Defence Economics: Core Issues

Dr Rajan Katoch, IAS (Retd) is a former Secretary, Heavy Industry, Government of India. In the course of a distinguished civil service career, he has served in the Finance and Commerce Ministries, and on deputation to the World Bank.
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  • April 2006

    Defence can seldom ignore the standard economic problem—the need to make critical often hard resource choices. Yet the output of defence studies focuses almost entirely on professional and strategic issues, and little on finance or economics. There is a presumption in most countries that the needs of defence must be met, and often they are met without
    serious political debate. Defence budgets attract limited scrutiny, even in advanced countries like the US, where the general feeling is that the bigger the budget the better.In India the defence budget has at times been approved by Parliament without a debate. Given the sheer size and scale of the defence sector and its share in the world economy and
    trade there is a need for greater knowledge of its economics, effective financial scrutiny and debate. Developing countries such as India with significant defence sectors need the analysis and insights of defence economics. Resources are scarce, the allocation problem are acute in the face of an unfinished development agenda and optimisation imperative. It holds the potential of enabling better utilisation of scarce
    resources, and getting a bigger “bang for the buck”, without
    compromising specified strategic objectives. Application of modelling and gaming theories can even assist in strategic decision-making. Insights and findings of defence economics can on the whole be expected to enhance national security.

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