Experts predict moderate growth in India's defence budget allocation, reflecting a commitment to modernization and self-reliance amidst ongoing fiscal challenges and market corrections. Here are the key insights regarding the defence budget and its implications:

Current Budget Overview

For the fiscal year 2024-25, the Indian government allocated ₹6.22 lakh crore (approximately $75 billion) to the defence sector, marking a 4.79% increase from the previous year.

This includes ₹1.72 lakh crore earmarked for capital expenditure, which focuses on acquiring new equipment and enhancing operational readiness.

Defence pensions account for a significant portion of the budget, estimated at ₹1.41 lakh crore, which poses challenges for modernization efforts as it consumes nearly 25% of the total defence budget.

Future Projections

Analysts anticipate a 7-8% increase in capital outlay for FY 2025-26, driven by ongoing regional security concerns and the need for military modernization.

Over the next five years (2025-2029), India's defence spending is projected to reach $415.9 billion, with a compound annual growth rate (CAGR) of 3.7%.

Strategic Focus

Modernisation And Self-Reliance

The government's emphasis on indigenizing defence production under initiatives like "Aatmanirbhar Bharat" aims to reduce import dependency, as approximately 35% of India's defence needs are still met through imports.

Investment In Technology

Significant investments in research and development are expected, particularly in areas like artificial intelligence, cyber warfare, and advanced weapon systems.

Market Reactions And Challenges

The defence sector has seen a correction of about 30%, although it remains at a premium compared to historical averages. Experts suggest that specific policy announcements will significantly influence market reactions going forward.

Balancing increased defence spending with welfare programs remains a critical challenge for the government, necessitating reforms in pension management and personnel costs to free up resources for modernization.

There is cautious optimism regarding moderate growth in defence budget allocations, the focus remains on enhancing capabilities amid fiscal pressures and geopolitical challenges.

Agencies