What if I were to say that the Indo-Pacific states are embroiled knee deep into an arms race?
Defined as an incredulously competitive struggle between two or more adversarial entities in terms of acquisition of arms, military capability and personnel, it’s possibly the provocative antics of China that have accelerated the odds of a war on the horizon. And yet the slightest of a window of opportunity has pushed India to orchestrate a sweet deal that benefits all stakeholders of the negotiation.
To say that China has been preoccupied across various fronts would be an understatement, what with the long-standing border dispute with India, the territorial disputes over the South China sea along with the tensions resulting from the political status of Taiwan. Countries which have progressively developed beefs with the nation are now seeking to invest in Indian weaponry to deter the daily aggression inflicted upon them by China.
The arms industry, like any market in the world, entails a relationship between producers and consumers- the root of all economic activity being the concepts of demand and supply.
Countries with natural monopolies and capabilities of producing and providing arms being classified as exporters- rushing to meet the demand put forward by countries classified as consumers, incapable of self sustaining mass domestic production of arms.
Now historically, India has always been a buyer, a consumer -one of the world’s largest importers of arms. Looking back on the past few years, one can very well recall the fruitful negotiations the country held with Russia and France.
In recent years however the government has been seeking to achieve “atma nirbharta” i.e self sufficiency or independence in the production of arms and weaponry.
In fact, this mission has embedded itself so deeply amongst the country’s objectives, that in a recent budget announcement, plans to sanction a 9.8% increase in budget to 5.25 trillion INR towards the development of the domestic defence industry were made public for the budget year 2022-23.
Microeconomic benefits
Sounds ambitious? Sure. But the extent to which this would benefit the country would surely be cathartic pleasure for the policy makers of the nation. We know that arms account for 11% of all of the country’s imports meaning a huge chunk of the government’s budget is spent on paying dues to another country for acquisition of what it cannot manufacture. This is money not spent on importing resources for other industries-leaving them high and low, money not spent on public investment, on the country’s people…for all one knows the lack of this initiative amidst the potential for war would have increased the imports creating disparities in investment domestically. More shockingly important-what if the government increased tax to create revenue to sustain its expenditure across all fronts?
Of course, one may say 68% of the central budget towards arms development would mean just as much if not exponentially more of the government’s investment is spent on arms. So what difference would it make, if not accelerate the internal problems even more? The answer: the fact that the production is domestic.
First and foremost, more production means more jobs. Schlepping the country’s unemployed off the streets is surely a plus for India. And then again since this would be internal production, a huge contribution would be made to the GDP, indicating a greater employment of resources, economic growth-contributing inversely to the government revenue to increase public investment. An equitable distribution of revenue on imports, public facilities and people-doesn’t it seem worth the initially expensive plan?
Getting some action on the plan
All is fine and well in a theoretical sense. Internally, on a microeconomic basis, self sustenance does promise to take this plan off. But to profit even more, one would need to realise the macroeconomic benefits of acquiring a powerful political position from an arms monopoly, meaning a need to entrance the global market by batting some eyelashes on the promises of a sweet deal that all benefit from.
What’s gratifying is that the government’s palawan has not been abstract but has been developed in practice. In a surprising turn of events, the Stockholm International Peace Research institute reported that India’s India’s imports of arms have fallen by 21% over the past 5 year since 2017 and instead Indian exports of arms have increased 6 times since 2015.
This is due to the fortunate incidences of global forces aligning in favour of the nation, to reap the potential benefits of domestic arms production. As aforementioned, the Chinese aggression toward the Indo Pacific countries make them wary of importing arms from China, which has seemingly also set off on a spending spree on defence and the military. If anything, this opens up the market for Indian weaponry which could very well be a manner of steeling protection against China’s plans.
Starting with the Russian Invasion, “war is not good marketing for Putin’s defence equipment” as WION news put it. Sanctions make it difficult to acquire or import arms from one of the world’s largest exporters of the same. So many countries relying on Russia are looking elsewhere for new suppliers.
For instance Malaysia currently employs Russian fighter jets. However on one hand the fleet itself is getting too old and in need of replacement and on the other updates or repairs cannot be made to the same as sanctions make it difficult to acquire spare parts of Russian makes used in the fighter jets.
This has prompted them to broker an almost done deal with India in exchange of India’s Tejas fighter jets. What led them to consider India’s jets can be understood by India sweetening the deal by establishing a maintenance facility in Malaysia that will tend to the repairs sought by the jets.
Egypt too has been eyeing the Tejas, a deal that they’ll definitely be closely considering due to India offering to set production factories in Egypt, ensuring jobs for the locals and a concrete consumer for the Indian win. The strategic location of factories in Egypt also makes India’s arms open to trade in the Middle east-specifically all the historically big conflict zones- by virtue of arms production being logistically in the bandwidth of this region.
Yet another success story that explained the eye opening statistics of SIPRI is that of the deal between India and Vietnam- an exchange including a proposition of Brahmos missiles in discussion along with “mutual logistics support” that has recently been signed off on.
If anything should be picked up from this article-its how to successfully broker a sweet deal that most importantly you benefit from. This also enlightens upon the relationship of politics and economics and how quickly the market can change- meaning one must be ready to pounce at all times.
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