International figures say India no longer biggest arms importer; India’s own figures say still Number One

Calculating arms imports is difficult; for example, INS Kochi, an India-built destroyer, has numerous imported systems

By Ajai Shukla

Business Standard, 29th Dec 15

The authoritative Congressional Research Service (CRS), which provides data and analysis to the US Congress, finds that India no longer features in the world’s three biggest arms importers.

A new CRS report, according to The New York Times, finds that of the world’s total arms trade of $71.8 billion in 2014, the three biggest importers were South Korea ($7.8 billion in contracts signed), Iraq ($7.3 billion) and Brazil with $6.5 billion.

In March, the equally authoritative Stockholm International Peace Research Institute (SIPRI) had declared, in its annual weapons trade report for 2014, that Saudi Arabia had surpassed India as the world’s biggest arms importer. According to that report, Saudi Arabia imported $6.46 billion worth of arms, compared to India’s $5.57 billion.

This is not the only divergence in public figures relating to defence procurement, particularly that of India.

On December 8, the defence ministry told parliament that India had bought Rs 24,992 crore ($3.78 billion) worth of foreign weaponry in 2014-15. Ten days later, the same defence ministry told the same parliament that India had spent Rs 29,222 crore ($4.42 billion) on foreign arms in that same period.

There are several reasons for such divergent figures in tracking the weapons trade. First, some institutions track the signature of defence contracts in a particular year. On the other hand, others track the actual delivery of defence systems during that year.

For example, India signed a $2.1 billion contract with Boeing for eight P8-I multi-mission maritime aircraft in 2009-10. Agencies tracking arms contracts would have put that entire amount in India’s arms trade ledger for that year. Others, who track delivery, would spread the $2.1 billion across the six years till 2015, when the last P8-I was delivered.

There is also a reason for divergence in the defence ministry’s own figures. The figure placed before parliament on December 8 represents actual orders placed on foreign vendors during the year, and assumes orders placed on Indian vendors to be 100 per cent indigenous. The higher figure placed before parliament on December 18 tracks foreign components in “Indian” weapon systems, treating them as imports.

For example, the warship INS Kochi was built by Mazagon Dock Ltd, Mumbai (MDL) and is, technically, an indigenous system. But it contains numerous foreign systems, such as the Israeli MF-STAR radar. According to the Defence Procurement Procedure of 2013 (DPP-2013), the cost of foreign systems, sub-systems and components in “indigenous” platforms are treated as imports, along with the freight, insurance, service costs, license fees, royalties and duties relating to their import.

Calculating according to DPP-2013, the “indigenous content in defence procurements for the year 2014-15 is approximately 40 per cent”, the defence ministry informed parliament on December 18. Based on the total procurement outgo of Rs 78,754 crore ($11.9 billion) for 2014-15, an imported component of 60 per cent adds up to Rs 47,252 crore ($7.14 billion).

That outgo is only from the capital budget. In addition, a significant portion of imported spares and components comes from the revenue budget, which, after deducting salaries, amounts to Rs 46,905 for the three services. Conservatively assuming a foreign outgo of 20 per cent from that component of the revenue budget, another Rs 9,381 crore ($1.4 billion) is added to India’s defence imports.

India’s total defence imports, arrived at by adding Rs 47,252 crore ($ 7.14 billion) of imports from the capital account to Rs 9,381 crore ($1.4 billion) of imports from the revenue account, amounts to $8.54 billion for 2014-15.

This means going by either CRS’s calculations, or those of SIPRI, India remains for now the world’s biggest arms importer.

On the export side, the CRS report notes that America is handily the world’s biggest arms exporter. From $26.7 billion in 2013, the sale of US arms rose in 2014 by almost $10 billion (35 per cent) to $36.3 billion, more than half of the global $71.8 billion arms export market.

Russia is a distant second, logging $10.2 billion in arms sales in 2014. Sweden is in third position ($5.5 billion); France is fourth ($4.4 billion) and China is fifth ($2.2 billion).