‘Need bigger allocation to achieve indigenous defence production target of ₹3 lakh cr by 2029’

With the defence budget of ₹6.21 lakh crore for 2024-25 nearly remaining unchanged over vote on account, the defence industry representatives said there was a need for a much higher increase of capital allocation and for indigenous acquisition, to achieve the long term target of reaching indigenous production of ₹3-lakh crore by 2029.

The start-ups, however, appear to be happy over the substantial increase in the Budget for iDEX, now 4.5 times larger than the previous year’s which they believe is another step to cement initiatives for self-reliance in the defence sector.

But for minor increase of ₹400 crore, the defence allocation for FY25 is much the same as interim Budget presented on February 1, industry veteran JD Patil, whole-time Director, and Senior Executive Vice President, of L&T’s Defence Business and New Age Smart Technology businesses told businessline.

“While this is good as there are no surprises, the capital allocation as also allocation for indigenous acquisition ought to have been increased keeping an eye on the long term target of reaching indigenous production of ₹3 lakh crore by 2029,” Patil remarked.

He also said that the “overall defence budget increase is not keeping in tune with inflation and therefore in real terms it is reducing in y-o-y terms and in terms of percentage of GDP terms”.

The defence outlay of ₹6,21,940.85 crore for FY25 is just 4.79 per cent more than the BE of FY24 that stood at ₹5,93,537.64 crore.

‘Future-centric’

The Society of Indian Defence Manufacturers (SIDM), a not-for-profit apex body of the Indian defence industry, was of the view that this budget is future centric for its strategic thrust on skilling, supporting MSMEs, and nurturing start-ups.

“Its strong focus on technological advancements through Research and Development and indigenisation will promote Atmanirbharta, laying a robust foundation for sustained growth in the Indian Aerospace and Defence industry and march towards an Atmanirbhar Bharat,” SIDM President Rajinder Singh Bhatia stated.

Start-up Dhruva Space, a space-engineering solutions provider, is optimistic over, what it said, the substantial increase in the budget for iDEX, which is now 4.5 times larger than the previous year’s. “This significant capital outlay, which forms a major portion of the DRDO budget, reaffirms our commitment to advancing technology and innovation in the defence and space sectors. It is indeed promising news for new space companies like Dhruva Space, poised to lead in global endeavours from India,” Chaitanya Dora Surapureddy, Chief Financial Officer of Dhruva Space, said.

Equirus Securities, one of the leading domestic institutional equities brokerage firms in India, stated while revenue expenditure at ₹4.3 trillion should decline 4 per cent over FY24 RE (+ 4 per cent over FY24 BE), capital expenditure at ₹1.8 trillion would rise by 6 per cent/9 per cent over FY24 BE/RE.

The government has not yet declared the complete bifurcation of FY25 capex among Army, Navy, and Air Force, Equirus Securities pointed out in its reaction to the defence budget.

“Based on segment data declared, Aircraft and Aeroengines would see the sharpest jump (from ₹241 billion to ₹408 billion). Spending towards naval fleet at ₹238bn would decline marginally. R and D expenses (DRDO) at ₹132bn would see only marginal growth over FY24 RE,” the brokerage firm stated.