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Source: This post is created based on the article ‘The puzzles of defence economics’, published in Business Standard on 16th October 2023.
UPSC syllabus Topic: GS Paper 3, Issues associated with Industrial policies
News: The article discusses the impact of recent conflicts, such as the Israeli action in Gaza and the war in Ukraine, on global military production. It contrasts high-intensity wars with insurgencies and explores the implications for defence economics.
What is the difference between high-intensity wars and insurgencies?
High-intensity wars, like the one in Ukraine, involve peer states and have a significant impact on military production. The military death rates are roughly 50,000 per year for Ukraine and 80,000 per year for Russia.
High-intensity wars require a large number of artillery shells, drones, and other equipment, putting stress on production capacity.
Insurgencies, like those in Afghanistan and Iraq, involve irregular forces and have different costs. In this type of conflict competent military faces irregulars or a much weaker opponent. For example, In Afghanistan, the Soviets lost an average of 1,500 people per year. The US lost 240 per year in Afghanistan and 220 per year in Iraq.
High intensity wars boost defence manufacturing globally. But, increased military production will negatively affect civilian production.
How military production changes as per the type of conflict?
Ukraine requires about 1.5 million artillery shells and 100,000 drones per year. Ukraine is backed by advanced economies, making up 65% of world GDP.
Russia is producing around two million shells a year but consuming about four million. Russia has lower support, mainly from North Korea and Iran.
The increased demand for military supplies is influencing global defense economics, potentially boosting industries related to defense production. However, there’s a trade-off, as resources diverted toward military production detract from civilian sectors.
This shift has historical precedence, such as after USSR collapse post-1989. At that time, reduced military spending due to peaceful time allowed greater civilian production.
However, now, large-scale military production will result into high spending on military production and negative effects on civilian production.
What are the opportunities ahead of India?
Now as the Russia is busy in fulfilling their own demand arising due to war, the demand of countries, depending upon the Russia’s military hardware is not being fulfilled.
India is sourcing less military hardware from Russia.
India can fill the gap in markets that relied on low-cost Russian equipment.
India can first provide spares compatible with Russian standards, then offer upgrades, and finally transition into NATO standards.
The strategy involves initially supplying compatible spares, then offering upgrades, and eventually transitioning these nations to NATO standards, all at competitive pricing.
