A 10-Year Global Arms Race Set to be Driven by India and China

According to a new report released by IHS Markit, set to drive stronger defense spending over the next decade are emerging global powers China and India.

Annual defense budgets should return to pre-financial crisis levels by 2018 even as global military spending rose in 2016 to $1.57 trillion.

Analysts believe that as Asia Pacific nations increase their military spending as they move their focus from territorial defense to power projection, there is now a risk of an arms race.

“This is new for the region and is likely to increase military-to-military contact between states,” Craig Caffrey, principal analyst at IHS Jane’s, said in a release Monday.

“Rising defense spending could therefore be indirectly responsible for increased tension within the region which in turn could spur faster budget growth,” he said.

From $123 billion in 2010 to $233 billion by 2020, China’s defense budget is on track to almost double within 10 years, IHS said.

Four times bigger than the UK’s and more than the combined spending of Western Europe would be China’s defense budget at that 2020 level.

Pushing Russia out of the top five biggest spenders, for its part India spent more than $50 billion on its military might in 2016.

The South Asian country is tipped to leap past the U.K. into third spot by 2018, should sterling remain at relatively weak levels and it is in the grip of a modernization drive.

Procurement spending has recently been constrained by rising personnel costs but that is set to change, Caffrey said.

“India needs new equipment to fulfill its modernization drive. Over the next three years, India will re-emerge as a key growth market for defense suppliers,” he said.

According to IHS Janes, spending $622 billion in 2016, the United States remains far and away the world’s biggest buyer of military goods and services. That figure represents about 40 percent of global spend and is more than four times larger than China.

“Since 9/11, over $9.35 trillion has been allocated to the US defense budget, with the Overseas Contingency Operations (OCO) accounting for $1.62 trillion or 17.3 percent of the total US Department of Defense (DoD) budget,” said Guy Eastman, senior analyst at IHS Jane’s.

“US DoD investment levels going forward were to decrease by 1.1 percent in real terms, but with the election of Donald Trump, the expectation is that both investment and readiness will receive injections of much needed funds,” Eastman said.

Estimating that roughly $10 billion will be added across the next 5 years, IHS Janes’ believes that the higher spending trend will continue as Western Europe’s defense budget rose for the first time since 2009.

Every December, the IHS Jane’s Defense Budgets team produces the annual Jane’s Defense Budgets Report. The report examines and forecasts defense expenditure for 105 countries and claims to capture 99 percent of global defense spending.

(Adapted from CNBC)


Categories: Economy & Finance

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