Defence Economics Questions and Answers

Answer: B

The answer is Adam Smith.

In The Wealth of Nations (1776), Book V, Smith writes that the first duty of the sovereign is to protect the society from the violence and invasion of other independent societies, which can be done only by a military force. He accepted the expense of defence as a proper charge on the state, and elsewhere remarked that defence is of much more importance than opulence. Smith is commonly called the father of modern economics.

J.K. Galbraith was a twentieth-century American economist, not the founder of the discipline. K. Subrahmanyam was India's best-known strategic analyst, not an economist of that era. 'Kannedy Govin' appears to garble the name of Gavin Kennedy, a modern writer on defence economics.

Answer: A

The answer is 3,59,854 crore (in rupees).

In the Union Budget for 2017-18 the Ministry of Defence was allocated Rs 3,59,854 crore. That total includes defence pensions; the allocation for the armed forces excluding pensions was Rs 2,74,114 crore, which is the figure often quoted as the defence budget proper.

The other three options are the same number with one digit raised by ten thousand crore each, so the question tests exact recall of the published figure. The 2018-19 budget was the first to cross four lakh crore including pensions.

Answer: B

The answer is Threat perception.

How much a state spends on defence and security depends above all on what threats it believes it faces: hostile neighbours, disputed borders, insurgencies and the military strength of likely adversaries. India's spending, for example, has risen after each war or crisis on its northern and western borders.

Territory and people shape what has to be defended, but a large or populous country with no perceived threat need not spend heavily, while a small one under threat may spend a great deal (Israel is the usual example). So neither territory nor people determines the expenditure on its own, and 'none of the above' is wrong because threat perception does.

Answer: A

The answer is Establishment of financial institutions.

War finance is the raising of money to pay for a war. Its standard elements are taxation (new and higher taxes), debt (public borrowing through war loans and bonds), the creation of money, and voluntary contributions (donations to war or defence funds, such as India's National Defence Fund). The paper spells contribution as 'countribution'.

Setting up financial institutions is part of a country's economic development, not a means of raising money for a war, so it is the one item that is not an element of war finance.

Answer: C

Fiscal mobilisation refers to mobilisation of financial resources for war.

'Fiscal' concerns public revenue and expenditure. In war, fiscal mobilisation means raising the money the war needs, through extra taxation, public borrowing and the diversion of the budget to defence.

Mobilising human resources is manpower mobilisation, and longer working hours are part of industrial or labour mobilisation. Mobilisation of economic resources is the broader term covering industry, agriculture and transport as well as money; fiscal mobilisation is only the financial part of it, so the more specific option is keyed.

Answer: A

The key accepts all three statements, so the answer is All are correct.

The resource curse, or paradox of plenty, describes countries rich in oil, minerals or other natural resources that grow more slowly and suffer more conflict and weaker governance than resource-poor ones (i). The British economist Richard Auty coined the term in 1993, in Sustaining Development in Mineral Economies (ii). Several African states, such as Nigeria, Angola and the Democratic Republic of the Congo, are standard examples (iii; the paper prints 'resource curve').

Options B, C and D each leave out or deny a statement the key treats as true.

Answer: A

Autarky refers to Economic self-sufficiency.

An autarkic state tries to meet its own needs, food, raw materials and industrial goods, without relying on trade, often for strategic reasons, so that it cannot be strangled by blockade in war. Nazi Germany's Four-Year Plan of 1936 and North Korea's Juche are frequently cited examples.

Economic interdependence is the opposite condition. Arms trade and defence technology are fields an autarkic state may try to make self-sufficient, but neither is what the word means.

Answer: A

The US share of global major arms exports in 2018-22 was 40%.

SIPRI's data on international arms transfers for 2018-22, published in March 2023 and in the SIPRI Yearbook 2023, put the United States at 40 per cent of global exports of major arms, up from 33 per cent in 2013-17. Russia came second with 16 per cent, followed by France with 11 per cent.

The higher figures, 50, 60 and 65 per cent, overstate the US share; no single exporter has reached half the world market in SIPRI's five-year data for that period.

Answer: B

Logistics refers to Supply Chains.

In military usage logistics is the science of planning and carrying out the movement and maintenance of forces: the supply, transport, storage and distribution of material, together with maintenance, medical services and the movement of personnel. Jomini treated it as one of the main branches of the art of war.

Communication networks fall under signals, mobilisation of finances under defence economics, and recruitment under manpower planning; each supports the forces but none is what logistics means.

Answer: A

Defence economics focuses on the Allocation of National Resources for National Security.

It applies economics to defence: how much of a nation's resources to devote to security, how to allocate the defence budget among forces and weapons, the economic effects of military spending, arms production and trade, and the economics of conflict and disarmament.

Defence and foreign affairs are fields of policy rather than an economic discipline, military education is training, and strategic culture concerns the beliefs and traditions that shape a nation's approach to war.