India has been the world's largest arms importer since 1993. Defense is one of the major spending sectors in the Indian economy. The geographical and topographical diversity, especially the 15,000 km long border which India shares with seven neighboring countries poses unique challenges to the Indian Defense Forces.
The world economy is governed by USD (United States Dollar). It is important to have more inflow of USD than outflow. This helps to preserve the Forex (Foreign Currency Reserve). The current forex reserves of India are $598.897 billion. However, India’s major hindrance in its economic growth is the outflow of USD i.e. imports of goods and services. The major imports that make a dent into India’s Forex reserves are- Oil Imports and Defense equipment imports. Since oil has no other alternative as it is a basic energy need, its import is completely necessary for the country. Whereas, defense equipment is not essential and its alternatives can be developed.
Now the question arises as to why India needs defense equipment. We know that very few countries in the world have enemy threats like the US. We have fought 5 wars after independence and the danger hasn’t reduced yet. Another reason for this is that India lacks a defense industry of its own sufficient to meet its external challenges and to keep pace with its expanding strategic interests. The need to modernize has also been one major reason for India’s status as a top spender on arms imports.
To date, India does not manufacture any indigenous rifles. To develop our indigenous Fighter Jet Tejas, it took around 4 decades. All this while we are purchasing fighter planes from Russia (Mig series Sukhoi ), France(Mirage Rafael), and Britain(Jaguar). However, successful technology development in missiles and rocket science has not only saved us billions of dollars but has earned a handsome amount of Forex through exports.
India imports equipment ( airplanes, ships, submarines, tanks, guns, radars, etc) and ammunition (for guns and aircraft). India is the biggest arms export market to three countries — Russia, France, and Israel and the second largest export market to South Korea.
India's defense budget is an integral part of the budget for each financial year. The defense budget constitutes 2.1 percent of our GDP. A major portion of the defense budget is imports. Defence imports in the last 5 years were 1.93 lakh cr which is sufficient to build schools, construct roads, and establish hospitals. If we were self-reliant in defense production, this much money could have been spent and utilized in other developmental projects, shortening our journey to becoming a developed nation.
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ABOUT THE AUTHOR
Mahika Singh
Mahika Singh, a dedicated finance enthusiast, is currently pursuing a BA (Hons) in Economics at Maitreyi College, Delhi University. Passionate about research and eager to expand her knowledge, she embodies dedication and hard work. With an unquenchable curiosity, she thrives on engaging in discussions, particularly those centered around finance and economics.
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