New Delhi: Noting that the 'peace dividend' of the post-Cold War era had not impacted on social sector spending, External Affairs Minister Pranab Mukherjee said today (Nov 13, 2006) that this posed fresh challenges to the country's planners who should strike a balance with military expenditure.

"The peace dividend at the end of the Cold War does not seem to have impacted to social sector spending. This is because increased defence outlays are needed to protect these very people," External Affairs Minister Pranab Mukherjee said while inaugurating the three-day International Seminar on Defence Finance and Economics here.

"Affordability is a moot issue. There has, therefore, to be a fine blend of economic sense and military sensibilities," Mukherjee, who till last month was the defence minister, pointed out.

"It's a question of logistics. Defence spending has a linkage with economic growth. We have, therefore, to find levels between defence and social sector spends," the minister added.

Nearly 500 delegates from across the country and abroad are attending the seminar, the first to be held here, which will discuss critical issues related to defence purchases. The 80-odd foreign delegates are from 28 countries including the US, Britain and China, representing think tanks, administrators, practitioners and decision makers.

Addressing the seminar, Finance Minister P. Chidambaram pointed out that global best business practices had often emerged from the defence sector and urged India's defence accountants to ensure faster, better and cheaper delivery of hardware without cost or time overruns.

"The challenge lies in balancing the requirements of a sound defence system with the obligations of a sound financial system," Chidambaram contended.

"We need to shift from a transaction-based system to an integrated system whereby expenditure is not done in a bunch at the end of a financial year," the minister maintained.

According to Secretary (defence finance) Vinod Mishra, the seminar will bridge the gap between think tanks and practitioners by bringing them together on one platform and will also demystify some of the complex concepts used in defence finance.

  
The seminar will deliberate on seven themes: defence strategies and economics; optimal resource allocation; myriad dimensions in defence acquisition; offset issues and project management concerns; defence research and development; defence manpower issues; audit and accountability in defence expenditure; and procurement and cost efficient logistic management in defence. 

The first session of the seminar has three sub-themes. 

The first concerns the core issues in defence economics. This will cover issues such as the emergence and evolution of defence economics, the impact of globalisation and new security challenges on defence economics and the new areas of challenge and research in defence economics. This sub-theme deals primarily with conceptual issues and the future of defence economics.
  
The second sub-theme deals with trends in defence expenditure. With world defence expenditure on defence on the rise, the discourse is expected to focus on its reasons and implications.
  
The third sub-theme concerns the affordability of defence.

"The question of competing demands of the social sector inevitably presents itself in any discourse on affordability of defence. This puts a great strain on the credibility and utility of defence economics as a tool of decision making," Mishra explained.
  
Under the topic of optimal resource allocation, issues such as formulation of integrated defence plans, transparency in defence planning, cross country experience in outcome budgeting and various accounting reforms undertaken in some advanced countries, will be discussed. 
  
"The topic of myriad dimensions of defence acquisitions is likely to generate a lot of interest among the participants as it is a complex process with few parallels in civil sector, Mishra maintained.