Defense expenditure, budget deficits, and income distribution in india (1970–2009)

This chapter empirically examines the relationship between defense expending, budget deficits, and income redistribution in India for the period 1970–2009. The analysis is based on an autoregressive distributed lag model (ARDL) popularized by Pesaran and Shin (1999). Empirical estimates reveal that military spending in India is indeed associated with income redistribution. The empirical approach indicates that there exists a long-run relationship between transfer payments as a percentage in GDP (TP), defense expenditures as a percentage in GDP (ME), and budget deficits as a percentage in GDP (DEF) in India. Defense expenditures as a percentage in GDP and the budget deficits as a percentage in GDP have positive and significant impacts on transfer payments in the same fiscal year. But the budget deficit as a percentage in GDP has a negative and significant impact on transfer payments as a percentage in GDP in the next fiscal year.