Military expenditure and economic growth: the case of India

Abstract

Purpose The relationship between military expenditure and economic growth is complex. The purpose of this paper is to examine this relationship in India. Design/methodology/approach The design of this study is descriptive in the theoretical part, and quantitative in the applied one. The study uses time series approach, and Hendry General-to-Specific (GTS) modeling methodology, to examine and analyze the relationship between military expenditure and economic growth in India, during the period 1980-2016. Findings The study shows the following: Absence of causal relationship between military expenditure and economic growth in India, during indicated period. The continuous regional tensions facing India represent the main factor for adopting Indian military strategy and emphasizing military capabilities. India has been able to build and develop links between civilian and military sectors. The Indian military scientific and manufacturing policies have achieved self-sufficiency in some of its military needs, a strong military industrial base and high levels of military exports. India participated with developed countries in military strategic industries. Such participation contributed to the integration of civilian and military sectors. India gave rights to private sector and foreign direct investment (FDI) for manufacturing in military industries, giving full marketing rights to the Indian government. These new policies considered a great move toward deep changes for Indian military manufacturing policy. Social implications The findings shed light on the importance of stimulating links between civilian and military sectors, particularly in the industrial sectors and scientific activities. Originality/value This study has a contribution to literature of military expenditures' economic effects. Theoretically, this study tries to fill the research gap regarding the impact of military expenditure in Indian case. Furthermore, to the best of the authors' knowledge, this is the first study that examines the relationship between military expenditure and economic growth in India using Hendry general-to-specific (GTS) modeling methodology and time series approach.