What Does The Defence Sector Expect From Budget 2024? | Union Budget Expectations

Summary

In this episode of 'Budget Trade' on NDTV Profit, host Samina Nala discusses India's defense sector, focusing on the impact of Defense Minister Rajat Singh's plans to enhance domestic manufacturing and exports. The show highlights the sector's growth, with defense stocks soaring and the interim budget for FY 2024-25 allocating a significant 13% of total expenditure. Expert opinions on the potential benefits of increased R&D incentives, collaboration between public and private sectors, and the focus on exporting complete defense platforms are shared, suggesting a promising future for India's defense industry.

Takeaways

• 📈 Defense stocks have seen increased investor interest due to ambitious plans to boost India's defense exports and strengthen domestic manufacturing under the Make in India initiative.
• 💰 India is the fourth highest defense spending country, with the interim budget for FY 2024-25 allocating 6.21 lakh crores to defense out of a total budget of 47.66 lakh crores.
• 🔍 The final budget for FY 2024-25, expected on July 23, will provide a clearer picture of India's defense priorities.
• 📊 The Nifty defense index currently has an order book of 2.87 lakh crores, showing strong future potential.
• 🚢 Defense stocks like Garden Reach, Cochin Shipyard, Mazagon Dock, and others have shown significant gains in the past year, with returns as high as 198%.
• 🔧 Key themes for the future include indigenization, increased defense exports, and higher government contracts for military equipment.
• 🌍 India's defense exports aim to reach 50,000 crores by FY 2028-29, a significant increase from the current 21,000 crores.
• 💡 The government is focusing on policies to support local defense manufacturing, R&D, and collaboration between public and private sectors.
• 🚀 Private sector involvement in R&D and technology development is expected to increase, driven by initiatives like the Technology Development Fund.
• 📉 Despite the recent rally in defense stocks, experts believe there is still potential for growth, especially for companies involved in advanced defense equipment and technology services.

Q & A

What is the current focus of the Indian defense sector according to the script?

The current focus of the Indian defense sector is on boosting defense exports and strengthening domestic manufacturing under the 'Make in India' initiative, as outlined by Defense Minister Rajat Singh.

What is India's ranking in terms of defense spending?

India stands fourth in the rankings of the highest defense spending countries, following the US, China, and Russia.

What was the defense share and budget allocation in the interim budget for FY 2024-25?

The defense share and budget allocation in the interim budget for FY 2024-25 stood at 13%, amounting to 6.21 lakh crores out of a total budget of 47.66 lakh crores.

When is the full budget for FY 2024-25 expected to be provided?

The full budgetary picture for FY 2024-25 is expected on the 23rd of July.

What is the current order book value of the Nifty defense index?

The current order book value of the Nifty defense index stands at 2.87 lakh rupees.

How have defense stocks performed in terms of investor wealth creation over the last one year and one month?

Defense stocks have seen significant gains, with companies like HAL and BML experiencing year-to-date returns of 99% and 83% respectively, and even higher returns in the last one month.

What is the growth trend in defense budget allocation over the years?

There has been a significant jump in defense budget allocation, with an 18.3% growth from FY 21 to 22 to the interim budget of FY 24 to 25.

What are the key themes in focus for the defense sector in the upcoming budget?

The key themes in focus include indigenization, localization of production to benefit domestic manufacturers, defense exports, and higher government contracts for acquiring new military equipment.

What is the current status of defense exports according to the script?

Defense exports have jumped to about 50,000 CR, with a plan to increase this number by FY 2028-29, representing a 3X jump from the FY 21 level.

What are the expectations from the defense budget in terms of R&D and private sector involvement?

There is an expectation for more government incentives and reforms to support the growth of the 'Make in India' theme, including a push towards privatization of R&D in defense technologies and collaboration between DPSUs and private industries.

How do the experts suggest the defense sector can compete more efficiently in the global market?

Experts suggest that the focus should be on exporting complete platforms rather than components, and that the government should encourage R&D and provide incentives for the private sector to develop advanced defense technologies.