Countries increasing their defense expenditure, stalwarting their dominance in the geopolitical scenario.

All revenue and capital expenditure on the armed forces, including peacekeeping forces of defence ministries and other government agencies engaged in defence projects, and paramilitary forces when judged to be trained, equipped, and ready for military operations, is referred to as defence expenditure. It typically reflects a country’s perception of the possibility of threats against it, as well as the level of aggressiveness it desires to use. It also provides an estimate of how much funding should be allocated for the future year. A budget’s size also reflects an organization’s capacity to support military actions. The size of that entity’s economy, other financial pressures on that entity, and the government’s or people’s willingness to pay such military activities are among the factors.

• Capital expenditure refers to the money spent by the government on the development of machinery, equipment, buildings, health facilities, education, and other similar projects. It also includes the price of acquiring long-term assets like land and defence equipment, as well as government investments that will generate future revenues or dividends. These expenses result in the creation of assets, which allow the economy to produce income by expanding and improving production facilities and improving operational efficiency. It also improves labour participation, examines the economy, and boosts the economy’s future ability to create more.

• Revenue expenditure refers to the portion of government spending that does not result in the creation of assets; such expenditures are spent to fulfil the government’s running needs. Salaries, salaries, pensions, subsidies, and interest are all examples of revenue expenditures. 

According to new figures released by the Stockholm International Peace Research Institute, total worldwide military expenditure grew to $1981 billion in 2020, up 2.6 per cent in real terms from 2019. (SIPRI). The United States, China, India, Russia, and the United Kingdom were the top five spenders in 2020, accounting for 62 per cent of worldwide military spending. 

India’s budget allocation has continually increased over time. Between 2011-12 and 2020-21, defense spending climbed by 127 per cent. The distribution of this allocation between revenue and capital spending, on the other hand, is skewed, with revenue expenditure expanding faster than capital expenditure. The key driver of greater revenue expenditure growth is increased spending on defense pensions. To achieve India’s new set aim, ‘Atmanirbhar Bharat,’ the country’s drive toward an enduring indigenous defense manufacturing industry, as well as to build a strong upholding for the new system, more revenue spending will be required. India is also one of the world’s largest importers of military equipment. The nation has aimed to bolster the expenditure by increasing private sector involvement in defense production and research and development. Manufacturing still is moving slowly, but research and development is gaining traction. India’s total defense budget has increased at a rate of 9% per year over the last 10 years. 

Between 2011-12 and 2018-19, defence revenue spending increased by 140 per cent, while capital expenditure increased by 101 per cent. During the same time period, the percentage of the total defence budget spent on pensions increased from 18 per cent to 26 per cent.

Furthermore, China’s, regional expenditure growth slowed in 2020 as countries like Thailand, South Korea, and Indonesia lowered their defence budgets in order to finance emergency relief efforts in the aftermath of the outbreak. The majority of the time, expected growth was slashed rather than actual cutbacks to the previous year’s budget. Asia’s defence expenditure growth slowed to 4.3 per cent in 2020, down from 4.6 per cent in 2019, as a result of the slowdown in China and the rest of the region. Despite this, the region’s share of global defence spending is expected to rise to 25.0 per cent in 2020, from 17.8 per cent in 2010 and 23.2 per cent in 2015. Despite increased investment in Europe, this is expected to remain relatively flat in 2021. 

While in real terms, total European defence spending had increased by 2.0 per cent in 2020. This was a relatively smaller increase than the 4.1 per cent increase witnessed in 2019, and Europe’s proportion of global defence spending declined somewhat in 2020, from 17.8% to 17.5 per cent. However, over the previous years, average spending across European NATO members has gradually climbed as a percentage of GDP, rising from 1.25 per cent in 2014 to 1.52 per cent in 2019 and rising further to 1.64 per cent in 2020. This is still well below the NATO recommendation that its members aim to spend 2% of GDP on defence, despite the significant 7.0% average economic contraction expected in 2020. When it comes to spending on defence equipment, NATO’s European members maintained the higher investment share of defence spending that they achieved in 2019, allocating 23% on average in 2020, beyond the NATO-recommended level of 20%.

The defence expenditures in the Middle East and North Africa have declined, falling to US$150 billion (excluding security expenditure), while the percentage of global defence spending fell to 8.9%, down from 10.5 per cent in 2017. Despite dedicating by far the highest share of economic production to defence, at 5.2 per cent of GDP, compared to the world average of 2.08 per cent, the area continues to struggle. Other oil-dependent economies began to feel the pinch as well. Following a significant 3.8 per cent real rise in the core ‘national defence’ budget in 2020, Russia was only able to execute a minuscule 1.4 per cent increase in 2021, resulting in a 3.6 per cent real reduction. Total Russian military spending (which includes pensions, military housing, and health and social assistance) is expected to drop from over 4.1 per cent of GDP in 2020 to under 3.8 percent in 2023.

Conclusion:

Peace is important to maintain fruitful trade relations in a given region. However, this peace can only be achieved if military spending is done. Military spending builds military might. This power acts as a deterrent for aggressors. In the absence of military spending, opponents may view the nation as a soft target. Hence, even though local defense spending may be more expensive, it creates more value in the form of more robust national security and fewer disruptions to trade and commerce. If the defense system of a country is fully integrated, there are economic benefits to it. Defense expenditure is, without a doubt, an unambiguous demonstration of power, as current patterns of growing defense spending shows.