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India Defence and Security Report Q1 2011


India Defence and Security Report Q1 2011

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Price $530.00
Meta Description No
Publisher Business Monitor International
Date of Report Aug 1, 2011
Quick Overview
India maintains a substantial defence force. Like most countries it scaled back the size of its military with the ending of the Cold War. In India’s case the reduction in force numbers was 120,000 troops, or 10.9% of the army’s strength. However, as the regional situation grew more serious, this policy was reversed. By 2003, the armed force levels were 4.7% higher than they had been at the end of the Cold War.
Historically, India sourced much of its military hardware from the Soviet Union. Since 1962 it has been Indian government policy to develop a local defence industry and reduce its dependence on imported equipment. India now possesses one of the largest and most sophisticated defence industries in the developing world. The defence industry is built around 39 state owned ordnance factories and 8 defencefocused government owned businesses. While the sector is nominally open to private sector companies they have been mostly confined to supplying raw materials or components to the state-owned factories.
Recently though India has begun entering into joint venture (JV) projects with other countries. It might be hoped this will reduce the level of bureaucratic delay that has marked many Indian defence projects. In January 2007, a project valued at US$549mn was signed between India’s Hindustan Aeronautics Limited (HAL) and Russia’s United Aircraft Corporation (UAC) to design and build a multirole transport aircraft. India and Israel have agreed to jointly develop a longer range variant of the Barak short range supersonic, vertically launched air defence system. Israeli Military Industries (IMI) has signed an US$11.6mn deal for the joint manufacture of advanced tank shells, with further orders expected to follow. Italy’s Fincantieri is to work closely with Cochin Shipyard in southern India on the flagship aircraft carrier project.
India needs to manage a complex combination of internal and external situations. Internally, after 60 years of independence, India faces a new challenge. Having kept the country together through decades of famine and poverty, the government now needs to create harmony and stability in a period of rapidly increasing, but terribly uneven, prosperity. Economic inequality, in terms of both present income and also economic opportunity, lies at the heart of most of the internal unrest.
Externally, the conflict in Kashmir is ongoing and brings India into proximity with both Pakistan and China. The most dramatic risk comes from Pakistan, its rather unstable but nuclear armed neighbour. It is unfortunate that it is the very size and capability of India’s conventional forces that has been a key driver behind Pakistan’s nuclear programme. Convinced they could not resist India in a conventional war, Pakistan looked to nuclear arms as a force multiplier.
Economically, India is performing well. Despite our rather bearish outlook for many of the world’s key economies, we expect India’s economy to continue growing at its present brisk pace throughout 2010 and 2011.
Table of Contents
Executive Summary ........................................................................................................................................ 5
SWOT Analysis ................................................................................................................................................ 6
India Security SWOT ............................................................................................................................................................................................ 6
India Defence Industry SWOT .............................................................................................................................................................................. 7
India Political SWOT ............................................................................................................................................................................................ 8
India Economic SWOT .......................................................................................................................................................................................... 9
India Business Environment SWOT .................................................................................................................................................................... 10
Global Political Outlook ................................................................................................................................ 11
Global Hotspots .................................................................................................................................................................................................. 12
Global Election Timetable, 2010 And 2011 ........................................................................................................................................................ 14
Latin America: More Of The Same ..................................................................................................................................................................... 19
Western Europe .................................................................................................................................................................................................. 20
Central Europe ................................................................................................................................................................................................... 22
South Eastern Europe ......................................................................................................................................................................................... 22
Russia And The Former Soviet Union ................................................................................................................................................................. 23
Middle East: Mostly The Same Old Challenges .................................................................................................................................................. 24
Sub-Saharan Africa: Definitive Elections Pending ............................................................................................................................................. 26
Asia: Accommodating A More Powerful China .................................................................................................................................................. 27
Wild Cards .......................................................................................................................................................................................................... 29
Global Security Outlook ............................................................................................................................... 31
South East Asia Security Overview .............................................................................................................. 37
The Strategic Outlook For The 2010s ................................................................................................................................................................. 37
South Asia In A Global Context .......................................................................................................................................................................... 37
The Outlook For South Asia................................................................................................................................................................................ 48
Political Overview .......................................................................................................................................... 50
Domestic Politics ................................................................................................................................................................................................ 50
Foreign Policy .................................................................................................................................................................................................... 52
Long-Term Political Outlook .............................................................................................................................................................................. 54
Foreign Relations ............................................................................................................................................................................................... 58
Security Risk Ratings ................................................................................................................................... 61
BMI’s Security Ratings ....................................................................................................................................................................................... 61
Table: Asia Pacific Regional Security Ratings .................................................................................................................................................... 61
Table: Asia Pacific State Vulnerability To Terrorism Index ............................................................................................................................... 62
India’s Security Ratings ...................................................................................................................................................................................... 62
City Terrorism Rating ......................................................................................................................................................................................... 64
Table: BMI’s Asia City Terrorism Index ............................................................................................................................................................. 65
Security Overview ......................................................................................................................................... 66
Internal Security Situation .................................................................................................................................................................................. 66
Religion .............................................................................................................................................................................................................. 66
Insurgency .......................................................................................................................................................................................................... 66
Assam.................................................................................................................................................................................................................. 66
Nagaland ............................................................................................................................................................................................................ 67
Maoists ............................................................................................................................................................................................................... 67
Refugees .............................................................................................................................................................................................................. 68
External Security Situation ................................................................................................................................................................................. 69
International Terrorism ...................................................................................................................................................................................... 69
Border Disputes .................................................................................................................................................................................................. 69
Armed Forces and Government Expenditure ............................................................................................. 71
Armed Forces ..................................................................................................................................................................................................... 71
Table: Regional Armed Forces, 2010 Forecast (including conscripted, ‘000 personnel) .................................................................................... 71
International Deployments .................................................................................................................................................................................. 73
Table: India Deployments ................................................................................................................................................................................... 73
Joint Exercises .................................................................................................................................................................................................... 73
Weapons of Mass Destruction ............................................................................................................................................................................. 74
Table: Indian Nuclear-Capable Delivery Vehicles ............................................................................................................................................. 76
Market Overview ............................................................................................................................................ 77
Arms Trade Overview ......................................................................................................................................................................................... 78
Industry Trends and Developments ..................................................................................................................................................................... 79
Procurement Trends and Developments ............................................................................................................................................................. 83
Competitive Landscape ....................................................................................................................................................................................... 85
Industry Forecast Scenario ........................................................................................................................... 87
Table: India’s Defence Personnel; 2000-2008 ................................................................................................................................................... 87
Table: India’s Defence Personnel; 2008-2015 ................................................................................................................................................... 87
Table: India’s Defence Expenditure; 2008-2015 ................................................................................................................................................ 88
Table: India’s Expenditure: % Of GDP; 2008-2015........................................................................................................................................... 89
Table: India’s Defence Exports; 2008-2015 (US$ mn) ....................................................................................................................................... 90
Table: India’s Defence Imports; 2008-2015 (US$ mn) ....................................................................................................................................... 91
Table: India’s Defence Trade Balance; 2008-2015 (US$ mn) ............................................................................................................................. 92
Key Risks To BMI’s Forecast Scenario ............................................................................................................................................................... 92
Macroeconomic Forecast Scenario .................................................................................................................................................................... 92
Table: India Economic Activity; 2006-2015 ....................................................................................................................................................... 94
Company Profiles .......................................................................................................................................... 95
BAE-HAL Software Ltd ....................................................................................................................................................................................... 95
Bharat Dynamics Ltd (BDL) ............................................................................................................................................................................... 97
Bharat Electronics Ltd (BEL) ............................................................................................................................................................................. 98
Hindustan Aeronautics Limited (HAL)...............................................................................................................................................................100
Honeywell International India ...........................................................................................................................................................................102
Ordnance Factories (OF) ..................................................................................................................................................................................104
Rolls-Royce International ..................................................................................................................................................................................105
BMI Methodology ........................................................................................................................................ 106
How We Generate Our Industry Forecasts ........................................................................................................................................................106
Defence Industry ................................................................................................................................................................................................106
City Terrorism Rating ........................................................................................................................................................................................107
Table: Methodology ...........................................................................................................................................................................................109
Sources ..............................................................................................................................................................................................................110




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