It’s not a guns and butter problem: The case for a larger Defense Budget

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The role of military expenditure in fostering technological advancements and driving overall development cannot be overstated. Historically, the military has played a pivotal role in catalyzing technological change, especially during the Industrial Revolution, when an industrialized military establishment emerged. This establishment systematically invested in innovation, laying the foundation for closer links between military and civilian innovation.

One notable aspect of military-related research is the economics of defense R&D, often overlooked in the discourse on research and development. The RAND Corporation’s research in the 1960s highlighted the market failure in private firms’ underinvestment in research and innovation, leading to the necessity of public investment in R&D. This rationale aligns with the Indian government’s commitment to disinvestment initiatives, emphasizing the importance of innovation in both defense and civilian applications.

Military-related R&D investments can significantly impact innovation through various channels. Firstly, military funding supports the development of scientific and engineering knowledge, benefiting both defense and civilian applications. Secondly, civilian spin-offs from defense-related investments are most significant in the early stages of technology development, fostering overlap between defense and non-defense applications. Lastly, defense-related spending on new technologies can advance civilian applications through procurement, enabling innovators to benefit from learning and scale of production.

The intertwining of military research and development (R&D) with technological innovation has proven to be a catalyst for the evolution and takeoff of several key sectors. A look at the development and innovation in semiconductors, electronic computers, and the internet can help use understand that the direct investment and innovation made by the military in these sectors help in the development of such sectors:

  • Semiconductors:

The genesis of the electronics revolution, encompassing the semiconductor and computer industries, can be traced back to the 1940s. Two groundbreaking innovations, the transistor and the computer, emerged during this period, fueled by Cold War imperatives centered on national security. The transistor, with its military applications in electronic systems and computers, garnered substantial federal funding, primarily from the Department of Defense and other defense-related agencies. Remarkably, nearly 25% of total industry R&D spending in the late 1950s was attributed to defense-related funding. Interestingly, this funding was predominantly directed towards established electronic component producers rather than the pioneering innovators in semiconductor technology.

  • Electronic Computers:

World War II witnessed the American military’s sponsorship of projects aimed at developing high-speed circulators for trajectory computation and firing tables for artillery. The iconic ENIAC, considered the first U.S. digital computer, made its debut in 1945, funded by the Army Ordinance for trajectory computation. The military’s engagement with computers expanded rapidly to include applications in nuclear weapons design, cryptography, and strategic defense. Numerous military-funded computers emerged in the 1940s and 1950s, fostering technical innovation diffusion in the nascent computer industry.

Federal R&D support for computers, mirroring the semiconductor scenario, was complemented by substantial procurement spending on military systems. This demand spurred the entry of new firms into the industry during the 1950s and 1960s. Additionally, defense-related R&D and procurement initiatives left an indelible mark on the U.S. software industry. The Department of Defense’s pursuit of a standard programming language resulted in the widely adopted Common Business Oriented Language ( COBOL ). The military’s insistence on COBOL support in purchased computers, coupled with its dominance as a market force for custom software, facilitated the development and dissemination of this programming language.

  • The Internet:

The U.S. Department of Defense emerged as a pivotal force in funding the early development and dissemination of the internet in the 1960s. Researchers such as Kleinrock and Paul Baran, with contributions from MIT and RAND, laid the theoretical foundations of packet switching during this period. DARPA, the Defense Advanced Research Project Agency, recognized the potential of these theories and funded the construction of a prototype network, giving rise to the ARPANET – a precursor to the internet.

The structure of significant R&D investments bolstered their impact. DARPA’s strategy of funding similar projects across various universities and private R&D laboratories, coupled with the Department of Defense’s procurement policies, complemented a broad-based approach to R&D funding. This synergy facilitated not only technological breakthroughs but also widespread diffusion and adoption, underscoring the interconnectedness of military R&D and the transformative trajectory of technological sectors.

India’s Defense Infrastructure: Current scenario

Despite challenges, India has made significant progress in its defense efforts. Reforms, including the appointment of a Chief of Defense Staff ( CDS ) and the creation of the Department of Military Affairs (DMA), indicate a shift towards a more integrated and efficient defense structure. The involvement of smaller private firms in defense-related R&D signifies a changing mindset and a departure from traditional state-dominated arms production.

A pivotal shift in focus occurred as India confronted the realities of its security landscape. While Indian leaders had long identified China as a potential adversary, only 12 of the Indian army’s 38 divisions historically faced China. The predominant attention was directed towards countering terrorist threats from Pakistan and addressing domestic insurgencies. However, the violent clash in the Galwan valley in June 2020, resulting in the loss of lives on both sides, prompted a swift reevaluation. The Indian military, with a strategic redeployment of troops, tanks, and infrastructure, intensified its focus on the China threat, marking a significant change in posture.

The second major transformation was the overhaul of India’s military command structure—the most substantial reorganization since the country’s independence in 1947. The creation of the Chief of Defence Staff ( CDS ) position, overseeing the army, navy, and air force chiefs, aimed to foster greater coordination and integration among the branches. This move was accompanied by the establishment of the Department of Military Affairs ( DMA ) within the defense ministry, challenging the traditional civil-military relations and empowering the military in national-security decision-making.

For almost a decade, India has held the unenviable title of the world’s leading arms importer. Its armed forces, ranking among the top five globally in terms of active manpower, ships, and planes, reflect a formidable presence. However, the true measure of India’s military ambitions reveals a deeper quest for regional dominance and security against potential adversaries, particularly China and Pakistan.

India’s military doctrine envisions the capacity to engage in simultaneous land wars with both Pakistan and China while maintaining naval dominance in the Indian Ocean. Despite revealing its nuclear capabilities in 1998, India has continued to advance its military prowess, developing ground-hugging cruise missiles and striving to perfect submarine-launched intercontinental missiles. The geopolitical landscape has further compelled India to adopt a more assertive posture under the leadership of Prime Minister Narendra Modi, marked by tense confrontations with China and robust responses to cross-border provocations.

The defense budget, contrary to the chest-thumping narrative, has witnessed a relative reduction over the past decade as a percentage of GDP. It falls significantly below China’s defense spending when considered in dollar terms. More crucially, the proportion allocated to capital expenditure has seen a considerable decline, impacting the modernization efforts of the navy and air force. With personnel costs consuming a substantial portion of the budget, funds for procurement, research, and development are severely constrained.

A critical examination of India’s military structure reveals potential weaknesses not solely attributed to the size but to the organization of its forces. Despite recommendations for integration, the army, navy, and air force maintain separate, inflexible structures. In contrast to China’s streamlined regional commands, India retains 17 single-service local commands, hindering operational efficiency.

India grapples with a substantial gap in defense capabilities compared to China. The defense budget, while increased to 28% of China’s, still reveals glaring shortfalls, especially in the air force and navy. Technological disparities persist, with India acknowledging a decade-long lag behind the People’s Liberation Army in the air domain.

The gap with China remains a significant concern. India’s defense budget, while increasing, is still dwarfed by China’s, and technological disparities persist. The focus on modernization, reorganization, and technological advancements is a step in the right direction. The recent geopolitical tensions, especially in Ladakh, have prompted a strategic shift, with a stronger focus on countering potential threats from China.

India’s ascent on the global stage hinges significantly on its ability to balance Chinese power geopolitically. The imperative to modernize its armed forces, the second-largest in the world with 1.4 million full-time personnel, is of global interest. Despite challenges, a closer examination of India’s defense efforts reveals several areas of notable and underappreciated progress.

The navy’s ambition to achieve a 175-ship fleet by 2035 faces challenges, and discussions of a three-carrier navy seem aspirational. However, India’s defense leadership remains optimistic about the trajectory, emphasizing progress in indigenous initiatives, such as the upcoming aircraft carrier.

The army faces its own set of constraints, with nearly half of its equipment deemed obsolete. The heavy commitment of forces on the China border has ramifications, including recent escalations in ethnic violence in the northeastern state of Manipur. Privately, Indian officials acknowledge the current inability to confront China for the next 30 years.

Despite these challenges, India’s defense landscape has witnessed significant changes over the last nine years. The institutional reforms, coupled with strategic operations like air strikes against Pakistan and the bold air-land raid in Ladakh, have demonstrated India’s intent to strengthen its military capabilities. The goal is to “add military muscle without spiraling costs,” aligning the ratio of Indian to Chinese defense spending with that of Chinese to American.

As India continues on this trajectory, its progress in defense should give China pause. The strategic investments in military expenditure not only safeguard national security but also act as a catalyst for technological advancements, infrastructure development, and overall national growth. In the pursuit of prosperity and global influence, India’s commitment to modernizing its armed forces is a testament to its evolving role on the world stage.


One of the most significant contributions of military budget allocation is the fostering of technological innovation. Military research and development ( R&D ) initiatives have historically been at the forefront of groundbreaking technological advancements. This is evident in the development of technologies such as GPS, the internet, and numerous medical breakthroughs, all of which originated from military-driven research.

The competitive nature of military conflicts necessitates constant technological advancements to maintain a strategic edge. As a result, military R&D initiatives often lead to the creation of cutting-edge technologies with both military and civilian applications. The spillover effect ensures that innovations initially developed for military purposes find their way into various sectors, contributing to economic growth and enhancing overall technological capabilities.

Military spending has a direct impact on job creation, providing employment opportunities across various sectors. The defense industry itself requires a skilled workforce for research, development, manufacturing, and maintenance of advanced technologies. Additionally, the economic activities associated with military contracts stimulate job growth in related industries, such as engineering, manufacturing, and technology.The skills and technologies developed in the defense sector often spill over into civilian industries, fostering innovation and creating jobs beyond the defense realm.

Furthermore, military contracts often involve collaboration with private enterprises, leading to the establishment of public-private partnerships that drive economic development. The aerospace, technology, and manufacturing sectors, among others, benefit from these collaborations, creating a ripple effect that boosts economic activity.

Allocating a portion of the budget to the military sector contributes to economic diversification. A robust defense industry provides a buffer against economic downturns by fostering a resilient and multifaceted economy. In times of peace, the defense industry can pivot towards civilian applications, ensuring a continuous stream of technological advancements and economic contributions.

Additionally, a technologically advanced defense sector enhances a nation’s capabilities in addressing new challenges, whether they be security threats or global economic shifts. The skills developed within the defense industry are transferable, contributing to a more adaptable and competitive workforce.

By fostering technological development and job creation, military budget allocation contributes to the nation’s overall wealth. The dual dividend effect means that the investment made in defense capabilities not only enhances national security but also propels economic growth, making it a strategic and multifaceted investment.

Military budget allocation should not be viewed solely as a drain on public resources but rather as a strategic investment with multifaceted benefits. The symbiotic relationship between military spending, technological innovation, and economic growth underscores the complex dynamics at play. A nuanced approach that balances national security with societal welfare priorities is essential to harness the positive outcomes of military budget allocation for the overall prosperity of a nation.

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