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

Introduction

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).