. This conclusion was based on an analysis of data from 44 developing countries, which unfortunately did not include India. However, an MIT study of defence expenditure vs. economic growth, involving 46 countries including India, found a small but positive impact on the economy.
Economic Growth vs Expenditure on Military Aviation
To some, the principles of economics may sometimes appear paradoxical. For example, in order to have individual prosperity, one must save; but to have national prosperity, we must spend! The essence of economic growth is the production of goods and services by the inhabitants of a nation that are required for domestic consumption or to meet with external demand. Higher level of domestic consumption generates higher level of demand that in turn leads to higher level of production necessitating higher level of investment. The consequent rise in income levels results in the rise of living standards. Production to meet with external demand i.e. for export, enhances overall prosperity levels faster than production for internal consumption. After the Second World War, Japan lay in ruins, her industry crippled and her economy totally shattered.
With the outbreak of the Korean War, Japan received large orders for the supply of goods, a large portion of which were weapons. This came as a shot in the arm for the Japanese industry and very soon the economy, rising from the rubble, began to grow. A more recent example is the changing situation in the USA, where the aeronautics industry has traditionally provided the country not only with global leadership in military power but also a favourable balance of trade for the economy.
In the regime of production-oriented activity contributing to economic growth, a direct and obvious spin off from military aviation is the growth of the Indian Aerospace Industry, which has traditionally met with internal demand.
However, with the reduction in both internal and external demand following the end of the Cold War, there has been a significant cut in defence expenditure resulting in a drop in production by the aeronautics industry with a consequent adverse impact on the economy. Thus, for economic growth and prosperity, it matters little as to what is produced, be it services, food, consumer goods, cosmetics, vehicles, or weapons of war, as long as it serves to satisfy demand, internal or external, preferably the latter. And for sustained economic growth, there is need for a continuous rise in levels of demand and supply, leading to growth of employment opportunity, infrastructure, human capital and money supply. Continuous increase of GDP and national income are the usually accepted indicators of economic growth.
To summarise, the basic determinants of economic growth are:
- Increase of production to enhance per capita income.
- Increase in employment opportunities.
- Increase in human capital.
- Increase in capital formation.
From the preceding it would be evident that in economic terms, expenditure on military aviation generates the same positive forces as any other industry, provided the balance of trade is favourable. Expenditure in the military aviation sector creates well-paid jobs and enhances the demand for a wide variety of goods and services apart from promoting technological progress. A large proportion of the funds spent on military aviation find their way directly or indirectly into the mainstream of the economy.
What is the quantum of resources consumed by the IAF annually for its sustenance and operations? It has been stated earlier on that the budgetary allocation for the IAF has been around 0.8 per cent of GDP. How does it compare with the expenditure in some of the non-productive sectors of the economy? Comparison of budgetary figures for the financial years 1998-99 and 1999-2000 between the IAF budget and the budgetary provisions on subsidies, written off loans to states, and postal deficit are quite revealing. During the financial year 1998-99, as against the IAF budget of Rs 9,046 crore, Rs 24,684 crore was spent on subsidies, Rs 1,225 crore was allocated to cover postal deficit and Rs 979 crore was lost as loans written off, totalling to Rs 26,888 crore. In the following year, as against Rs 10,398 crore allocated to the IAF, the three non-productive liabilities of the Government totalled to Rs 25,672 crore.
Indian Aerospace Industry
In the regime of production-oriented activity contributing to economic growth, a direct and obvious spin off from military aviation is the growth of the Indian Aerospace Industry, which has traditionally met with internal demand. From a modest beginning as a private company set up in 1940 to service Allied military aircraft, Hindustan Aeronautics Limited has evolved into a major industrial organisation with 16 Specialised Divisions and nine R&D Centres. Today HAL is rated as one of the top PSUs within the country and is rapidly climbing the rating ladder amongst the aerospace industries of the world. Contribution of HAL to economic growth may be listed as being in the following areas:
In the concept and design stage are the Twin Engine Combat Aircraft Trainer (TECAT), Advanced Jet Trainer, Medium Tactical Transport aircraft for both military and civilian use and the Light Attack Helicopter.
- Development of human capital.
- Development of downstream industries.
The range and sweep of activities of HAL in hand and to be undertaken in the future would involve a turnover amounting to staggering figures running into several thousands of crores of rupees, value addition of considerable magnitude and growth of knowledge and productive employment to thousands of personnel at different levels of skill. From a figure of Rs 581 crore in 1985-86, the value of production by HAL steadily rose to Rs 2,565 crore in 2000-2001 and to Rs 4,425 crore in the financial year 2004-05. From its inception, HAL has produced 3,500 aircraft of 11 indigenous designs. It has overhauled 8,000 aircraft and 27,000 aero-engines.
From a modest Rs 85 crore in the financial year 1985-86, the export component has grown to Rs 215 crore in the financial year 2003-04. Over the years there has been a steady increase in the turnover, growth of infrastructure, and levels of productivity through absorption of higher levels of technology. Today, the major projects in hand include development and production of LCA, HJT 36 Intermediate Jet Trainer, Advanced Light Helicopter, Saras twin engine light transport aircraft, composite based components for ISRO projects, engine components for Snecma, components for Airbus aircraft, Marine Gas Turbine Engines and software packages for Boeing. In the concept and design stage are the Twin Engine Combat Aircraft Trainer (TECAT), Advanced Jet Trainer, Medium Tactical Transport aircraft for both military and civilian use and the Light Attack Helicopter.
In the area of licensed manufacture, there are a number of projects, big and small. These include the production of SU 30 MKI, Hawk AJT, Jaguar and Dornier 228 transport aircraft. Other programmes include mid-life upgrade and overhaul of a number of fixed and rotary wing aircraft and sizeable offset business from the Boeing and Airbus deals with the two state-owned national carriers, Air India and Indian Airlines.
The IAF operates at the cutting edge of technology and it devolves upon the apex agency, DRDO, to develop and support such technology.
HAL has been in the forefront of advanced technology, providing valuable spin-offs from which other sectors of industry benefit, as several production activities and requirement of services are outsourced to the private sector. The spiralling cost of aircraft of foreign manufacture involves a large outflow of funds, which is injurious to the health of the Indian economy. HAL is firmly set on the road to expand their range of production and integrate fully with the cycle of design, production, obsolescence and replacement to provide the needed support to military aviation in the country. From a stage of total import, HAL has passed through licensed production and is now moving towards joint production and marketing to minimise the outflow of foreign exchange.
Production activities at HAL have spawned a large number of ancillary units, which provide opportunity and production activity at lower levels of technology to support major projects at HAL. Similarly, military aviation has spurred the growth of the oil industry with the establishment of over 115 dedicated refuelling stations, manufacture of ground handling equipment and consumables such as oxygen, nitrogen and lubricants.
Development of Human Capital
HAL has around 30,000 employees comprising a large number of highly trained professional aerospace engineers, technicians and administrators who joined the organisation in their youth and have grown with the organisation. The index of productivity is evident in the fact that sales per employee have risen from Rs 1.4 lakh per employee in 1985-86 to Rs 6.9 lakh per employee in the year 1999-2000. Value addition per employee rose from Rs 77,000 in 1985-86 to Rs 4.8 lakh in the year 1999-2000.
Research And Development Establishments
An important objective of all economic planning is self-reliance, which can be achieved only through a sound R&D base. Devoid of adequate military industrial infrastructure, a developing country that seeks a respectable level of national security has no option but to resort to huge imports of hardware and consumables as also is required to pay for transfer of technology, royalty, maintenance, certification etc. Such liabilities are a huge drain on the resources of a nation that have debilitating effect on economic growth negating the measurable positive impact of indigenous effort. A strong and effective R&D base within the country paves the way to the growth of the military industrial complex leading to enhanced self reliance, reduction in imports, conservation of foreign exchange, growth of indigenous technological aptitude, all of which has positive impact on economic growth.
Reduction in the outflow of capital means that more funds are available for investment and circulation within the country. Military aviation has inspired the growth of R&D within the country, covering applied research as well as design and development in a variety of disciplines such as aeronautics, armament, rockets, satellites, missiles, computer science, electronics, instrumentation, communications, radar, electronic warfare, materials, metallurgy and so on. Spin-offs from R&D are available to the civil sector, which is a direct contribution to national development. The DRDO, which is the primary agency for R&D for the Armed Forces, functions in close association with 15 science and technology agencies, 40 academic institutions, 50 PSUs and over 200 private sector enterprises. The DRDO budget has progressively increased over the years and stood at around 4,000 crore in the financial year 2004-05. Given the increasing demand on the DRDO, a sizeable enhancement in the budget this year should only be expected. While the burden of expenditure on R&D in the fields of frontier technologies including nuclear and space is a part of the expenditure on national security, the fruits of R&D go to benefit the whole economy.
14 of the 59 IAF airfields are dual use and handle scheduled civil air traffic on a regular basis.
The IAF operates at the cutting edge of technology and it devolves upon the apex agency, DRDO, to develop and support such technology. Projects of DRDO involve a number of private and public sector agencies to support them, thereby promoting economic activity. As an example, for the LCA project, there are 11 academic institutions and 60 major industries involved. With nearly 5,500 crore committed to the project, the level of economic activity can well be visualised.
Taken together, the Indian Aerospace Industry, R&D Establishments engaged in aeronautical research and the IAF, constitute a huge aviation industrial network albeit with adverse economy of scale. The thrust towards self-reliance and indigenisation has drawn increasing participation from the private sector, providing them the exposure to high technology and the stringent standards associated with the field of military aviation.
Non Economic Factors Of National Growth
National growth and development is not governed by economic factors alone. As per a leading economist, Professor Cairncross, “The key to development lies in the minds of men, in the institutions in which their thinking finds expression and in the play of opportunities on ideas and institutions.” An underdeveloped or developing economy is not only required to enhance levels of investments to achieve higher levels of growth; but is also required to gradually transform the social, religious and political institutions, which are inclined to act as impediments to economic progress. This phenomenon was clearly manifest in Afghanistan where deep religious mindsets have successfully thwarted attempts at progress for over a century in spite of their sharp business acumen.
Expenditure on military aviation is generally regarded as a means to preserve liberty and freedom from external aggression.
As a nation, Afghanistan has been a complete political, social and economic disaster.
Expenditure on military aviation is generally regarded as a means to preserve liberty and freedom from external aggression. These are prerequisites for a stable and peaceful environment in the absence of which no type of growth, economic or otherwise, can be sustained. Security comes at a price, which must be paid by a nation through the investment of resources and sacrifice. zulfikar Ali Bhutto’s resolve to go nuclear even if “Pakistanis have to eat grass” is an example of an extreme position in this regard. However, the fact that resources must be committed to guarantee the minimum levels of security is a subject beyond debate.
The process of economic development can also be seen as expanding capabilities of people, upgrading levels of knowledge, growth of value systems, and improvement in the quality of life. The IAF, like military forces in general, helps break down barriers in social relationships and can be regarded as an instrument of change in promoting national integration and sociological advancement. Although difficult to quantify, these are socio-cultural benefits that promote socio-economic well being of the state even if they cannot be considered as a part of GDP.
Contribution of Air Force Infrastructure
From a flight of four aircraft and 25 men, established in 1932, the IAF has grown into a sizeable force with over 1,000 aircraft and 130,000 personnel. It provides the core aviation activity and related expertise in a variety of disciplines. It operates at the cutting edge of technology with a variety of aircraft, radar and missile systems and promotes air-mindedness, modernity in thought, spirit of adventure, dedication and sacrifice. Air Force bases are spread all over the country and today there are 59 full-fledged operational airfields complete with air traffic control and support services. Some of these bases are located in remote and inhospitable areas – in Ladakh and the North East.
The IAF sustains a large pool of highly disciplined and trained manpower. Approximately five per cent of the work force i.e. 6,000 retire from service annually and are available to enrich the work force in the civil sector.
14 of the 59 IAF airfields are dual use and handle scheduled civil air traffic on a regular basis. Other IAF airfields can also be made available for civil air traffic with prior clearance. Some of the airfields in remote areas were developed when proper road access did not exist. Initially, IAF aircraft operated from improvised landing grounds, which subsequently evolved into standard facilities to support regular operations. Around each of these airfields developed air bases of varying size, which entailed extensive construction activity and investment of large funds. The larger bases support populations of around 20,000 and generate considerable economic activity and create business and employment opportunities in and around the base and also provide basic education facilities that are open to the civil population around the bases. Expenditure on the development of Air Force infrastructure leads to all round qualitative change in the socio-economic environment in the area. So far it has proved to be a boon, especially for the far flung and remote parts of the country.
The IAF sustains a large pool of highly disciplined and trained manpower. Approximately five per cent of the work force i.e. 6,000 retire from service annually and are available to enrich the work force in the civil sector. By virtue of their training and discipline, they have the potential to make a significant contribution to the economy through augmentation of human capital in a wide variety of disciplines. Military aviation has always provided the required human resources for the growth in the civil aviation sector. This has quite suddenly acquired greater significance in the recent past in the context of the rising demand in the civil aviation sector, consequent to liberalisation, which has spurred the expansion of existing airlines and mushrooming of a large number of new ones based on the low cost model.
Apart from the commitment to provide security against external aggression, the IAF has a significant contribution to make towards internal security. The IAF is employed in the frequent and routine redeployment of para-military forces, and also provides swift response to rush security personnel to disturbed areas to prevent or neutralise law and order problems. Speedy reaction with counter hijack forces is also a responsibility of military aviation.
Aid to Civil Authority
Disaster relief is a major area of responsibility of the Armed Forces in general and the Air Force in particular. Disasters or natural calamities such as floods, earthquakes, avalanches or fires, require swift response, which is most effectively provided through military aviation. It need hardly be stated that natural calamities occur in India with uncanny regularity. Speedy transportation of rescue and recovery teams, medical aid, food supplies, relief material and evacuation of casualties are some of the activities for which military aviation is considered eminently suitable.
Military aviation is totally integrated not only with the security paradigms but also with the social structure, industrial activity and the economy. It provides the nation the strategic underpinnings for sustained national growth.
However, it would neither be possible nor necessary to quantify the contribution of military aviation towards this national effort as such contribution cannot be provided so effectively and speedily by any other agency, nor can it be translated into monetary equivalence to be added to GDP. Response to the earthquake in Gujarat on 26 January 2001 and the Tsunami of 25 December 2004, are vivid examples of contribution by military aviation.
The IAF has participated with success in the UN Peace keeping Operations in Congo, Somalia, Sierra Leone and now in Sudan. It has provided and continues to provide specialist services to several foreign air forces including professional training for their personnel in India and abroad. Such interchange has generated immense goodwill, has served to enrich the professional regime and has enhanced the status of the nation in the world.
Military aviation is totally integrated not only with the security paradigms but also with the social structure, industrial activity and the economy. It provides the nation the strategic underpinnings for sustained national growth.
Expenditure on military aviation is an integral part of defence expenditure. In the Indian context, the level of defence expenditure is low and is usually under 3 per cent of GDP. The general belief is that expenditure on defence, which includes expenditure on military aviation, although necessary, diverts national resources towards non-developmental activity and hence does not contribute to national growth.
National growth has clearly two connotations, economic and non-economic. Apart from providing security to the nation, expenditure on military aviation has commercial and economic spin-offs. It has an array of beneficial effects on national well being as it promotes industrial production activity, R&D, infrastructure development, human resource development, employment opportunities and a range of socio-economic benefits.
Overall, the economy is sensitive to expenditure on military aviation as it stimulates growth, builds human capital and promotes synergy in civil-military relationship. While expenditure on military aviation may be regarded as a necessary burden on the resources of a nation, there is no doubt that a number of tangible benefits do accrue and the overall beneficial effects outweigh the perceived retardants to national growth.