Sustained growth not only enables us to provide inclusive development, but also shores up our educational, energy and military security
Until recently, we had taken a very compartmentalised view of national security. Each threat to national security was neatly fitted into one compartment. The first, of course, was a war with Pakistan. That was fitted into a compartment and was meant to be deterred, or defended, through the might of our armed forces. A war with China was, and remains, unthinkable and therefore that threat was fitted into another compartment and reserved to be dealt with through a mixture of engagement, diplomacy, trade, and positioning adequate forces along the borders. Beyond Pakistan and China, we did not perceive any external threat to our security. Other threats such as communal conflicts, terrorism, naxalism or maoist violence, drug peddling and fake Indian currency notes were bundled together under the label threats to internal security and were left to the ministry of home affairs. Some threats were not acknowledged at all as threats to national security and these included energy security, food security and pandemics. K Subrahmanyam was one of the earliest to argue that we should take a more holistic view of the threats to national security.
Recently, eminent voices have echoed the views of K Subrahmanyam. Prime Minister Manmohan Singh, in his address to the Combined Commanders Conference on October 20, 2005, identified as threats to national security terrorism, proliferation of weapons of mass destruction, low intensity conflicts, and threats to the security of sea-lanes. The National Security Adviser, Shivshankar Menon, delivering the Raja Ramanna Lecture on January 21, 2013, said, We now need to consider our energy security, food security, technology security, and social cohesion and institutions, to name just a few, when we think of national security. In another place in the same lecture, he argued that there was little distinction between internal security and external security and identified the internal security challenges as having some roots outside India and (is) linked to what happens outside the country.
A close examination of the threats to national security will reveal that each one of them is connected to one or more other threats. For example, the threat of terrorism is connected to the threat of proliferation of arms, including weapons of mass destruction. The threat to the security of our sea-lanes is connected to the threat to energy security. Low-intensity conflicts have a direct bearing on social cohesion. Technology security will be the key to building new institutions. Natural disasters, especially those caused by climate change, can wreck food security. Pandemics and diseases, if uncontrolled, can diminish our capacity to defend the borders against our adversaries or to defeat the militants within the country. National security is, therefore, caught in a complex spiders web and unless we recognise that each strand of this web is connected to other strands, we would not be able to do justice to our fundamental obligation to protect and defend the security of the nation.
Defending and promoting national security stands on three important pillars: firstly, human resources; secondly, science and technology; and thirdly, money. I have placed money last, not because it is the least important, but because it is the most important pillar of national security. Without money, we cannot nurture and build our human resources. We need schools, colleges, universities, libraries, laboratories, skill development institutions and, above all, highly qualified teachers. Only now we have been able to achieve near-universal enrolment of children in school, but there are still problems in retention and, according to 2010-11 statistics, only 73% of children who enrol in class I complete five years of schooling and only 59.4% complete eight years of schooling. Despite having 32,987 colleges and 621 universities, the gross enrolment ratio is only 18.8%.
The central government spends only 0.67% of GDP on education (2010-11), and that includes all heads of expenditure that could be broadly brought under the subject education. It is estimated that all the state governments put together spend another 2.36% of GDP on education (2010-11). The percentages may appear modest, but the absolute amounts are quite large. Nevertheless, the average child enrolled in class V has only attained the competence of a child in class II. At the other end, none of our universities figure in the top 200 universities of the world.
Let me turn to science and technology. Every country that has moved up to the level of middle income country or a developed country has intensively promoted and heavily relied upon science and technology. It begins with the gross enrolment ratio. Countries that have made the big leap in the last 30 years have an impressive GER. In Malaysia it is 40%, in Brazil it is 26% and in China it is 26%. China has about 1,200 colleges devoted to engineering which produce about 700,000 engineering graduates every year. None of the threats to national security can be effectively countered unless we embrace science and technology and impart instruction in science and technology beginning at the school level.
We also have a long coastline extending to 7,516 kms. It is only after the Mumbai terror attack that we took steps to strengthen coastal security. We created a coastal command, authorised and funded a number of coastal police stations, funded the purchase of boats for coastal policing, and installed some radars. However, given the thousands of boats--small and big--that are in the waters off the west coast, the threats to security still remain quite high. On the waters off the east coast, there is virtually no force other than the Navy. We have many defence and defence research installations on the east coast, the DRDO and the department of space use the east coast extensively, and there is a large programme for exploration of oil and gas in the Bay of Bengal. Except for the presence of naval and coast guard vessels, and some technology that they have brought in, we have not used technology in a big way to bolster our security along the coast line.
In the air, we rely on the Air Force. This is perhaps the most technology-driven arm of the defence forces. In space, we have a few satellites, mainly dedicated to communications, weather forecasting and other peaceful purposes. Some satellites are capable of surveillance, but we abide by the international regime that there should be no militarisation of space.
Apart from land, sea, air and space, there is another domain, which is cyber-space. Much of our critical infrastructure lies in cyber-space. Cyber crimes such as hacking, financial fraud, data theft, espionage etc. would, in certain circumstances, amount to terrorist acts. Further, the threat of disruption of financial, rail, air, power, critical information services through cyber attacks could also be construed as terrorist attacks. I need hardly emphasise that the latest advances in technology would be required to build our capacity to meet the threats in cyber-space and, only recently, we made a modest beginning to build capacity to counter threats in cyber-space.
Money is the third pillar of national security. Money comes out of growth. The revenues of the government are tax revenue and non-tax revenue. Non-tax revenue constitutes a small proportion of total revenue and is more uncertain. Tax revenue consists, mainly, of five taxes: excise, customs, service tax, income tax and corporation tax. Excise revenue is a function of growth in the manufacturing sector; customs revenue is a function of higher imports; service taxes are a function of more activity and more transactions in the services sector; income tax and corporation tax are a function of more incomes for individuals, families and corporations. Increase in tax revenue is, in a very large measure, the outcome of higher growth. When the economy is on a roll, tax revenues are buoyant and when the economy slows down, the first casualty is revenue from taxes.
In our own times, we have seen the difference between the period when the Indian economy was on a high growth path and the period when there has been a noticeable slow down. In the former phase (2004-2008), we were able to provide for virtually everything that we desired, but also for exceptional items of expenditure such as the agricultural loan waiver scheme. When there is a slow down, the consequence is the exact opposite. The first hit is on tax revenue. As the anticipated growth in tax revenue declines, and expenditure cannot be compressed in the short-term, the gap between revenue and expenditure rises rapidly. The short-term response is to borrow more, leading to a ballooning of the fiscal deficit. The medium term response will be to contain expenditure, but that has its own consequences. A cut back on public expenditure will further slow down the economy. It will also curtail the number of jobs that are created. A cut back on social welfare will hurt the poor: less money for education or health care will deny many people access to basic education or basic health facilities. And, finally, a cut back on expenditure on defence or on the police forces will severely compromise our defence and security preparedness and diminish our capacity to meet the challenges to national security.
It is therefore a self-evident truth that growth is the key for greater public welfare and greater security. Yet, we adopt a disdainful attitude to growth. Some think that the value of growth is overstated and that we would be better off if we pursued not the goal of growth but other goals such as cultural nationalism or debt-driven egalitarianism.
I conclude by asserting that there is no substitute for sustained growth over a long period of time if India should attain the status of, at least, a middle income country. It is only sustained growth that gives as a chance to tune the growth model in favour of inclusive development. Without growth there will be neither development nor inclusiveness.
Extracted from the K Subrahmanyam Memorial Lecture delivered by the finance minister on February 6, 2013