India Defence and Security Report Q1 2007

Prime Minister Manmohan Singh is doing a good job at keeping India moving forward along the straight and narrow path. On the one hand he has foreign relations to worry about - the long-running dispute in Kashmir and the advancement of relations with China. On the other hand, there are domestic issues at play - balancing the drive for key reforms against opposition forces within and outside of the governing coalition, and perhaps more importantly, the intractable conflicts in the north-east of India. All things being equal, BMI does not anticipate any radical changes in Indian politics for the immediate future. India's inter-state relations are relatively strong, with the exception of its relation with Pakistan, which could be described as 'fluctuating'. Until the Mumbai bomb attacks in July 2006, India-Pakistan relations had appeared to be improving. Violence continued in Kashmir, but both sides had made a series of concessions. The bomb blasts have challenged popular support for the peace process in India, but we believe that the negative impact will only be short-term. Relations with China have recently improved with the reopening of the Nathu La pass between Sikkim and southern Tibet. Domestic security is proving more elusive. In Nagaland, the lack of progress made in the peace talks with government officials has led to threats that the cease-fire will be broken if action is not taken to merge districts in the region together.

In July 2006, India extended the term of the Armed Forces (Special Powers) Act by a year. Elsewhere, insurgents in other north-eastern Indian states are increasing their activities, fuelled by guns and drug money from across the Bangladeshi and Myanmar borders. Talks between the government and the United Liberation Front of Assam (ULFA) appointed People's Consultative Group continue. Officials said that the talks were fostering an environment conducive to dialogue with the ULFA, and that only once this had been achieved could counter-insurgency measures be reconsidered. These threats are countered by one of the largest professional standing armies in the world. At 1.1mn soldiers, 55,000 naval personnel and 170,000 airmen, India's armed forces are two to three times larger than its neighbouring rival Pakistan. In addition, India possesses one of the largest and most sophisticated defence industries in the developing world, which provides for all but the most advanced requirements. Despite allegations that the military is under-funded and hesitant to modernise, India maintains a vibrant defence import industry and has the potential to improve its export market.