Growing Chinese Imports Fuel Indian Paranoia
India is continuing to run large current account and trade deficits. India's trade deficit was an estimated $86.6 billion in April- January 2009-2010, according to media reports. The Reserve Bank of India said the nation's current account deficit widened to $29.8 billion in fiscal 2009, compared with a deficit of $17 billion in prior year.
The nation’s capital account continued to be negative for the second quarter in a row. The gauge of investment flows into and out of the country showed a shortfall of $4.44 billion in the three months to 31 March, compared with a net inflow of $26.5 billion a year earlier, RBI said.
India's government has sent letters to the country's telecom companies ordering them not to buy equipment from Huawei, ZTE, and several other Chinese companies due to security risks, according to a report in Businessweek. A few weeks ago, the Wall Street Journal reported that there was a similar move by Delhi to limit China's growing role in building India's power sector.
Growing Chinese Imports:
India's imports from China expanded 19 per cent and stood at US$ 32.49 billion in 2008-09, while exports were at US$ 9.35 billion. India's trade deficit with China is expected to grow larger this year, a trend India considers alarming given the nature of imports that go into India's essential infrastructure of power generation and telecommunications networks.
Power Sector:
Chinese are now supplying equipment for about 25% of the new generating capacity India is adding to its national grid, up from almost nothing a few years ago. There are thousands of skilled Chinese expatriates at Indian plant sites, along with Chinese chefs, Chinese television and ping pong.
Telecom Sector:
India is already the biggest export market for China's two leading telecom equipment manufacturers, Huawei Technologies and ZTE, as both companies have focused on India in recent years. As India has grown to the world's No. 2 mobile phone market in recent years, its imports of Chinese handsets have soared.
Unlike China, India lacks the necessary industrial and manufacturing base for greater self reliance in infrastructure equipment and defense armaments. India also runs large current account deficits while China is enjoying large surpluses strengthening its economic position in the world.
Defense Equipment:
India is overwhelmingly dependent on foreign imports, mainly Russian and Israeli, for about 70 per cent of its defense requirement, especially for critical military products and high-end defense technology, according to an Indian defense analyst Dinesh Kumar. Kumar adds that "India’s defense ministry officially admits to attaining only 30 to 35 per cent self-reliance capability for its defense requirement. But even this figure is suspect given that India’s self-reliance mostly accrues from transfer of technology, license production and foreign consultancy despite considerable investment in time and money".
On the same theme, Russian newspaper Kommersant reported that "India has had little success with military equipment production, and has had problems producing Russian Su-30MKI fighter jets and T-90S tanks, English Hawk training jets and French Scorpene submarines."
On India's perennial dependence on imports, here's how blogger Vijainder Thakur sees India's loose meaning of "indigenous" Smerch and other imports:
"The Russians will come here set up the plant for us and supply the critical manufacturing machinery. Indian labor and technical management will run the plant which will simply assemble the system. Critical components and the solid propellant rocket motor fuel will still come from Perm Powder Mill. However, bureaucrats in New Delhi and the nation as a whole will be happy. The Smerch system will be proudly paraded on Rajpath every republic day as an indigenous weapon system.
A decade or so down the line, Smerch will get outdated and India will negotiate a new deal with Russia for the license production of a new multiple rocket system for the Indian Army.
China will by then have developed its own follow up system besides having used the solid propellant motors to develop other weapon systems and assist its space research program."
India does export some armaments but its modest record of producing and exporting weapon systems is evident from the fact that India’s defense annual exports averaged only US$ 88 million between 2006-07 and 2008-09. By contrast, Pakistan exported $300 million worth of military hardware and munitions last year.
Alternatives:
India is looking for alternative sources for critical imports to reduce its dependence on the Chinese and Russians. But it faces an uphill task with Chinese imports in particular. China has become the biggest and the most efficient factory for the world's largest American, European and Japanese companies. Even if it does manage to find non-Chinese sources, India will have to pay much higher prices for such imports. And these imports may still contain crucial Chinese components which dominate the international supply chain for most non-Chinese companies, continuing its dependence on the Chinese.
On the defense side, India has begun to diversify away from Russia. Israelis have become major suppliers to India, and the US and Europeans are now bidding to sell military hardware to India. Both Israeli and Western equipment carries significantly higher price tags than imports from Russia.
Summary:
In spite of Gandhi's Swadeshi movement and Indian policy of developing self-reliance, the nation remains heavily dependent on imports from China for its critical infrastructure, and its growing appetite for weapons systems on Russia and Israel. These growing imports are fueling India's current account deficits, and adding to its paranoia with regard to the rise of China. In response, Indian government is acting to reduce dependence on Chinese imports, a move that will likely to add further to its trade imbalance because of the higher costs of imports from non-Chinese and non-Russian sources.
Related Links:
India-Israel Military Relations
Pakistan's Military Production
BRIC, Chindia, and the "Indian Miracle"
India's "Indigenous" Weapons
Pakistan's Telecom Boom
India's Growing Defense Budget
The nation’s capital account continued to be negative for the second quarter in a row. The gauge of investment flows into and out of the country showed a shortfall of $4.44 billion in the three months to 31 March, compared with a net inflow of $26.5 billion a year earlier, RBI said.
India's government has sent letters to the country's telecom companies ordering them not to buy equipment from Huawei, ZTE, and several other Chinese companies due to security risks, according to a report in Businessweek. A few weeks ago, the Wall Street Journal reported that there was a similar move by Delhi to limit China's growing role in building India's power sector.
Growing Chinese Imports:
India's imports from China expanded 19 per cent and stood at US$ 32.49 billion in 2008-09, while exports were at US$ 9.35 billion. India's trade deficit with China is expected to grow larger this year, a trend India considers alarming given the nature of imports that go into India's essential infrastructure of power generation and telecommunications networks.
Power Sector:
Chinese are now supplying equipment for about 25% of the new generating capacity India is adding to its national grid, up from almost nothing a few years ago. There are thousands of skilled Chinese expatriates at Indian plant sites, along with Chinese chefs, Chinese television and ping pong.
Telecom Sector:
India is already the biggest export market for China's two leading telecom equipment manufacturers, Huawei Technologies and ZTE, as both companies have focused on India in recent years. As India has grown to the world's No. 2 mobile phone market in recent years, its imports of Chinese handsets have soared.
Unlike China, India lacks the necessary industrial and manufacturing base for greater self reliance in infrastructure equipment and defense armaments. India also runs large current account deficits while China is enjoying large surpluses strengthening its economic position in the world.
Defense Equipment:
India is overwhelmingly dependent on foreign imports, mainly Russian and Israeli, for about 70 per cent of its defense requirement, especially for critical military products and high-end defense technology, according to an Indian defense analyst Dinesh Kumar. Kumar adds that "India’s defense ministry officially admits to attaining only 30 to 35 per cent self-reliance capability for its defense requirement. But even this figure is suspect given that India’s self-reliance mostly accrues from transfer of technology, license production and foreign consultancy despite considerable investment in time and money".
On the same theme, Russian newspaper Kommersant reported that "India has had little success with military equipment production, and has had problems producing Russian Su-30MKI fighter jets and T-90S tanks, English Hawk training jets and French Scorpene submarines."
On India's perennial dependence on imports, here's how blogger Vijainder Thakur sees India's loose meaning of "indigenous" Smerch and other imports:
"The Russians will come here set up the plant for us and supply the critical manufacturing machinery. Indian labor and technical management will run the plant which will simply assemble the system. Critical components and the solid propellant rocket motor fuel will still come from Perm Powder Mill. However, bureaucrats in New Delhi and the nation as a whole will be happy. The Smerch system will be proudly paraded on Rajpath every republic day as an indigenous weapon system.
A decade or so down the line, Smerch will get outdated and India will negotiate a new deal with Russia for the license production of a new multiple rocket system for the Indian Army.
China will by then have developed its own follow up system besides having used the solid propellant motors to develop other weapon systems and assist its space research program."
India does export some armaments but its modest record of producing and exporting weapon systems is evident from the fact that India’s defense annual exports averaged only US$ 88 million between 2006-07 and 2008-09. By contrast, Pakistan exported $300 million worth of military hardware and munitions last year.
Alternatives:
India is looking for alternative sources for critical imports to reduce its dependence on the Chinese and Russians. But it faces an uphill task with Chinese imports in particular. China has become the biggest and the most efficient factory for the world's largest American, European and Japanese companies. Even if it does manage to find non-Chinese sources, India will have to pay much higher prices for such imports. And these imports may still contain crucial Chinese components which dominate the international supply chain for most non-Chinese companies, continuing its dependence on the Chinese.
On the defense side, India has begun to diversify away from Russia. Israelis have become major suppliers to India, and the US and Europeans are now bidding to sell military hardware to India. Both Israeli and Western equipment carries significantly higher price tags than imports from Russia.
Summary:
In spite of Gandhi's Swadeshi movement and Indian policy of developing self-reliance, the nation remains heavily dependent on imports from China for its critical infrastructure, and its growing appetite for weapons systems on Russia and Israel. These growing imports are fueling India's current account deficits, and adding to its paranoia with regard to the rise of China. In response, Indian government is acting to reduce dependence on Chinese imports, a move that will likely to add further to its trade imbalance because of the higher costs of imports from non-Chinese and non-Russian sources.
Related Links:
India-Israel Military Relations
Pakistan's Military Production
BRIC, Chindia, and the "Indian Miracle"
India's "Indigenous" Weapons
Pakistan's Telecom Boom
India's Growing Defense Budget
Comments
Mr. Wen sought during the visit to strengthen commercial ties with big-ticket investment proposals and a promise to further open China's markets to India.
On Wednesday, Indian and Chinese companies signed more than 40 deals in the power, commodities and telecoms sectors for a combined $16 billion. Many of the deals were Chinese bank financing agreements for large Indian orders of Chinese exports of telecom and power-producing equipment.
During the first 10 months of 2010, China exported goods valued at $32.87 billion to India, but its imports totaled only $17 billion.Mr. Wen reiterated that Beijing will heed New Delhi's request to broaden access of Indian exports such as pharmaceuticals, information technology and agricultural products to shrink India's trade deficit.Mr. Wen also said in his speech to the diplomats that China understands and supports India's desire to play a bigger role at the United Nations, including the Security Council. China has long opposed a permanent seat for India on the council, and Mr. Wen's comments Thursday didn't appear to represent a change to that position. President Barack Obama during a visit to India in November for the first time publicly backed India's inclusion as a permanent member of the Security Council.
India, concerned over its trade deficit of $19 billion last fiscal year, wants better market access for its exports. For now, India's main export to China is iron ore, while it imports large amounts of high-value manufactured goods.
"The two sides agreed to take measures to promote greater Indian exports to China with a view to reduce India's trade deficit," the two countries said in a joint statement.
India-China trade ties have often been rocky, as India continues to impose antidumping duties—the highest by any country at the World Trade Organization last year—against Chinese products, alleging that the prices of some goods are set artificially low.
China has also raised objections to India's stringent regulations in sourcing power and telecommunications equipment, calling them discriminatory.
China and India have shared interests in reform of the council, with both supporting expanded representation of developing countries, Mr. Wen said Thursday.
India replaced China as the world’s top weapons importer, according to a study by the Stockholm International Peace Research Institute, as it aims to modernize its armed forces and project power through the region.
India received 9 percent of the volume of international arms transfers from 2006 to 2010, with 82 percent of that coming from Russia, Sipri said in a report released today. That topped China, South Korea and Pakistan, it said.
“The increases are substantial, and if you look at the Indian plans for the near future, they are massive,” Siemon Wezeman, a Sipri researcher who helped write the report, said in a telephone interview. “It’s worrying from the fact you are bringing a lot of weapons into an area that isn’t particularly stable, where you’ve got countries that have been at each other’s throats.”
India’s internal security threats and rivalries with Pakistan and China, the nuclear-armed neighbors with which it has border disputes, have driven the increase in expenditures, Wezeman said. The country’s plans to boost defense spending in the next decade to modernize the military have attracted U.S. and European firms banned from selling weapons to China.
The average volume of worldwide arms transfers in 2006-2010 was 24 percent higher than in 2001-2005, the report said. The Asia-Pacific region led the world, accounting for 43 percent of arms imports. It was followed by Europe at 21 percent, the Middle East at 17 percent and the Americas at 12 percent.
Economic Growth
India’s $1.3 trillion economy may expand by as much as 9.25 percent in the next financial year, the fastest pace since 2008, according to a Finance Ministry survey released last month. The World Bank estimates that more than three-quarters of India’s 1.2 billion people live on less than $2 a day.
Purchases by India of submarines, aircraft carriers and transport airplanes “can only be seen in the framework of regional ambitions,” Wezeman said.
India is seeking to buy 126 warplanes in the world’s biggest fighter-jet purchase in 15 years, according to the Indian Defense Ministry. Paris-based Dassault Aviation SA (AM), Chicago-based Boeing Co. (BA), Bethesda, Maryland-based Lockheed Martin Corp. (LMT), Sweden’s Saab AB (SAABB), Russia’s United Aircraft Corp. and European Aeronautic, Defense & Space Co., based in Paris and Munich, are competing for the contract.
The outlays on weapons have allowed India to demand technology transfers as part of purchases, Sipri said. The U.S. and Europe have banned weapons sales to China since the 1989 Tiananmen Square crackdown. U.S. military officials have questioned China’s motives in developing ballistic anti-ship missiles and radar-evading fighter jets.
‘Huge Market’
India is “in a position where they have this huge market at a time when exporters are in desperate need to find export markets,” Wezeman said.
The U.S. remains the world’s largest exporter of military equipment, accounting for 30 percent of arms deliveries between 2006 and 2010, the report said. The Defense Department is requesting $671 billion for the 2012 fiscal year starting Oct. 1, $37 billion less than this year’s request.
Stockholm-based Sipri, founded in 1966, conducts research into conflict, armaments, arms control and disarmament, according to its website. A substantial part of its funding comes from the Swedish government, it said.
In December, the two countries agreed to increase bilateral trade to $100bn (£66bn) by 2015, up from $60bn in 2010.
Mr Singh will also attend a summit in China that will include Brazil, Russia, India, China and South Africa.
China is India's largest trading partner. However, the two countries still share a very unbalanced trade relationship.
"India's import dependence on China has gone up significantly on critical items," said Samiran Chakraborty, regional head of research for India at Standard Chartered Bank.
"Whereas if you look at exports, India's primary export to China is only iron ore."
Mr Chakraborty says this issue could come up during the visit.
"One of the demands is to open up the Chinese markets to India. Otherwise the trade balance is very much in favour of China and working against India," he adds.
'Complimentary relationship'
When China's Prime Minister Wen Jiabao visited India in December, the two sides agreed to take measures to promote Indian exports in China, in an effort to reduce India's trade deficit.
About 400 business leaders came with Mr Wen to India and business deals worth $16bn were signed.
The two countries also agreed to expand co-operation in infrastructure, environment, information technology, telecommunications, and investment and finance.
Mr Chakraborty says it is in each sides interest to continue to deepen ties.
"If these two have to stay side by side sharing borders and trying to grow at high growth rates it has to be a complimentary relationship rather then a tense relationship," Mr Chakraborty said.
"Otherwise it will impact the investment climate in both countries".
As per the latest data on international arms transfers released by Stockholm International Peace Research Institute (SIPRI), the volume of Indian imports of major weapons rose by 111% between 2004-08 and 2009-13, and its share of the volume of international arms imports increased from 7% to 14%.
The major suppliers of arms to India in 2009-13 were Russia (accounting for 75% of imports) and the US (7%), which for the first time became the second largest arms supplier to India, said SIPRI. As earlier reported by TOI, the US has already bagged defence deals close to $10 billion over the last decade in the lucrative Indian defence market, with the latest being the $1.01 billion one for six additional C-130J "Super Hercules" aircraft.
The other deals on the anvil are the ones for 22 Apache attack helicopters, 15 Chinook heavy-lift helicopters, four P-8I maritime patrol aircraft and 145 M-777 ultra-light howitzers, together worth another $4 billion or so.
SIPRI, on its part, said the USA's share of Pakistani imports in the same period was 27%. China was also a major supplier in the region, accounting for 54% of Pakistani arms imports and 82% of Bangladeshi imports.
"Chinese, Russian and US arms supplies to South Asia are driven by both economic and political considerations," said Siemon Wezeman of SIPRI. In particular, China and the US appear to be using arms deliveries to Asia to strengthen their influence in the region, he added.
The five largest suppliers of major weapons during the five-year period 2009-13 were the United States (29% of global arms exports), Russia (27%), Germany (7%), China (6%) and France (5%).
Despite India's emergence as the world's largest arms importer over the last decade, the modernisation of its armed forces continues to take place in a haphazard manner due to the lack of concrete strategic planning in tune with the country's long-term geopolitical objectives, as reported by TOI earlier.
The Indian armed forces are still grappling with critical shortages in fighter jets, submarines, helicopters, howitzers, night-fighting capabilities and the like. The IAF, for instance, is down to just 34 fighter squadrons when it requires at least 44 to be "comfortable" against the twin-challenge posed by Pakistan and China.
A K Antony, who has been India's longest-serving defence minister, may have often chanted the mantra of "indigenisation" during his seven-and-a-half year tenure, especially after defence scams erupted one after the other, but failed to deliver meaningful systemic reforms on the ground.
There was, for instance, no concrete revamping of the DRDO and its 50 establishments as well as the five defence PSUs, four shipyards and 39 ordnance factories to ensure they deliver weapon systems without huge cost and time overruns.
http://timesofindia.indiatimes.com/india/Indias-arms-imports-almost-three-times-of-China-Pak-SIPRI-report/articleshow/32190097.cms
At a news conference with Chinese President Xi Jinping, India's PM Narendra Modi said "peace on the border" was important for progress.
Talks came as India accused China of fresh territorial incursions in Ladakh.
China is one of India's top trading partners but they vie for regional influence and dispute their border.
Mr Modi and Mr Xi made separate statements at the end of their talks in Delhi on Thursday.
Under the investment plans, China pledged to:
Help bring India's ageing railway system railway system up-to-date with high-speed links and upgraded railway stations.
Set up industrial parks in Gujarat and Maharashtra.
Give more market access to India to products, including pharmaceuticals and farm products.
Both sides also focussed on increasing co-operation in trade, space exploration and civil nuclear energy.
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Indian and Chinese companies have also signed preliminary deals worth more than $3bn (£1.8bn) in aircraft leasing and telecoms, among other sectors.
Despite the continuing tensions, trade between India and China has risen to almost $70bn (£43bn) a year, although India's trade deficit with China has climbed to more than $40bn from $1bn in 2001-2002.
http://www.bbc.com/news/world-asia-india-29249268