The cost of being India-centric

Daily Times, April 2, 2006
VIEW: The cost of being India-centric —Ahmad Faruqui

Now that the military budget is hitting $5 billion — a very large amount for any country, let alone a poor country, the opposition needs to raise the issue of military transparency and accountability in parliament. This would be entirely appropriate, given that the official line is that that the country has no external enemies. The timing is auspicious

In recent months, General Pervez Musharraf has repeatedly stated that Pakistan’s foreign policy is not India-centric. But does this talk jibe with his actions?

On March 20, General Musharraf witnessed firsthand the second-in-six-months launch of the Babur cruise missile. One is unlikely to see this nuclear-capable missile being used against internal enemies, whether they are irritants in Balochistan or foreigners in the Tribal Areas. The only use for the missile is to counter the threat posed by India’s Brahmos cruise missile.

In additions, the deal for the American F-16 fighters is back on track, now that the October earthquake has receded in the background. Just like Babur, this high-tech fighter would hardly be the weapon of choice against internal enemies. It is designed to neutralise the threat posed by the Indian Air Force, which in the medium-to-long term is likely to be armed with F-16s and F-18s, in addition to Russian SU-30s.

If there was any doubt that Musharraf continues to pursue an India-centric foreign policy, it was removed by Islamabad’s decision to hike its defence budget by Rs 61 billion. Now, that’s serious money, representing a billion dollars. Moreover, it represents a hike of 27 percent in last year’s defence expenditures of Rs 223 billion. This increase could not be designed to match the inflation (single digit according to government claims). It could not represent incremental funding to continue the “war against terror” in the Tribal Areas or in Balochistan. It is squarely and simply designed to keep India at bay, while allowing Pakistan to push a militaristic agenda in Kashmir.

China’s increasing military profile, in particular its “string of pearls” strategy in the Indian Ocean, figures prominently in the Indian strategic calculus. While the Indian Army is mostly focused on Pakistan, its Air Force and Navy are mostly focused on China. The Air Force is improving its capabilities through the acquisition of Israeli-made Phalcon airborne early warning and control systems. The Indian Navy is on its way to becoming a blue water navy. With its upgraded fleet of submarines and the possible deployment of two aircraft carriers within the next decade it is developing sea denial and limited power projection capabilities.

Pakistan’s military spending programme, being entirely India-specific, faces an impossible task of countering a perceived enemy that is six times larger. Between 1947 and 2006, Pakistan’s military expenditures showed an annual growth rate of 11.5 percent in nominal terms and 6.5 percent in constant dollars. These growth rates match India’s growth rates between 1962 and 2006, which were 11.6 percent in nominal terms and seven percent in constant dollars. Even then, the military balance remains heavily in India’s favour.

Using an econometric model, one can explain the evolution of Pakistani military spending almost entirely by reviewing the evolution of Indian military spending. The relationship is valid whether one looks at data in nominal local currency units or in constant dollars. The model shows that for every 10 percent increase in Indian military spending, Pakistan has increased its military spending by 10 percent the following year. This has been Islamabad’s way of keeping the local-currency ratio of Indian-to-Pakistani military spending roughly around 3:1. During the past four decades, it has fluctuated between 2:1 and 4:1.

Last year, India spent Rs 817 billion on its military. That translates into $18.3 billion (the Indian rupee is worth about a third more than a Pakistani rupee). This year, it is expected to spend Rs 890 billion ($20 billion), about nine percent more than last year. So why has Pakistan raised its defence spending by three times the amount in percentage terms as India? Because the ratio (in local currency) between Indian military spending and Pakistan’s military spending had deteriorated during the past three years to almost 4:1. Pakistan’s latest increase will bring the ratio down to 3:1.

It should be noted that official military expenditures published by both countries do not include the cost of military pensions nor the cost of large-scale nuclear and ballistic missile programmes. In addition, in the case of Pakistan, they do not include the costs of large weapon systems such as submarines, tanks or fighters. Like so much else that happens in Islamabad, the accounting of these additional expenditures is a mystery.

In India’s case, the budget of the central government has a large section devoted to military spending. It tells us that about 40 percent goes to the capital account and the rest to the current account. Within the current account, 66 percent goes to the army, 20 percent to the air force and 14 percent to the navy. Of the army’s budget, 42 percent goes to salaries and so on. The ministry of finance in New Delhi provides all together some 85 pages of detail on military spending, a stark contrast to the single line entry in Pakistan’s budget. It is unfortunate that Shaukat Aziz has not shown the same zeal in making military expenditures transparent as he has displayed in making earthquake relief expenditures transparent.

That would be a welcome change, since the Pakistani military has provided no accounting of its expenses for almost six decades. Now that the military budget is hitting $5 billion — a very large amount for any country, let alone a poor country the opposition needs to raise the issue of military transparency and accountability in parliament. This would be entirely appropriate, given that the official line is that that the country has no external enemies.

The timing is auspicious, since the prime minister of the only known “enemy” state has just offered a treaty of peace and friendship to Pakistan. If Pakistan would rethink its militarily forward policy on Kashmir and focus henceforth all its energies on seeking a diplomatic settlement to the dispute, about half of its military expenditure would become unnecessary. By so doing, its defence spending would come down to about 2.5 percent of GDP, in line with that of other South Asian countries. Such a move would free up $2.5 billion dollars, or Rs 147.5 billion, for development programmes.

Thus far, Islamabad has shown no sign of changing its India-centric defence posture. Strategic myopia has crept into the DNA of Pakistan’s defence and foreign policy establishment. How long will it continue to hold back the human and social development of the 160 million people of Pakistan? That is the $64 million question. Pakistan needs to gear up for fighting an economic battle in the international market place, not for a war that is unlikely to ever take place.

Dr Ahmad Faruqui is director of research at the American Institute of International Studies and can be reached at Faruqui@pacbell.net