India remains the world's largest arms importer; And India is facing its longest unicorn drought in 7 years

Market Watch

• Indian benchmark indices fell for the fourth consecutive session today, with the Sensex down 337 points at 57,900, and Nifty down 111 points at 17,043.
• Sectorally, Nifty PSU Bank (-1.90%), IT (-1.65%), Metal (-1.22%) and Realty (-1.01%) shed the most, while Media (0.16%) and Pharma (0.01%) gained the most.

India remains the world's largest arms importer

The Stockholm International Peace Research Institute has released its latest report on global arms transfers, and India is once again the biggest importer of arms in the world.

• Notably, India has held the position of being the world’s largest importer of arms from 1993–2022.

By the numbers: For 2018-2022 India accounted for 11% of all arms imports in the world - despite seeing an 11% decline compared to its imports in the 2013–17 period.

• The biggest suppliers of arms to India were Russia (45%), France (29%), and the US (11%).

Key trends: Russia - long seen as India’s most reliable defence partner - has in fact seen a drop in the percentage of arms it supplies India (64% in 2013–17 compared to 45% in 2018-2022).

• The reason for this is competition from France and the US, increased defence indigenisation in India, and restrictions imposed on Russia after the Ukraine conflict.
• France has beaten the US to become India’s second-largest arms supplier thanks to recent deals (62 combat aircraft, 4 submarines.)

India’s rivals: Pakistan has seen a 14% increase in arms imports between 2013–17 and 2018–22 accounting for 3.7% of the global total.

• Unsurprisingly, China accounted for over 77% of Pakistan’s arms imports, followed by Sweden (5.1%) and Russia (3.6%).
• China - the world’s 5th largest arms importer - primarily got its arms from Russia (83%), France (8.1%), and Ukraine (5.6%).

Between the lines: The top 5 arms importers in the world are India (11%), Saudi Arabia (9.6%), Qatar (6.4%), Australia (4.7%), and China (4.6%) - together accounting for over 35% of global arms imports.

• The top 5 arms exporters in 2018–22 were the US, Russia, France, China and Germany - accounting for 76% of the world’s arms exports in 2018–22. US arms exports accounted for 40% of the global total in 2018-2022.
• The volume of international transfers of major arms in 2018–22 was 5.1% lower than in 2013–17.

India is facing its longest unicorn drought in 7 years

Despite being the world’s third-largest unicorn ecosystem, India has not seen a new unicorn in the last six months.

• Molbio Diagnostics was the most recent Indian company to achieve unicorn status in Sept 2022.

Why this matters: This makes the current unicorn drought the longest since August 2016, when the dry spell lasted 17 months.

• In contrast, in 2021, India added a new unicorn almost every week, amounting to a total of 44 in the year. Another 23 were added in the first nine months of 2022.
• Currently, only 17 of India’s 80 unicorns, for which data is publicly available, are profitable.

Why is this happening? The lack of new unicorns is a result of the extended funding winter that has plagued technology startups globally.

• With central banks raising interest rates, investors are negotiating hard with founders and arriving at much lower valuations compared to 2021.
• Founders are also more pragmatic about chasing profitable growth - a change from the quick-growth models during the pandemic.
• Startups also expect slower revenue growth in the coming quarters amid subdued demand and expect to fall short of their revenue projections.
• 55 unicorns incurred a cumulative operating loss of $5.9 billion in FY22 - almost double that in 2021.

The bottom line: Cockroach startups are the ones expected to survive this funding winter because of their ability to achieve profits and operate frugally.

ICYMI

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