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 Even these are outdated as neither outcome nor accrual budgeting, which permits both income-expenditure flows and balance sheet assets and liabilities to be formulated, are utilised.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]

On recrafting Australia’s relations with India

It’s as much about institutional capacity as it is about issues of the day

Rory Medcalf from Sydney’s Lowy Institute for International Policy wrote an open letter to Australia’s new foreign minister. Excerpts:

Your Government has the opportunity to ensure that Australia becomes permanently serious about India, and to manage any ill-feeling that might arise in New Delhi from ruling out uranium sales.

Early reassurance, at the highest level, that Australia wants qualitatively improved ties with India. Any misperception that Australia might focus on China at India’s expense needs to be scotched.

Proper resourcing of Australia’s diplomacy with India: this has several facets. India is not just another country. The billion-plus scale of its population is echoed in its cultural and geographic diversity and the size and complexity of its mass media, political and business interests. In this context, and if your agenda is ambitious, the tradition of representing Australia’s interests in India with modest diplomatic, bureaucratic and financial resources cannot last. It is time to consider a full India branch in the Department of Foreign Affairs and Trade (DFAT) and a diplomatic presence beyond New Delhi. If Canberra sees fit to deploy diplomats (rather than narrowly-focused trade representatives) in Shanghai, Guangzhou and Hong Kong, why not Mumbai, Chennai or Kolkata? Finally, DFAT has not cultivated a single Hindi-speaker in a decade. Yes, India’s elite speaks English. But much of the political life of the country uses the vernacular, and to consider it not to be worth schooling a single Australian diplomat in that language is a false economy, not to mention an insult to a major world civilisation. (Hindi is also a backdoor to Urdu, and Australia’s diplomatic and security agencies desperately need talent in that language.) [Lowy Interpreter]

Medcalf’s arguments echo what this blog wrote during the Mohammed Haneef imbroglio: Australia must invest in institutional capacity that to engage India. Mr Stephen Smith would do well heed the contents of Rory Medcalf’s memo.