Money Over Matter | Cost Consciousness

Maj. Gen. Mrinal Suman (retd)

Every nation evolves well-considered National Strategic Objectives (NSO). These are based on a nation’s aspirations as regards its envisioned place in the comity of nations in short, medium and long terms. All its planning and initiatives (foreign policy, economic reforms and military strength) are directed towards the achievement of these objectives.

However, due to constantly evolving geo-strategic environment, discernment of probable threats with any degree of certainty poses a formidable challenge to the defence planners. Resultantly, there is a tendency amongst the defence planners to play safe. They tend to be extra-cautious by overplaying the threats in all possible contingencies.

Although foreign policies and economic strength are of immense importance, pre-eminence of a nation has always been a function of its credible military prowess. A militarily weak nation counts for little on the world stage. In other words, the achievement of NSO is possible only if the nation possesses enough muscle to project its military strength. And for that, adequate resources have to be made available to the armed forces.

Undoubtedly, national defence is a costly proposition. All governments are hard pressed to make available the needed resources to the armed forces to enable them to fulfil their responsibility. Defence and economic development have a mutually antagonistic relationship as both vie for the same pie. Defence always draws resources away from economic growth. That is the reason that militaries in all countries are increasingly having to contend with mounting public demand for reduction in defence outlays.

Further, increasing public scrutiny raises questions about justification for major military expenditure. Defence equipment, especially high-tech, are priced exorbitantly. Unconventional conflicts and internal security concerns necessitate entirely different inventory. Manpower overheads are rising. Worse, as defence budgets have failed to keep pace with inflationary trends, defence allocations have been falling in real terms.

As can be seen, it is a dilemma that all countries face, i.e. how to achieve NSO with limited resources that a nation can afford to spare for the armed forces. Two obvious options available are either to dilute NSO or to provide matching resources. Both are not pragmatic. Dilution of NSO implies compromising national security imperatives, a highly undesirable course of action that can prove perilous for the nation’s survival. On the other hand, provision of addition resources to the armed forces would mean curtailment of resources for economic development and public welfare. It is an equally undesirable alternative as public welfare lies at the heart of every nation’s core aspirations.

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While the debate regarding division of resources between the armed forces and the economic growth continues unabated, the militaries carry on shouldering the responsibility of safeguarding national interests. There is no dilution in that as the militaries cannot fail their nations. Therefore, the only viable option available to the national leadership is to strike the right balance while allocating resources.

More importantly, the militaries have to learn to manage within the limits of the apportioned capital. Application of the scientific tool of defence economics is considered to be ideally suited for that. Emergence of defence economics as a separate and distinct discipline of study is of great significance as it helps identify methods/ techniques of maximising the yield of the assigned resources to achieve NSO to the maximum extent possible.

Import of Defence Economics in Optimising the Defence Budget  

At the outset, it will be in order to differentiate between finance and economics as many tend to consider them to be similar or synonymous. Whereas finance is primarily concerned with the science of managing available funds, economics covers a much wider span and range. Economics is a social science that studies the broader management of goods and services, including their production, consumption and the factors affecting them.

Defence economics encompasses all aspects of defence