Trend and Impact of Military Expenditure on Economic Growth in South Asia

Trend and Impact of Military Expenditure on Economic Growth in South Asia

Sudhakar Patra (Berhampur University, India)
DOI: 10.4018/978-1-5225-4778-5.ch014
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The objective of the chapter is to analyze trend, pattern, and impact of military expenditure in South Asian countries, namely Bangladesh, India, Nepal, Pakistan, and Sri Lanka. The study is based on secondary data from World Bank database, South Asian report, and RBI macroeconomic indicators. The trend of military expenditure has been analyzed using line graphs for all five South Asian countries. Military spending is higher as percentage of GDP in Pakistan among all South Asian countries. Military expenditure has positive impact on economic growth in South Asian countries. The study suggested effective military expenditure strategies and expenditure which is important for improving economic productivity and growth of countries. There is positive correlation between total military personnel and per capita GDP in all South Asian countries except Pakistan.
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A military budget (or military expenditure) also known as the amount of financial resources dedicated by a nation to raising and maintaining an armed or other methods essential purpose. Military budgets often reflect how strongly an entity perceives the likelihood of threats against it, or the amount of aggression it wishes to employ. It also gives an idea of how much financing should be provided for the upcoming year. The size of a budget also reflects the entity’s ability to fund military activities. National defence and security is of prime importance for any government or nation. National defence means protection of a country against foreign invasion or aggression. National security is a concept that expects the central government of a unitary state to protect the whole country and its people against any national crisis or emergency by adopting political, economic, diplomatic, military other means. Terrorism and the activities of terrorist organizations are perhaps the most serious threat to peace and security. The use of terrorism as an instrument of policy by a few states has exacerbated intra and inter-State conflicts. Terrorist groups have invested new technologies, particularly in cyberspace, for trans-national mobilization and ideological radicalization, especially of the youth. No nation is safe from foreign aggression and intervention. There had been two world wars. Wars have been taking place in different regions of the world like, world war in Vietnam, Arab - Israel war, Iran Iraq war and the recent Iraq - Kuwait conflict and India’s one with china and four with Pakistan including recent Cargill conflicts. During the period of over 70 years of our countries independence, there has been invasions and aggression. In order to maintain peace in the region and with a population of peace loving nationals, we have been forced to a great deal with the national defence.

The relationship between military expenditure and economic growth has been widely debated among economists. However, there is no specific prediction of the direction of causation between the military expenditure and economic growth. In general, studies have found that military expenditure can influence an economy both positively or negatively. Results are mixed and often contradicting. Military expenditure can affect economic growth through a number of channels. For example, military expenditure can affect an economy either positively as per the finding of Hassan, Waheeduzzaman, and Rahman (2003), through an expansion of aggregate demand or through increase security, and negatively (Deger, 1986) through a crowding out of investment. On top of that, there are findings showing no meaningful relationship as found by Galvin (2003) and Yildirim et al. (2005). In some cases, the results are mixed as found by Kollias et al. (2004) and Dakurah et al. (2000).

Key Terms in this Chapter

Military Expenditure: Military expenditure is the amount of financial resources dedicated by a nation to raising and maintaining an armed forces or other methods essential for defense purposes.

Impact: Impact is the action of one object coming forcibly into contact with another, a marked effect or influence.

Economic Growth: Economic growth is an increase in the capacity of an economy to produce goods and services, compared from one period of time to another.

Armed Forces: The armed forces or the armed services of a country are its military forces authorized to use lethal or deadly force and weapons to support the interests of the state and some or all of its citizens.

Personnel: Personnel refers to the people who are employed in a company, organization, or one of the armed forces.

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