How India arises as a huge player in defense

This report is a “Inside India” newsletter in CNBC for this week, which brings you a timely and timely news to emerging power and major companies behind the height of a meteor. Like what you see? You can subscribe here.

India is already the best arms importer in the world, but this does not prevent the country from enhancing its defensive capabilities. New Delhi plans to spend about $ 200 billion on The next ten years On converting and updating her army.

This raises an important question: Why does India rush to double weapons and fighting aircraft? You may think that Pakistan, the country has been going on and competing for a long time. However, foreign policy analysts say that the operator in eastern India – specifically, is China.

The growing geopolitical tensions, skirmishes on the border between Chinese Indian and the high presence of Beijing in the Indian Ocean in the search for its defense in India. India and China are also closed in the competition of technology that experts say it has contributed to increasing tensions between the emerging Asian countries.

“The expansion policies of China and military accumulation along the border are still a serious challenge,” Bravin Krishna, a professor of international economics at Johns Hopkins University, told CNBC.

The high presence of Beijing around the water of the Indian subcontinent is the most urgent concern.

“China has made it clear that the Indian Ocean is not an ocean in India,” Bramet Pal Chaudhry, head of South Asian Training at the Eurasia Group, told CNBC on the phone.

According to Indian naval intelligence, China is building aircraft carriers, two of which will be deployed in the Indian Ocean. Beijing also has a complete naval base in Djibouti, a country in the east of the African continent, where marine exercises are taking place.

Renewing relations between India and India

On this background, India Prime Minister Narendra Modi met US President Donald Trump at the White House Two weeks ago The two leaders affirmed the efforts made to enhance American defense relations and India.

Moody also signed India Buy more American defense equipmentIncluding additional heavy armored vehicles, drones and combat aircraft.

The former American ambassador to India, Kenneth E.

The purchase of US defense equipment is also one of the ways that New Delhi can reduce the trade deficit of the United States in India, which is seen as a key to maintaining good relationships with Trump.

Boeing It has acquired the largest part of the US foreign military sales of India since 2017, according to estimates of the Queen Washington Research Group, a search arm at the TD Cowen Investment Bank. Trump also Display India access to Lockheed Martin on the latest Lockheed Martin F-35 fighter.

India is not technically qualified to get the F-35s, given that the country is not an official military ally of the United States and is currently a buyer of Russian equipment.

If Trump is excluded, analysts say it will be a big victory for India, although others are under severe pressure to see this happens. According to Reuters, Indian Foreign Minister Vikram Missri He told reporters earlier this month The US offer was selling F-35s in the “suggestion phase”, adding that the acquisition did not start.

“We believe that there will be some challenges that complement the sale due to India's use of Russian military systems,” Roman Shuwaiser, Space and Space Policy analyst at the Queen Washington Group for Research.

Play cakes with China

Regardless of the results of the F-35 deal, defensive spending in India is expected to remain strong. total, Jpmorgan It is estimated that the capital expenses of India on the defense will grow by 8 % every year from 2024 to 2026.

“Growth in defensive Capex in India is driven by its own geopolitical and security considerations,” ATUL TIWARI, Infrastructure, Industrial and Facilities at JPMorgan, wrote to customers on Monday note.

However, experts argue that India still has a long way to play with its main rival, China. Through official figures, China's military and defensive budget is currently three times the size of India and grows at a rapid rate, according to Eurasia.

U.S. restrictions in the United States can complicate India's plans to double US defense equipment.

“The limited investment in manufacturing … means that the American industrial defense base faces restrictions on capacity and extended delivery tables. This comes at a time when India must compete with European demand for American weapons, as well as America's needs to confront China,” said Tara Harharan, head of the US Arms Administration Research, the hedge fund that saves renewable markets in New York.

Driving towards self -sufficiency

Hariharan added that over time, the pressure on India will grow to become more self -acquisition because it is already facing internal tensions between the desire to buy American weapons and government policies “Make in India” that gives priority to local production. Hindustan AviationBharat Electronics and Zen Technologies emerged as three of the largest players in the growing defense sector in India, according to JPMorgan note.

India is increasingly realizing what is better to buy from foreign countries, and any equipment to be manufactured at home.

In 2023, General Electric Partnership Participate in manufacturing Air engines with Hindustan in India. The deal, which obtained the approval of the US Congress, included the transfer of technology to India.

Sources close to the Indian government participated that the transfer of technology was a topic discussed between Modi and Trump during the recent Indian leader's journey.

“If India can find other ways to obtain technology transfer and produce equipment inside the country … then delivery times will be accelerated,” said the source, who asked not to be called because it was not authorized to speak in this regard.

Krishna of Johns Hopkins University added that over time, India's desire to stay away from foreign weapons and investment in the capabilities of the indigenous population is.

India's ambition to expand its defense capabilities and protect its densely populated mother from new threats that can make it a more attractive partner American and Russian companies – a dance between the competing global powers that India will have to balance elegantly.

The European Union wants India to reduce definitions. As part of the discussions on the India-European Union Free Trade Agreement, The mass wants to reduce Delhi from a “very high tariff” A senior European Union official said goods such as wine, lives and cars. However, the European Union has significantly said that the customs tariff should not be “one for one” as various Gulf countries face their development levels, and face unique challenges in its economies. Ursula von der Lin, President of the European Union, will be in India from 27 to 28 February and meet the country's Prime Minister Narendra Modi.

Negotiations on the Free Trade Agreement in India and the United States are well advanced. There is only a A few remaining outstanding problems before the free trade agreement is completedThe UK's Business and Trade Minister Jonathan Reynolds told CNBC-TV18 exclusively. However, Reynolds stopped providing a tangible timetable for the deal, which he said would be a comprehensive agreement not only covered goods and services, but also less than the barriers that companies operate in both countries.

Tesla's flirtation in India may not be smooth. According to Tesla, Tesla was exploring the locations of the showroom in India to start selling vehicles in the country, following a meeting between the Prime Minister in India Narendra Modi and CEO of Tesla Elusk earlier in February. However, EV has After declaring any plans to establish factories in India Although Moody is pushed, such as introducing a new EV tariff policy.

Deepseek causes an external flow of Indian stocks. The Chinese artificial intelligence company is raised by the cost of feelings in the Chinese market, with a measure of wild shares in the country as well as abroad to shares of more than 26 % since its lowest level in January. Money should come from a place – most of the time, It was transferred from the competitor of its emerging markets India. The economy of the Indian subcontinent also contributes to the sharp correction of the stock market in recent months.

Indian stocks continued in negative lands this week. As of 12:30 pm local time on February 27 Elegant 50 The index fell down 0.09, while the broader Sensex index was flat.

The return on the Indian government bond increased for a few years a little to 6.701 %.

On CNBC TV this week, Aditya Sorich, head of stock research in India in Macquie Capital, said, said this week, Aditya Sorich, head of stock research in India, Macquie Capital, said, India's money is traded more defensiveFocusing on the information technology sector, choosing pharmaceutical companies and financial data, which has “evaluation support”. On the other hand, there are risks in the estimated space for the consumer and the industrial sector due to the high profits expectations.

Meanwhile, after the launch of Deepseek, The focus in artificial intelligence space has turned into software showsAccording to Konal Farah, BNP Paribas Director and Head of Stock Research in India. “Indian companies can play a very important role there,” he said immediately, especially because the Indian rupee is declining, which makes IT services cheaper for buyers abroad.