MODELING AND FORECASTING OF INDIA’S DEFENSE EXPENDITURES USING BOX-JENKINS ARIMA MODEL

Sapana Sharma,Sanju Karol

doi:10.29121/granthaalayah.v9.i2.2021.3698

Sapana Sharma, Sanju Karol

Open Access

https://doi.org/10.29121/granthaalayah.v9.i2.2021.3698

Copy DOI

Abstract

Many developed and developing countries are at the core of the security and peace agenda concerning rising defense expenditure and its enduring sustainability. The unremitting upsurge in defense expenditure pressurizes the government to rationally manage the resources so as to provide security and peace services in the most efficient, effective and equitable way. It is necessary to forecast the defense expenditure in India which leads the policy makers to execute reforms in order to detract burdens on these resources, as well as introduce appropriate plan strategies on the basis of rational decision making for the issues that may arise. The purpose of this study is to investigate the appropriate type of model based on the Box–Jenkins methodology to forecast defense expenditure in India. The present study applies the one-step ahead forecasting method for annual data over the period 1961 to 2020. The results show that ARIMA (1,1,1) model with static forecasting being the most appropriate to forecast the India’s defense expenditure.

Highlights

The global military expenditure was estimated $1917 billion in 2019 as per the report of Trends in World Expenditure, 2020
The results indicated that these single variable autoregressive integrated moving average (ARIMA) models showed higher accuracy and stability than those used by the single variable artificial neural networks (ANNs) models across the four time periods
It is necessary to forecast the defense expenditure in India to expect forthcoming changes viz. opportunities as well as threats (Fauziah & Gunaryati, 2017), that planners can adapt to these changes for successful implementation of planning (Kurzak, 2012)

Summary

Introduction

The global military expenditure was estimated $1917 billion in 2019 as per the report of Trends in World Expenditure, 2020. In total world’s share India contributed around 3.7% and spending was $ 71.1 billion in 2019 and became the third largest military spender in the world following US and China. Comparing this with prior year (2018), India moved from fourth position to third position, surpassing Saudi Arabia (SIPRI, 2020). Upsurge in defense expenditure expects prudent management in order to endow security in the most efficient and effective way. To ponder these facts, it becomes a needful piece of work to forecast the defense expenditure for planning the strategies efficiently in advance. The requirement for more precise forecast of defense expenditure in order to avert the risk of uncertainty has led to the advancement and upgrading of time series models

Objectives

Results

Conclusion