India's Maritime Economics and Security Framework

India's Maritime Economics and Security Framework

Introduction

India's economy depends overwhelmingly on maritime routes, with 95% of its trade by volume passing through the Indian Ocean. In an era where economics and national security are increasingly intertwined, this maritime dependence carries extraordinary strategic weight, particularly given India's position between hostile neighbors in Pakistan and China. Chokepoint crises, whether in the Red Sea or South China Sea, repeatedly demonstrate how maritime disruptions shock the global economy, making sea lane security a central element of India's strategically ambiguous positioning in today's divided geopolitical landscape. Understanding India's maritime strategy requires examining three interconnected elements: the economic stakes of its sea lane dependencies, the security investments anchoring its regional presence, and the port diplomacy and naval power that extend its influence across the Indian Ocean.

The Economics Stakes of Sea Lanes

The economic risks of maritime trade disruption are well-established: higher shipping costs, surging insurance premiums, inflationary spillovers into energy and food prices, and supply chain disruptions that slow growth. While these shocks reverberate through every trading economy, they hit particularly hard in highly exposed economies like India's, where maritime routes sustain economic activity.

The 2023 Red Sea Crisis illustrated India's maritime vulnerability. Regional instability disrupted a strait through which India passed roughly 80 percent of its European exports (the EU accounts for about 15 percent of India's goods exports). Freight costs exploded, with Kolkata to Rotterdam shipments surging from $500 to $4,000. While this crisis represented a rare case of overt Indian geopolitical alignment with Israel, which prompted Houthi aggression against its vessels, it nonetheless underscored India's exposure to maritime instability. The timing proved particularly damaging given the already ongoing war in Ukraine, as India had surged its imports of Russian crude oil, leveraging its refining capacity to re-export petroleum products to Europe and bypass Russian sanctions. This petroleum export flow dropped 38 percent due to the crisis. The "Malacca Dilemma" is often framed as a Chinese vulnerability, but India faces an equally acute dependence, as 60 percent of its sea-based trade passes through the strait, including nearly all its liquefied natural gas (LNG) and 80 percent of its oil imports.

Maritime Security Strategy

Given these high economic stakes, India has made substantial security investments across four key areas: policy frameworks that direct its regional strategy, the Andaman & Nicobar Command as its forward operating base, infrastructure expansion in critical locations, and multilateral exercises that build interoperability with key partners.

1. Policy Frameworks

India's Act East Policy, announced in 2014, represents the strategic evolution of its 1990s-era Look East approach. Where the earlier policy focused primarily on economic engagement, Act East adds substantial security layers that explicitly aim to counter Chinese regional influence geoeconomically. The policy seeks to deepen economic ties with Southeast Asia while projecting influence eastward through security partnerships, maritime diplomacy, and connectivity projects. India reinforced this framework in 2019 with the Indo-Pacific Oceans Initiative (IPOI), a multilateral platform that explicitly prioritizes maritime security and cooperation.

2. Andaman & Nicobar Command

The most concrete manifestation of these policy frameworks is the Andaman & Nicobar Command (ANC), established in 2001 just 100 nautical miles northwest of the Malacca Strait. As India's only tri-service command, the ANC integrates Navy, Air Force, and Army assets under a single Commander-in-Chief (CINCAN) that provides unified operational command at one of India's most strategically valuable positions. The ANC's mission encompasses maintaining domain awareness over the eastern Indian Ocean, securing sea lanes, conducting anti-piracy and disaster response operations, and providing surveillance coverage across the Malacca, Lombok, and Sunda Straits. It also serves as a staging point for joint exercises with partner navies including the U.S., Japan, Australia, France, Singapore, and Indonesia. Effectively, the ANC functions as India's forward operating base at its most crucial chokepoint.

3. Infrastructure Expansion

Over the past decade, India has significantly expanded ANC-supporting infrastructure. INS Baaz, a naval air station established in 2012 at the southern tip of Great Nicobar Island, is India's closest airfield to the Malacca Strait at roughly 300 nautical miles. Currently being upgraded to handle P-8I maritime patrol aircraft and potentially fighter jets, INS Baaz extends India's surveillance and rapid response capabilities directly into the strait's northern approaches. Supporting installations include INS Kohassa and INS Utkrosh, which provide rotary-wing and light aircraft operations. India has also developed extensive dual-use infrastructure, including jetty expansions, fuel storage facilities, radar stations, and communications networks. Future plans include a major transshipment port and airfield on Great Nicobar Island that will serve as both a civilian commercial hub and strategic military facility.

4. Multilateral Exercises

Complementing this physical infrastructure, India's Malabar naval exercises with the U.S., Japan, and Australia serve as both strategic signaling and interoperability building. The exercises' locations include the Philippine Sea and waters off Japan; an implicit message to China that the Quad nations are capable of coordinated naval operations across the Indo-Pacific, including in areas of core Chinese interest. This cooperative posture serves two purposes: it acts as a counterweight to Chinese regional aggression while embedding a crucial economic logic into India's security framework. From the Indian perspective, protecting sea lanes is fundamentally about safeguarding economic stability, and not merely power projection.

Port Diplomacy and Regional Connectivity

Beyond developing its own major ports, India has pursued a deliberate strategy of international port partnerships that provide strategic regional access. This approach operationalizes Prime Minister Modi's SAGAR vision (Security and Growth for All in the Region), which sets a framework for maritime cooperation while directly countering China's "String of Pearls" strategy. Indian strategists widely perceive this network of port investments encircling India as a containment threat, which prompted India to develop its own "Necklace of Diamonds" strategy, in a counter-network of port access agreements. Five ports illustrate this strategy's geographic scope and logic.

1. Chabahar Port

Chabahar Port, located on Iran's southeastern coast along the Gulf of Oman, represents India's most important port access agreement near the mainland. Serving as India's primary gateway to Afghanistan and Central Asia, the port allows India to bypass Pakistani territory entirely; a capability that has become increasingly indispensable given hostile relations. Since Modi's 2016 deal, India has invested over $500 million in the port itself, part of a larger $8 billion commitment to Iran's Chabahar Special Economic Zone that includes road and rail networks connecting to iron and steel mining projects in Afghanistan.

Chabahar's true purpose, however, lies in countering the China-Pakistan Economic Corridor (CPEC). Launched in 2015, CPEC forms the flagship project of China's Belt and Road Initiative (BRI), a 3,000-kilometer infrastructure network linking western China directly to Pakistan's Gwadar Port on the Arabian Sea. Gwadar provides China a land-sea bypass route that avoids the Malacca Strait entirely, while simultaneously giving Beijing a permanent presence in India's maritime sphere. Modi's 2016 Chabahar announcement was intentionally responsive, coming just one year after CPEC's inception. Both China and India employ similar "port diplomacy" frameworks in a striking parallel, where infrastructure investments are made in economically struggling neighbors whose governments welcome the capital.

2. Duqm Port

Oman, the first Gulf nation to formalize defense relations with India, is a natural partnership for Indian port diplomacy. The relationship has incrementally strengthened, with India stationing its INS Mumbai guided-missile destroyer at Duqm for years before securing formal access for both Navy and Air Force assets in 2018. The arrangement is mutually beneficial. Oman gains a capable security partner in a region frequently destabilized by piracy, militant attacks, and regional conflicts, as India has run anti-piracy operations and protected commercial shipping from Houthi attacks. India, in turn, gains strategic access in the Arabian Sea outside the Strait of Hormuz, extending its reach westward and providing a logistics hub for sustained Gulf operations.

3. Sabang Port

Sabang Port is a valuable example of the gap between aspiration and political reality. Located at the northern tip of Indonesia's Aceh province, directly at the northern entrance to the Malacca Strait, Sabang would provide India with a forward position far closer to the chokepoint than the ANC. Indonesia extended an invitation in 2018 for India to develop the port and city, and Indian naval vessels have been granted access. However, meaningful development has stalled, as investment proposals remain under review and appear unlikely in the near term. The Indonesian strategic community has firmly rejected Indian characterizations of Sabang as a potential military base, emphasizing Indonesia's long-standing alliance-free foreign policy. Indonesia has already raked in over $35 billion worth of Chinese investment through the BRI and is unlikely to provide India with any military exceptionalism. Until India and Indonesia reach formal agreements with long-term visibility, Sabang remains largely aspriational.

4. Sittwe Port

Sittwe Port in Myanmar's Rakhine State represents a unique case in India's port diplomacy, as one focused on internal connectivity rather than expansive power projection. Part of the broader Kaladan Multi-Modal Transit Transport Project (KMTTP), the port came under full control of India Ports Global in 2024. The project aims to connect Kolkata to Myanmar through combined sea and land routes, reinforcing supply lines to India's northeastern states. This addresses the critical vulnerability that is the Siliguri Corridor ("Chicken's Neck"), which represents the sole land connection between mainland India and its Seven Sisters states. This 20-kilometer-narrow corridor, squeezed between Nepal, Bhutan, Bangladesh, and China, could be severed in any conflict scenario, effectively isolating the region. Sittwe Port provides a maritime bypass, allowing India to supply its northeastern territories through Myanmar even if land routes are compromised. While India's port diplomacy generally aims to counter external threats and chokepoints, Sittwe illustrates a case of arguably superior importance, where maritime strategy works towards inward territorial cohesion.

5. Changi Naval Base

At the southern entrance to the Malacca Strait, Singapore's Changi Naval Base provides India with another key access point as part of a longe-standing defense relationship. Singapore positioned itself as among the earliest supporters of India's 1990s Look East policy, and as Indian Defense Minister Mukherjee noted in 2006, Singapore had become "the hub of [India's] political, economic and security strategy in the whole of East Asia." Military cooperation formalized in 2017 when both nations signed an agreement allowing reciprocal access to naval facilities for logistics and resupply. Combined with access to Sabang Port (should that materialize), Changi would provide India presence at both the northern and southern entrances to the Malacca Strait, effectively bracketing the chokepoint with logistical hubs. Even without Sabang's full development, Changi alone extends India's sustained operational range into Southeast Asian waters.

The Economics of Naval Power

1. Budget Allocation and Structure:

In India's FY 2024-25 defense budget of approximately $75 billion, the Navy received just 19 percent of the total, representing the smallest allocation among the three services. This budget sustains a blue-water navy of approximately 130-150 ships, including two aircraft carriers and two ballistic missile submarines. While modernization funding has increased in both absolute terms and as a percentage of the naval budget, most expenditures still flow to recurring costs of salaries, pensions, and operational maintenance. This structural constraint limits capital available for new platforms and capabilities, directly hindering the Navy's ability to operate from the Persian Gulf to the South China Sea. This reflects a fundamental tension in India's security strategy, where it faces primarily land-based adjacent threats from Pakistan and China, which drives Army and Air Force prioritization, yet its economic security depends overwhelmingly on maritime trade routes.

2. Naval Shipbuilding and Industry Growth

Indigenization forms the cornerstone of India's naval modernization strategy, embodied in the "Aatmanirbhar Bharat" (self-reliant India) doctrine. This approach serves to both reduce dependence on foreign defense suppliers while capturing the economic benefits of domestic shipbuilding. Currently, the construction of 60 naval vessels is projected to generate over 800,000 jobs and circulate more than $35 billion through the Indian economy. Success stories like the indigenously built INS Vikrant aircraft carrier and INS Arihant and Arighaat ballistic missile submarines demonstrate India's advancing shipbuilding capabilities.

Nearly 70 percent of the Navy's capital expenditure now flows to indigenous projects, while approximately 90 percent of Maintenance, Repair, and Overhaul (MRO) operations are performed by Indian contractors, primarily Micro, Small, and Medium Enterprises (MSMEs). The economic multiplier effect means each shipyard worker creates approximately 6.4 additional jobs in ancillary industries, as the complexity of modern naval construction reverberates demand across the electronics, steel, maritime equipment, and defense sectors. This multiplier effect operates not just through capital expenditure on new ships but also through continuous MRO spending, pushing sustained economic activity.

These investments are reflected in the shipbuilding industry's growth, from approximately $90 million in 2022 to over $1.1 billion in 2024, with projections reaching $8 billion by 2033.

3. Returns on Investment:

India's blue-water naval capabilities have produced returns across multiple sectors, and while this analysis has focused primarily on strategic chokepoints, the Navy's operational contributions extend to trade route security, anti-piracy operations, humanitarian assistance, and nuclear deterrence through its ballistic missile submarine fleet.

Operation Sankalp, India's sustained Gulf deployment, escorted 624 lakh tons of cargo aboard 503 Indian-flagged merchant vessels in 2023. In 2024 alone, the Navy deployed approximately 30 ships to the region, protecting some 230 merchant vessels carrying over $4 billion in cargo. This capability has established India as a "net security provider" in the Gulf of Aden and Arabian Sea, as it has directly prevented cargo losses from attacks and helped stabilize surging maritime insurance premiums during periods of instability.

Unsurprisingly, India's incentives for this protection are substantial. In FY 2019-20, over 60 percent of India's oil imports (worth some $66 billion) originated from Persian Gulf producers. Following the Ukraine conflict, India's dependence on seaborne energy imports likely surged as did Russian oil supplies (arriving via maritime routes). With India importing roughly 85 percent of its oil needs, and nearly all of that arriving by sea, naval protection of energy supply lines directly sustains economic stability.

Strategic Synthesis

India's maritime strategy reveals a sophisticated understanding of 21st-century geoeconomics, where naval power functions less as traditional military projection and more as economic lifeline protection. This article demonstrates how India has built a comprehensive maritime security framework through three mutually reinforcing elements: forward military infrastructure, port diplomacy, and a modernizing indigenous naval-industrial base.

India's achievements are thus far concrete. The ANC provides a robust forward presence close to the Malacca Strait as a unified tri-service command. The port diplomacy network extends India's operational reach across critical flashpoints: Chabahar counters CPEC, Duqm provides Arabian Sea access outside the Hormuz chokepoint, Changi brackets the Malacca strait from the South, and Sittwe fortifies the strategically vulnerable Seven Sisters' link to the mainland. These deliver power projection without the political complications of permanent overseas bases. By prioritizing indigenous shipbuilding, India has transformed naval modernization from a pure security expenditure into a wider economic development program. With multiplying effects across ancillary industries, economic circulation simultaneously builds the platforms that protect billions in annual trade. Multilaterally, India has positioned itself as the regional "net security provider" through the SAGAR framework and Quad partnerships. The Malabar exercises demonstrate interoperability with leading navies, while anti-piracy operations in the Gulf of Aden protect public goods, enhancing India's regional standing. Importantly, India maintains this cooperative posture without abandoning its strategic autonomy and avoiding formal alliance commitments that constrain its diplomatic flexibility.

Yet formidable challenges constrain India's ambitions, as China's PLA Navy poses the most acute threat with a growing numerical advantage. China commissions warships at a pace India cannot match, supported by a shipbuilding industrial base that dwarfs India's capabilities and dominates the global market. China's BRI compounds this with strategic encirclement, as its "String of Pearls" has created a network of forward operating locations surrounding India. CPEC and Gwadar Port represent important concerns, placing Chinese-backed (and controlled) infrastructure directly on India's maritime doorstep. Domestically, the Indian Navy's lacking budget share reflects a fundamental geostrategic dilemma: major land-based threats from Pakistan and China mean the Army and Air Force consume most defense resources, even as India's economic security depends on maritime trade. Capital expenditure for new platforms competes with recurring costs, holding back the necessary acquisition pace. Structural vulnerabilities remain, as a majority of India's seaborne trade still transits the Malacca Strait over which it does not have control. The Siliguri Corridor remains a weakness despite access to Sittwe port, with the entire northeastern territory depending on either a narrow land corridor or maritime logistics through Myanmar.

Nonetheless, India's maritime positioning suggests strategic awareness rather than complacency through the integration of economic imperatives with security investments. As it accelerates its current trajectory, India will seek to secure a position of regional prominence to protect its economic interests. This will require sustained prioritization of maritime capabilities despite competing land-based security demands. India's maritime strategy reflects the reality that naval power is not optional expenditure but essential economic infrastructure. The ~$14 billion annual naval investment spent on protecting over $850 billion in maritime trade represents a ~1.7 percent insurance premium on economic survival. For India, this era of increasing economic statecraft means the ability to safeguard sea lanes directly determines the nation's capacity for growth, energy security, and national autonomy. The strategy's success will largely determine the extent to which India develops as a truly independent pole in the Indo-Pacific or remains vulnerable to coercion through maritime interdiction.

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