Some of the advice you are getting here is not spot on. I have two campaigns under my belt, both which had a lot of fighting in Burma and India. I found that the Indian army by 1944 had become my most experienced and powerful troops outside of the Marines. It is ironic that US division in the Pacific do not gain much experience since their operations tend to be short but violent grabs of Island bases. It is sustained everyday combat that hardens your unit up. By 1945, it was my crack Indian troops that were leading the way.
Now here is what I do to build up an effective and unrestricted Indian army. A lot depends of if you have an aggressive opponent. If Japan invades India, your units will gain experience but combat attrition will slow the growth of the Indian army. I don't mind this though as I think it is a mistake for Japan to commit to a major operation in India.
At start you get a bunch of untrained, low morale, under strength units. The aim is to build up the army and purchase them out as efficiently as possible. India gets a good replacement rate for squads. You will want to plan so that you are upgrading your units to the next level as soon as possible, so that you have plenty of the most modern squads in your pools. You do this by upgrading a few small units and then disbanding them until you have enough squads in your pools to upgrade your brigades and divisions.
Here is how I build up and purchase out.
1. You get a lot of independent brigades. Upgrade the squads but not necessarily the devices. I will then selectively start to disband brigades to fill my squad pools to fill out divisions first.
2. Concentrate on rebuilding the few unrestricted division that you have first. Turn off replacements for all restricted units.
3. Upgrade your squads in restricted divisions but turn off replacements.
4. Start disbanding restrictive divisions and let them return in 180 days as cadres. If you are fighting hard, do this slowly and selectively. If India is relatively quite you can do more than one division at a time. Then when the unit returns in 180 days, buy it out immediately for hardly any PP and then start to rebuild. I do not rebuild brigades until all my divisions are up to full strength. Rebuild at least three battalion level units because you will need them when the next squad upgrade comes.
This is what I mostly do. I do buy out some divisions without disbanding if I have spare PPs but PPs are rare. However, I do not ever build up a restricted division before buying it out. The real shortage for the Allies in 1942-43 is PP. This way you can build up your Indian army with a minimum of PP expenditures. Some might call this method gamey but I do not agree since you are trading off six months of not having the unit to gain some PP. Fair to me.
If you are fighting hard vs Japan you will just have to accept that some units are never going to return. However, I am willing to trade quantity for quality anytime. Indian division get larger as the war progress and many replace their British squads with Indian. This in itself puts a tremendous demand on your pools. My current campaign just turned 1/44 and I do not have a single independent Indian brigade. However, all my divisions are unrestricted and in the fight. It is a powerful force.
It takes a lot of thought to manage your Commonwealth troops. The biggest problem is that they all share the same device pools and replacements for devices is not good. It takes some practice but it is kind of fun.
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