Yeah, India is the issue, just doesn't make a whole lot of sense as a separate faction. Heavy industrialization under British rule makes as much sense as anything (and I wouldn't sweat about being too unrealistic, there's some give in suspension of disbelief in such a setting). To me, it would make more sense as an "up for grabs" territory or similar.
I don't think you need India as another faction, having four on the periphery makes more sense than anything.
When in doubt, wander around wikipedia: http://en.wikipedia.org/wiki/Royal_Indian_Navy#1934.E2.80.931945.
For historical relevance to your game, Japanese leadership had determined that they would either attack Russia or the USA. Historically they chose USA, so if that did not happen in your game then keep in mind that in real life Japan and Germany would have conquered the USSR. Russia barely survived against Germany without Japan attacking, so the USSR would have never made it fighting a war of two fronts.
It was the Battle of Khalkin Gol in 1939 that left the Japanese quite convinced that fighting the USSR was a bad idea, so you'd have to deal with that. Or not, barely anyone has heard of it.
I believe there was some alternate WWII scenario wherein Japan discovered oil in Dalian, which greatly increased their practical military power, so that's an option too.