Insuring your policy

Defence expenditure is the premium paid to insure against the failure of foreign policy

A good defence strategy is one that manages the risks of foreign policy going wrong for one reason or the other. It might turn out that foreign policy was based on the wrong presumptions, or unexpected events might upset the geopolitical balance and so on. In these circumstances, a state should have the military capacity to ensure that its interests are protected. In other words, work for the best, but prepare for scenarios where the best doesn’t happen.

It follows that there is a good reason to keep the foreign & defence policy establishments at a sufficient distance in order to prevent confusion on their respective objectives. They must co-operate and co-ordinate at some levels, but it must be recognised that defence expenditure is essentially premium paid to insure against the failure of foreign policy.

There are two mistakes states can make: subordinating defence strategy to foreign policy and vice versa.

Nehru’s policy of non-alignment (as distinct from participation in the Non Aligned Movement) in the years following independence was infused with realism. But he failed to (and indeed refused to) invest in building the necessary military capacity to hedge against the chance that non-alignment might fail. In the event, he had to seek urgent military assistance from the United States in 1962 after the Chinese invasion.

Pakistan is an example of the other mistake. Its foreign policy is completely subordinate to its military strategy. It is eminently sensible for Pakistan to develop military capacity to defend itself against India. But it is high folly to then pursue a foreign policy of relentless hostility and antagonism towards its eastern neighbour.

The takeaway from this little post is that an essential question that foreign policy analysts must ask is—are the goods sufficiently insured?

Where are our defence economists?

Defence budgeting would do well with more economic reasoning

One of the topics discussed at the Takshashila Executive Programme on Strategic Affairs in New Delhi earlier this month was the issue of defence budgeting. Mukul Asher and Sushant K Singh have an op-ed in DNA today that covers one aspect of it—the need to have competent defence economists in New Delhi’s policy & budget planning establishment.

Here’s an extended excerpt:

The current focus in defence sector budget formulation, in parliamentary approval process, and in post-budget assessment is almost solely on accounting procedures and practices. Even these are outdated as neither outcome nor accrual budgeting, which permits both income-expenditure flows and balance sheet assets and liabilities to be formulated, are utilised. The capital component of the defence budget involves multi-year expenditures and planning, which annual budget cycles are unable to accommodate effectively.

The current defence budget formulation largely involves incremental budgeting (e.g. 10% increase in nominal terms over the previous period), with usually no separation between inflation-induced and real increase in expenditure. No groups at the planning or strategic levels, whether at the Planning Commission or at the Prime Minister’s Economic Advisory Committee appears to be analysing the defence budget from forward strategic planning perspective incorporating current and prospective threat perceptions. The budget proposals are also not subjected to analysis from the perspective of defence economics as a distinct sub-discipline and profession.

This is a serious gap, which needs to be urgently addressed in an era when geo-politics and geo-economics are increasingly inter-related. While this is recognised by other major powers, particularly China, India has been relatively slow in integrating the two to enhance its economic and security space and leverage.

An important step towards integration of the two would be to give greater prominence to the role of defence economists at every level of the defence sector, and encourage their coordination with economists in other sectors.

There are three critical aspects of defence economics: projecting national resources available now and in the future; working out the proportion of these resources which should be allocated for internal and external security and division of resources within each of the two areas; and tracking the efficiency with which the resources so allocated are used.

The above requires developing a competent group of analysts specialising in defence economics. Currently, no university in India, to our knowledge, offers such specialisation at any level. The need is particularly acute at the post-graduate levels. The absence of such expertise in defence related think tanks is also striking. The media and professional military and economic journals have also not promoted this branch of economics.

In the short run, such specialists would need to be trained (or recruited from) abroad; particularly in the US where defence economics is a thriving discipline. But there is no substitute for developing indigenous capacity to train its own defence economists and analysts.

As India revamps its higher education sector, and Knowledge Commission advances the scope for applying knowledge and technology to a wide variety of sectors to bring about greater economic efficiency, the need to subject the defence sector to greater economic reasoning and analysis should receive deserved consideration.[Asher & Singh/DNA]

My op-ed in Outlook: The buck yes, but where’s the bang

Union Budget 2009 and what it means for foreign affairs and defence

In the July 20th issue of Outlook magazine I point out that the Budget has the good, the bad and the ugly for strategic affairs. An edited version of the following appeared in print.

First the good: the UPA government used the Union Budget to strengthen India’s leverage in Sri Lanka by setting aside Rs 500 crore for the rehabilitation of the Tamils displaced by war. It has increased the foreign aid outlay for Nepal to Rs 238 crore, set aside Rs 125 crores for Mongolia and increased outlays for African and Eurasian countries by various amounts. This is in addition to sustaining the massive assistance to Bhutan (Rs 961 crore) and Afghanistan (Rs 442 crore). The foreign ministry’s overall budget has been increase by 24%, which should help Indian missions raise the game in foreign capitals.

Similarly, the increased outlays in several areas under broad rubric of national security—including defence, police, paramilitary forces, space and atomic energy—should be useful in securing the nation in an increasingly volatile geopolitical environment. The allocation of between 2% to 3% of GDP (depending on how defence expenditure is defined) even while massively expanding social sector expenditure programmes assigns substantial resources for defence while sending a signal of the size and strength of the Indian economy.

India, in its own conservative way, appears to be strengthening its diplomatic and military capacity in line with its status as an emerging power.

But only partly, because there is the bad. Continue reading My op-ed in Outlook: The buck yes, but where’s the bang

R Venkataraman, RIP

Constitution-maker, defence minister, president

Former president Ramaswamy Venkataraman passed away in New Delhi today, aged 98. He was a member of the constituent assembly and rose to become president of the republic during a critical period in its history. His contribution to India’s strategic security is less well-known, but very significant. As defence minister in Indira Gandhi’s cabinet in 1983 he set-up a unique committee consisting of the three service chiefs, the top defence ministry bureaucrats and the top scientists in charge of India’s nuclear and missile development programmes. The biggest decision he made was to ask Dr V S Arunachalam and Dr APJ Abdul Kalam to accelerate the ballistic missile development programme by running five projects in parallel. It was Mr Venkataraman who allocated Rs 388 crores for the Integrated Guided Missiles Development Programme (IGMDP) that gave India the Agni, Prithvi, Akash, Trishul and Nag missiles.

In Wings of Fire, Dr Kalam writes: “He advised us to list all the resources we needed to achieve our goals, overlooking nothing, and then include in the list our own positive imagination and faith. “What you imagine, is what will transpire. What you believe is what you will achieve,” he said.”