<p>So the budget is simply measured by adding up all the expenses. </p>

<p>The comparison to GDP that you reference is that we can measure how 'intensive' that sector is in the economy by what size of the economic pie is spent on that sector. So a country could spend a seemingly large amount of money, but if their overall economy is large enough, the military spending to GDP ratio would be small, indicating that the country isn't too devoted to that sector. </p>

<p><a href="https://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures" rel="nofollow">https://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures</a></p>

<p>As we can see in the link, India spends 2.3% and the US spend 3.3%, while the actual number is different by an order of magnitude. So the ratio gives us a way to compare across countries as the absolute numbers ignore a country's size. </p>

CC BY-SA 3.0
2016-08-20T12:41:58.167Z
2016-08-20T12:41:58.167Z
VCG
<p>I read that defence budget of the country is 2-3% of GDP, but isnt GDP  irrelevant when we are talking about expenditure? Shouldn't it be in a ratio of military import/total import?</p>

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2016-08-20T09:02:14.757Z
What do you mean by "correct way"? What do you want the indicator to actually mean?
410 gone
CC BY-SA 3.0
2016-08-21T15:33:54.070Z
Why would you not include domestic expenditure?
Giskard
<macroeconomics><finance><international-trade>
Correct way to measure Defence budget of a country like India
Amritesh Anand
# Correct way to measure Defence budget of a country like India

(Asked by: username_0 on 2016-08-20)

I read that defence budget of the country is 2-3% of GDP, but isnt GDP irrelevant when we are talking about expenditure? Shouldn't it be in a ratio of military import/total import?

**Tags:** macroeconomics, finance, international-trade

> **Comments:**
> **username_1**: What do you mean by "correct way"? What do you want the indicator to actually mean?  
> **username_2**: Why would you not include domestic expenditure?  

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## 1 answers

### Answer by username_3 on 2016-08-20. Score: 1

So the budget is simply measured by adding up all the expenses.

The comparison to GDP that you reference is that we can measure how 'intensive' that sector is in the economy by what size of the economic pie is spent on that sector. So a country could spend a seemingly large amount of money, but if their overall economy is large enough, the military spending to GDP ratio would be small, indicating that the country isn't too devoted to that sector.

<https://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures>

As we can see in the link, India spends 2.3% and the US spend 3.3%, while the actual number is different by an order of magnitude. So the ratio gives us a way to compare across countries as the absolute numbers ignore a country's size.


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