Defence stocks have been on a remarkable upswing in the lead-up to the 2025 Union Budget presentation on January 31. Shares of key players such as Hindustan Aeronautics, Bharat Electricals, Bharat Dynamics, Data Patterns, and Paras Defence surged between 3-5 percent, fueled by optimism surrounding a potential increase in budgetary allocations for the sector.
Market experts believe that the upcoming budget has the power to reshape India’s defence landscape by prioritising modernisation, self-sufficiency, and technological advancement.
A well-structured capital expenditure plan, increased investments in research and development, and strategic policy incentives could not only strengthen national security but also position India as a formidable force in the global defence market.
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Over the past decade, India’s defence expenditure, as reported by the Ministry of Defence, has grown at a compound annual growth rate (CAGR) of 8.1 percent in nominal terms, rising from Rs 2.85 lakh crore in 2014-15 to Rs 6.22 lakh crore in 2024-25.
However, its share relative to the country’s gross domestic product (GDP) and overall government spending has seen a downward trend. The proportion of the MoD’s budget relative to GDP has dipped from a peak of 2.4 percent in 2020-21 to 1.9 percent in 2024-25, while its share of central government expenditure has declined from 17.8 percent in 2016-17 to 12.9 percent in 2024-25.
“We anticipate that the Budget for FY 2025-26 will play a crucial role in accelerating India’s progress towards self-reliance in the defence and aerospace sectors, both of which are poised for significant expansion. The government’s ongoing focus on Atmanirbhar Bharat and Make in India is expected to be reinforced through strategic budgetary allocations aimed at fostering innovation, supporting MSMEs, and streamlining defence procurement processes. In particular, increased emphasis on emerging fields such as unmanned aerial systems (UAS), advanced materials, cyber defence, and space technology could open up major opportunities for private investment,” said Amey Belorkar, Fund Manager - Defence and Aerospace Venture Fund, IDBI Capital Markets & Securities.
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