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Achieving long term, sustainable economic growth and prosperity is a key goal for both underdeveloped
and developed countries. According to the Keynesian theory, government consumption, which
increases demand for goods and services is an essential component for economic growth. One avenue
of government consumption is through military spending. Military spending affects economic growth
through many ways. Increases in military spending typically increase capacity utilization, boost
profitability, and ultimately boost investment and overall output when aggregate demand is lower than
anticipated supply. Many empirical studies provided a positive relationship between increase in military
spending and economic growth. The Military and defence sector is considered as one of the most
important sector for economic growth in India. The government allocates a large proportion of its
income towards this sector every year in its budget outlay. This year’s Union Budget includes a total
defence budget of Rs. 5.25 lakh crore, which is about 10% higher than the previous year’s allocation of
Rs. 4.78 lakh crore.
It has been opinionated that an increased military budget formulation can become an economic burden.
With more resources allocated to military planning , a smaller percentage is left for investment in the
education and technology sectors, which are crucial to the process of economic growth and offer a
wider base for socio-economic development. Higher military spending reduce the total pool of
resources that may be used for other domestic uses like investing in productive capital, education, and
market-driven technological advancement. Furthermore, large military spending can amplify
fabrications that reduce resource distribution efficiency, lowering the total yield factor. The total yield is
the capital gain from the investment made in resources. Thus, more military spending can be a
hinderance to economic development of a nation.
Yet military spending is still crucial as it provides a security cover to the residents of a nation and more
so during times of uncertainties. The Indian government thus came up a novel way to cut on military
spending while still allowing or sufficient military spending in terms of weapons, training, innovation and
development, namely the “Agnipath Scheme”. This scheme involves a recruitment process for persons
who do not have the rank of officer, with the purpose of deploying fitter, younger troops to the front
lines, many of whom will be on four-year contracts. Only 25% of the recruited youth will get selected to
the permanent cadre in the armed forces after the expiry of four-year contract. It’s a game changing
endeavor that will help the Army, Navy, and Air Force portray themselves as more youthful. Under the
‘Agnipath’ scheme, the youths between the ages 17.5 and 21 will be eligible to apply for the scheme.
During the period of their service, they will be getting a salary of Rs. 30,000 and at end of their four-year
tenure; each soldier would receive a lump sum payment of Rs. 11.71 lakh which will be tax-free. They
will also receive a four-year life insurance policy worth Rs. 48 lakh. The scheme’s main goal is to cut the
escalating pension bill in order to better manage the defense budget, reduce expenditure on defense
sector and give the armed services a more youthful look.
No doubt, this ‘Agnipath’ scheme will increase skilled-employment in the economy and thereby make
the economy more stable. There will be once-in-a-lifetime opportunity for youths to serve their country
and contribute to national development. There will be other advantages to youths as well. The 25% of
the soldiers will get a permanent position in the armed forces. The rest 75% of soldiers will get other
opportunities to stand in their own career path. They will be given Rs. 12 lakhs after the completion of
their period. For those wishing to open their own business will be given bank loans at low rate of
interest. They will be given special concessions to study further of their own choice. Overall, there will
be injection of more knowledgeable and skilled labor-force into the economy, which will generate more
efficient output.
But it has to be keep in mind, that India is a developing country where resources and jobs are limited.
The demographic labor surplus coming out from the four-year of military service require jobs to sustain
their living. The lack of productive employment and the lack of efficient technology in the country might
act as a hindrance in employing these skilled youths coming out of the military services, leading to
demographic disaster instead of demographic dividend. This will on the other hand, hamper economic
production and stability of the economy. The jury is still out on whether this scheme will become the key
ingredient to greater economic development or a key factor in increasing unemployment in the nation.
Well written