Momentum for railway, defence in India Budget

Highlights

• Rail capex up 1.9 percent
• Three rail corridors for energy, minerals, and cement
• More trains to be upgraded to Vande Bharat standard
• Defence allocation broadly unchanged

Post Covid, railways have been in the limelight, attracting attention and investments from the present government. For the Interim Budget 2024, expectations were high that the finance minister would announce a slew of measures and capex. The total railway capex, including Extra Budgetary Resources, have gone up 1.9 percent YoY to Rs 2,65,200 crore. In the budget, the government announced that it is setting up three major railway corridors to reduce congestion and logistics costs for energy, mineral, and cement, connecting to main clusters, including enhanced port connectivity.

That apart, the finance minister also announced that 40,000 normal trains will be upgraded to Vande Bharat standards. The NAMO trains and metro rail services will be  extended to more cities. This, along with the strong focus on tourism, means there is more opportunity for capacity expansion, redevelopment, and electrification of  railway lines.

KEC International has strong presence in railways and higher capex for the development of corridors should benefit. We also feel that railway PSUs such as RVNL, IRCON, and RITES should continue to benefit in the light of these plans.

The defence expenditure estimate for FY25 has broadly remained unchanged at around Rs 4.54 lakh crore. A ground-breaking provision in the budget allocates a substantial corpus of Rs 1 lakh crore, offering a 50-year interest-free loan for long-term financing, refinancing, and projects with negligible interest rates. This strategic financial move is poised to trigger a surge in research and development (R&D) across pivotal sectors, namely high-end manufacturing, defence, renewables, net zero, and decarbonisation. Companies at the forefront of R&D investments, such as MTAR and Data Patterns, stand to benefit significantly from this unprecedented initiative.

Beyond immediate cost savings, this financial support addresses the critical need to manage the prolonged funding requirements inherent in extensive R&D projects. These projects often navigate protracted trails and approval cycles, making the extended loan term and interest-free nature of the financing instrumental in sustaining their progress. This visionary budgetary allocation not only stimulates innovation but also reinforces India's position on the global economic stage, signalling a commitment to foster advancements in technology, sustainability, and strategic sectors.