Agnipath Scheme – India’s Pandoras Box

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.