Abstract
The debate regarding the relationship between military expenditure and economic growth especially in the context of developing countries is an old one. There is apparent conflict within government budgets between education expenditure and military expenditure. The military budget of the India is that part of budget allocated for the funding of the Indian armed forces. This military budget finances salaries of employees and training costs, maintenance of equipment and facilities, support of new or ongoing operations, development and procurement of new weapons, equipment, vehicles, etc. The chapter explores the relationship among GDP, military expenditure, and education expenditure in India. The time series analysis reveals that there is long-run causality running from education expenditure and military expenditure to GDP. The study also reveals that there is short run causality running from military expenditure to GDP.
TopIntroduction
The debate regarding the importance of defence and defence expenditure is old especially in the developing countries. There are number of studies regarding the relationship between defence expenditure and economic growth in the literature. The majority of these studies have focused on the relationship between defence spending and economic growth in developing countries. The military budget of the India is that part of budget which allocated for the funding of the Indian Armed Forces. This military budget finances employee salaries and training costs, the maintenance of equipment and facilities, support of new or ongoing operations, and development and procurement of new weapons, equipment, and vehicles.
Economic development theorists generally agree that the quality of human resources has a significant impact on economic development and growth. This body of thinking is of the opinion that the quality and quantity of labour determine production by virtue of it being a factor of production. Moreover, improving the quality of the labour force yields implicit, non-economic outputs related to the generation of ideas and decisions which have a significantly positive impact on investment, innovation and other growth opportunities (Roux, 1994). This is indicative of the apparent conflict within government budgets between education expenditure, on the one hand, and defence spending on the other. However, the crowding-out effect of defence spending on public education expenditure is not that simplistic (Roux, 1994). This present study explores the inter-relationship among GDP, military expenditure, education expenditure in India.
Figure 1 presents military expenditure as percentage of GDP for some Asian countries in year 2014. It shows that Saudi Arabia spends 10.7 per cent of its GDP on defence head followed by Israel and UAE. Indonesia spends less than one per cent of its GDP in this head.
Figure 1. Percentage of military expenditure to GDP of Some Asian Countries in 2014
Key Terms in this Chapter
Education Expenditure: It is the amount of total government’s budget of a country allotted in different educational activities. In India, the share of total income in education varies in the range of 3-8 percent.
GDP: Represents the monetary value of all goods and services produced within geographic borders of a nation over a specified period of time.
Military Expenditure: Military expenditure is employee salaries and training costs, the maintenance of equipment and facilities, support of new or ongoing operations, and development and procurement of new weapons, equipment, and vehicles.
Stationary Time Series: A series is said to be (weakly or covariance) stationary if the mean and auto covariances of the series do not depend on time.
VECM: A vector error correction (VEC) model is a restricted VAR designed for use with nonstationary series that are known to be cointegrated.