Budget 2024: Key Defence sector expectations and investor advices by Religare as focus is on self Reliance and exports

Budget 2024: The dual objectives of achieving self-reliance and the status of a net exporter sets the theme of Union Budget 25 for the defence sector, said Gurpreet Sidana, CEO of Religare Broking. Here are key Budget expectations and investors advices by Sidana

Focus on self Reliance and Exports

In response to the worsening global security environment, marked by conflicts in Europe, the Middle East, and ongoing border disputes, the Indian government is emphasizing on indigenous defence manufacturing and reducing import reliance, said Sidana. He added that the efforts to cement the ground for a defence sector also includes banning certain defence imports and advancing the "Make in India" initiative, significantly boosting Indian defence manufacturers' order books.

According to the Ministry of Defence's August ‘23 report, defence exports have impressively surged from Rs. 686 crore in FY14 to nearly Rs. 16,000 crore in FY23, highlighted Sidana. Besides this remarkable 23 fold increase, the government is promoting private investment through liberalized FDI policies and dedicated Defence Industrial Corridors, and is aiming to strengthen India's defence preparedness and build a robust domestic defence industrial base.

Key Expectations from Union Budget 2024

The defence budget for FY25 has been set at ₹6.21 lakh crore in the interim budget, marking a 4.72% increase from the previous year. A significant portion is allocated for capital expenditure, essential for modernizing defence capabilities. With the government targeting defence exports of ₹35,000 crore by FY 2025, the focus will likely be on R&D to advance technological innovations and favourable policies to encourage private sector participation through strategic partnerships, said Religare's Sidana. Additionally, increased funding for the Agnipath recruitment scheme and steps towards integrated capability development reflects government’s long-term strategic planning and commitment to strengthening defence preparedness.

Advice for Investors

Investors should focus on companies with a strong track record in project execution, diversified portfolios, and robust order books, as these are likely to benefit from increased government spending and policy support. Companies involved in shipbuilding, drone manufacturing, and other defence equipment manufacturing could attract heightened investor interest.

Conclusion

The Union Budget 2024 should set a clear roadmap for enhancing India's defence sector by prioritizing modernization, self-reliance and strategic partnerships. By focusing on Indigenous manufacturing, technological advancements and integrated planning; the government aims to build a robust defence industrial base that can meet emerging security challenges and bring net dollar inflow by being a defence exporter. This strategic approach not only strengthens India's defence capabilities but also positions the country as a significant player in the global defence market.

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