Union Budget 2024 Expectation: Defence Sector Seems Positive On Upcoming Budget

Interim Budget 2024: In the budget for the fiscal year 2023-24, the defence sector was allocated Rs 5.94 lakh crore, marking a 13 per cent rise from the previous year

The Indian defence sector finds itself at a pivotal moment amid simmering geopolitical tensions and an increased emphasis on self-reliance in strategic technology. The upcoming Union Budget 2024 has garnered significant attention due to these factors. Although specifics are yet to be disclosed, industry experts and stakeholders have expressed their expectations for the vital allocation.

With the Union Budget 2024 announcement scheduled for February 1, the defence sector expects some adjustments in fund allocations. The government is expected to maintain its ongoing procurement plans, giving notable attention to crucial initiatives such as the second indigenous aircraft carrier and the acquisition of 97 Tejas Mark-1A aircraft. Experts anticipate a 5-7 per cent rise in capital outlay, reflecting a concerted effort to enhance the nation's defence capabilities.

In the budget for the fiscal year 2023-24, the defence sector was allocated Rs 5.94 lakh crore, marking a 13 per cent rise from the previous year's Rs 5.25 lakh crore. Within this, the capital outlay designated for "modernisation and infrastructure development" saw an increase to Rs 1.62 lakh crore, representing a 6 per cent uptick from the FY2023 budget's Rs 1.52 lakh crore and a substantial 57 per cent surge from FY2020.

The overall expectations for the defence sector remain positive. “The government’s target is to become self-reliant and also make India an export hub in the long term. I believe investments would continue on the defence side as well, with increased capex spending to be seen more in FY2025,” said Sneha Poddar, AVP Retail Research, Broking, and Distribution, MOFSL.

Amit Anwani, Lead Analyst (Capital Goods, Industrials, and Defence) at Prabhudas Lilladher, suggests that the industry foresees incremental allocations, albeit not substantial, in the upcoming budget for sectors like defence, power, and railways. However, more significant announcements are anticipated after the elections when the entire budget is presented. Anwani anticipates a slight moderation in defence capital expenditure (capex) compared to previous years. In FY2023, there was a 7 per cent increase in defence capex, reaching around Rs 1.62 lakh crore, up from Rs 1.52 lakh crore in the preceding year.