Rs 4.54 Lakh Crore Defence Sector Budget 2024: Keep These Defence Stocks Under Your Radar That Gave Up To 685 Per Cent Returns in Just 1 Year!

The government also aims to significantly boost defence exports, targeting over Rs 50,000 crore by FY29, following a record Rs 21,083 crore in 2023-24.

In her Union Budget 2024 presentation on July 23, Finance Minister Nirmala Sitharaman announced the defence budget for FY25, allocating Rs 4.54 lakh crore, reducing it from Rs 6.21 lakh crore from the Interim Budget. This marks a steep decrease from the Rs 6.21 lakh crore allocated in the Interim Budget just 5 months earlier. Sitharaman began her address by emphasising the government's continued support from the public, noting the historic re-election of PM Modi's administration and highlighting India's strong economic growth and stable inflation.

Budget Breakdown and Strategic Allocations

Despite the reduction, the defence allocation remains substantial, covering various critical areas. Approximately 28 per cent of the overall defence budget, or Rs 1.72 lakh crore, is dedicated to capital acquisitions. This includes procuring new equipment and technology, which is crucial for modernizing the armed forces.

The Armed Forces' revenue expenditure, excluding salaries, is set at Rs 92,088 crore. Additionally, Rs 1.41 lakh crore is designated for defence pensions, reflecting the government's commitment to supporting its veterans. Further allocations include Rs 6,500 crore for enhancing border infrastructure, Rs 7,651.80 crore for the Indian Coast Guard, and Rs 23,855 crore for the Defence Research and Development Organisation (DRDO).

Capital Expenditure and Modernization Efforts

The interim budget for FY24 was revised from Rs 5.94 lakh crore to Rs 6.24 lakh crore, and despite the slight decrease in FY25, the allocation remains the highest among other ministries, constituting nearly 13 per cent of the Central government's overall budgeted expenditure. However, this allocation is still below 2 per cent of India's GDP, with capital expenditure for new acquisitions set at Rs 1.72 trillion, representing 27.67 per cent of the total defence budget. Experts point out that a modern military typically allocates around 50 per cent of its defence budget to capital accounts, highlighting the need for increased spending in this area.

Enhancing Border Infrastructure

The Border Roads Organisation (BRO) received a notable 30 per cent increase in its allocation, amounting to Rs 6,500 crore. This investment underscores the government's commitment to strengthening India's borders amidst ongoing military challenges.

Boosting Defence Innovation and Exports

To foster innovation in the defence sector, the budget allocates Rs 518 crore to the iDEX scheme, which supports technological solutions from startups, MSMEs, and innovators. The goal is to boost the startup ecosystem within the defence industry by funding innovative technological solutions.

The government also aims to significantly boost defence exports, targeting over Rs 50,000 crore by FY29, following a record Rs 21,083 crore in 2023-24. The strategy involves reducing reliance on imported military equipment by boosting domestic defence manufacturing, with a target of Rs 1.75 lakh crore in defence manufacturing turnover within the next 5 years.

Private Sector Involvement and Future Prospects

Private sector companies played a significant role in defence production in FY24, accounting for 22 per cent of the total Rs 74,739 crore. Although this is a decline from FY23's Rs 1.09 trillion, it still marks significant private-sector involvement. The increased share in FY24 is a result of private-sector defence production falling less than the overall numbers.

The Indian armed forces are likely to spend approximately USD130 billion on capital procurement over the next five to 6 years. The defence capital acquisition budget needs to grow 25 per cent annually over the next five years to achieve the ambitious annual defence production target of Rs 3 trillion by FY29. A minimum of 20 per cent compound annual growth rate (CAGR) is required, coupled with substantial growth in defence exports, to meet this target.

Following is the list of Defence Stocks to keep under the radar that gave multibagger returns in just 1 year:

Conclusion

The reduction in the defence budget allocation for FY25 presents both challenges and opportunities for India's defence sector. While the decrease necessitates efficient utilization of available resources, the continued focus on capital acquisitions, border infrastructure, and innovation highlights the government's strategic priorities. With significant targets set for defence exports and domestic manufacturing, the future of India's defence sector looks positive.

Disclaimer: The article is for informational purposes only and not investment advice.