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India’s Defence Budget Makes It to Top 5 In the World, but China Still a Threat

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India, a rising superpower, has proved it’s might yet again with the latest world defence budget rankings. India makes it to the top 5 in the world as one of the largest defence budgets. In a first of its kinds results, India has overtaken the UK as the 5th largest defence budget nation.

According to a report in London, these new rankings in defence budget point towards a shift in the defence balance between India and UK. These rankings have been shared by the Military Balance 2018, prepared by the IISS (International Institute for Strategic Studies). In 2016, India’s defence budget stood at $51.1 billion and in 2017, overtaking the UK, the defence budget has peaked at $52.5 billion. On the other hand, the defence budget for the UK dropped from $52.5 billion to $50.7 billion from 2016.

Also Read: IMF Confirms India as the World’s Fastest Growing Economy

China’s Defence Budget is Almost Three Times India’s!

China ranks at number two with a whopping $150.5 billion budget. The rankings are topped by the US. The defence budget for China saw a surge of 25% in 2016-17, whereas the surge for India was a mere 2.4%.

Ever since the Doklam region issue between India and China, the defence balance for India with China favours the latter. Over the past decade, China has invested large amounts in building military equipment and vehicles, the total is much more than the combined investments of India, Japan and S. Korea. Furthermore, China also has a significantly more number of defence personnel than India, over 1000tactical aircrafts as compared to around 800 in India and a stronger cruiser, destroyer and frigate fleet too.

Also Read: Indian Armed Forces Not Strong Enough to Counter China

Is India’s Defence Budget Inadequate?

There have been reports that suggest that India is trying to become a defence exporter rather than an importer. This is further to the ‘Maki in India’ policy. However, even though the budget for India may have reached Top 5, the fact remains that the overall capability of the defence forces in India continues to be inadequate. This is mainly because of poor logistics, a shortage of ammunition and also spare parts.

The Top 5 Defence Budgets of the world are:

  1. US ($602.8 billion)
  2. China ($150.5 billion)
  3. Saudi Arabia ($76.7 billion)
  4. Russia ($61.2 billion)
  5. India ($52.5 billion)

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Asia Pacific

China-Pakistan Economic Corridor Economically & Logistically Unstable – Experts

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China’s ambitious plan to transport oil across the Himalayas in Pakistan under the China-Pakistan Economic Corridor (CPEC) might be “economically unsustainable” and actually benefit the US in the ongoing US-China rivalry.

India-China Border Tensions Intensify As PLA Troops Occupy Heights, Build Fortifications & Install An ‘Enormous Signage’

China has pushed its way to conquer Pakistan’s construction sector with its multi-billion-dollar Belt and Road Initiative (BRI) offering it more than 40 projects. One of the ambitiously proposed projects includes an oil pipeline connecting Gwadar port to Kashgar in China’s Xinjiang province via the challenging and unstable region of Himalayas.  

Experts write — “Starting from sea level, it will have to cross the 4700-metre Khunjerab pass to reach the Chinese mainland, requiring heavy pumping equipment and significant power supply to keep the pipeline flowing.”

Pakistan Deploys Additional 20,000 Soldiers In North Ladakh On China’s Behest – Reports

Additionally, the author says that the region is prone to the periodic danger associated with earthquakes and landslides which adds to the regular costs of maintenance. The temperature also drops to as low as negative 30 degrees Celsius which would require heating technologies apart from the insulation.

Furthermore, the project is also believed to be economically unsustainable as a study formulates that it would cost approximately $10 a barrel to move oil from Pakistan to western China through pipelines, along with added $5 to deliver oil to demand centres in the eastern region.

Pakistan Deploys Additional 20,000 Soldiers In North Ladakh On China’s Behest – Reports

On the other hand, it costs just $2 per barrel to ship oil from the Persian Gulf to the east coast in China. The author says that “this translates to China losing roughly half a billion dollars per year through pipeline shipments.”

Meanwhile, China has been pressing the project, however, the Xinjiang province of China is already supported by a massive network of oil and gas pipelines from Kazakhstan and Russia. Many experts speculate that China’s interest in the project in Pakistan stands solely due to the Malacca dilemma that could work in favour of the United States.

India-China War: China Has No ‘Military Advantage’ Over ‘Battle-Hardened’ Indian Army – CNN

VS Reddy, a research assistant at the Nuclear and Space Policy Initiative of the ORF believes that “China has been pressing to complete the Gwadar port in Pakistan and build the China-Pakistan Economic Corridor (CPEC), allowing it to be connected overland to an Indian Ocean port.

Gwadar and CPEC allow China to circumvent the Strait of Malacca which can be blocked by rival navies in the event of a conflict termed as “Malacca Dilemma”. Many political analysts opine the Strait of Malacca situated between Malaysia, Singapore, and Indonesia connecting the Indian and Pacific Oceans could help the US gain advantage from an event of Chinese blockade in the region.

How Many Chinese Soldiers Were Killed In The India-China Clash At Galwan Valley / Ladakh?

“Since China’s economic growth is highly dependent on the sea routes for receiving energy along with other raw materials which it uses for cheaper productions which are later shipped back as finished products other continents, it could be a major blow to China,” tells Ragahvan Srivastava to EurAsian Times.

India has established a strong naval presence in the Andaman Sea adjacent to the Strait of Malacca and is regularly partnering with the U.S. and other countries in safeguarding it. “Such a presence can be translated into a formidable blockade. On the other hand, China has yet to showcase its capabilities and willingness to fight to keep this Strait open for its ships,” writes Vidya.

China-Australia Spat: Australia To Invest $270B In Defense Capabilities As Tensions Soar With China

Rahul Jaybhay / Vipasha Kaushal

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Economy

Indian Startups Ditch Chinese Investors & Move Towards Japan As India-China Ties Worsens

It is hard to estimate whether Japan will be able to match China in terms of investment and risk appetite as 18 of India’s 30 unicorns — private companies with a valuation of at least $1 billion — have a Chinese investor.

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With deteriorating ties between India and China, Indian startups are looking towards Japanese investors as the COVID-19 pandemic has left them high and dry. Experts wonder if Japan can match China in terms of investment and risk appetite.

With the ongoing lockdown and the fears of raging virus, businesses have resisted opening its operations fully which has led to ploughing back of past profits and earnings. While it is easier for long-established profit-making businesses to survive, though, for a limited period in such a situation, it can prove to be fatal for the startups with little or no profits to fall back on.

In April, the Indian government modified the Foreign Direct Investment (FDI) policy which would require the government’s approval for nations sharing a border with India to invest in the country. Such a move is aimed to curb opportunistic takeover, especially from China, when the country is still in the process of fighting the COVID-19 pandemic.

There is a rising sentiment against Chinese products in India due to the recent border clashes. After the troops of the two neighbouring countries clashed on the LAC in the Galwan valley leaving 20 Indian troops dead and an unknown number of Chinese casualties, people are pledging to boycott Chinese products.

“In the last 12 to 18 months, a lot of Chinese VCs or Chinese companies want to throw money at Indian companies, and that has inflated a lot of deals,” said Chua Kee Lock, CEO of venture capital firm Vertex Holdings. He further added that the decline in Chinese investment due to the new regulations means startup valuations in India will be hit harder than in other countries.

With growing ties between India and Japan, Indian startups are looking to get investors. “Japan, by any stretch of the imagination, is one of the top candidates [to enter India],” said Rakesh Mishra, founder of electric powertrain startup Entuple E-Mobility, during his presentation organised by National Association of Software and Service Companies (NASSCOM) to woo the Japanese investors.

“At this juncture, I won’t be interacting with any Chinese investors,” said Ajit Patil, a co-founder of DeepTek, a Pune-based medical startup. He raised several million dollars in funding from local investors and Japanese medical imaging company Nobori in May.

Toppan Printing, a Japanese commercial printing company joined a $15 million funding round for Medikabazaar, an online shopping site for hospitals making it Toppan’s first investment in an Indian startup.

“Many parts of Southeast Asia and India are ahead of Japan in going digital,” said Hiroshi Eguchi, who leads strategic investments at Toppan. “India is also attractive as a market,” he added.

However, it is difficult to estimate whether Japan will be able to match China in terms of investment and risk appetite. According to Gateway House, a Mumbai-based think tank, 18 of India’s 30 unicorns — private companies with a valuation of at least $1 billion — have a Chinese investor.

Another Japenese fund, SoftBank is one of the biggest investors in Indian companies like Paytm, Oyo and Ola with about $10 billion in investments.

“There are many companies that make large acquisitions but a better approach may be to find success through various investments,” said Takeshi Ebihara, general partner at venture capital firm Rebright Partners, said during the NASSCOM event.

Analysed By Smriti Chaudhary. Invaluable inputs from Nikkei Asian Review

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Asia Pacific

India-China Standoff: Decrease Border Tensions Or Face Business Losses – China Warns India

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China has warned India of repercussions in business and has threatened the possibility of being replaced by other Southeast Asian markets “if the boiling nationalist sentiment continues unchecked in India”.

10 Indian Soldiers Released By China; ‘No Indian Troops’ Under Chinese Custody Now

China’s state-run newspaper, Global Times (GT) which runs at the hands of the Chinese Communist Party has warned that the growing anti-China sentiment in India following the Himalayan brawl at the border in Ladakh may harm the business ties between both the Asian economic giants.

“If the boiling nationalist sentiment continues unchecked in India, it may lead to serious consequences in extreme cases, which would only weaken that market’s appeal to the outside world, making it easier to be replaced with other Southeast Asian markets,” writes the Chinese daily.

India’s anti-China sentiment

Post the violent border clashes in the Galwan valley of Ladakh where 20 Indian soldiers lost their lives to Chinese troops, the Indian countrymen stood up in nationalistic fervour against China by launching a campaign to boycott Chinese products. 

Indian netizens trended hashtags like #HindiCheeniByeBye, #MadeInIndia and #BharatVsChina on Twitter and made repetitive calls for the absolute boycott of Chinese goods and rather opt for domestic brands.

The Indian Prime Minister, Narendra Modi had previously led a campaign called “Vocal for Local”, however, experts believe that it was not even remotely connected to the latest situation with China.

The Smartphone Scenario

On Wednesday, the Chinese Smartphone giant Oppo cancelled the live stream launch of its flagship 5G smartphone in India amidst the intensifying calls for boycotting Chinese goods in the nation.

In India, 4 of the top 5 players in the Smartphone business are Chinese brands. While Xiaomi remains at the top position conquering almost a third of the market, Oppo stands at fifth position and has shipped about 3.5 million devices in the first quarter of 2020.

“In order to ensure the safety of their capital and personnel, it is essential for Chinese companies to take precautions for a worst-case scenario and consider placing their India investment and production plans on hold until the border crisis between the two neighbours is resolved,” advises the GT to Chinese manufacturing giants.

However, OnePlus, another China-based smartphone maker with prices higher than the top five selling brands witnessed its latest model being sold rapidly in India on Thursday, despite the repeated calls for a boycott.

Indian Government at the rescue?

While maintaining the warning for India to quit the anti-China fever, the GT goes on to ask the Indian government to “offer the necessary protection for all Chinese personnel, as well as all Chinese businesses and their assets in the country.”

Earlier in 2017, Indians had destroyed some mobile outlets to showcase their support for Indian army amidst similar troubles with China at the border.

The GT presses the “people to show rationality in the face of the border tension so as to maintain the stability of bilateral economic and trade ties.”

Meanwhile, it continues to clear the air about repercussions as, it says that “But if they (Indian government) fails, then it would also be the people who will bear the negative outcomes, and, Indians may suffer more losses than their Chinese neighbours.”

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