Budget 2023: Defence allocation in focus as India aims to modernise its armed forces amid LAC tensions with China
Budget 2023: With border issues with China and the ongoing war between Russia and Ukraine being some of the key factors the government will need to consider while allocating money to the sector.
Budget 2023: Ahead of the presentation of Union Budget in Parliament on February 1, India's defence sector is in the spotlight. Experts expect crucial developments in defence in this year's Budget, with border issues with China and the ongoing war between Russia and Ukraine being some of the key factors the government will need to consider while allocating money to the sector.
According to Vikas Gupta, CEO and Chief Investment Strategist, OmniScience Capital, the defence Budget has to be increased significantly due to the following reasons:
1. Since 2017, and even earlier, India has been experiencing friction along its border with China, especially the brokder in the North East near Bhutan to Ladakh in the North.
2. India's border with Pakistan has always been volatile.
3. Kashmir needs a strong defence from infiltrations across the border.
4. Pakistan-China highways pass through Indian territory, which needs to be monitored and eventually taken control of.
5. The Quad wants India to play a strong part in defending the marine trade routes passing through the Indian Ocean.
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Urmi Shah, Research Analyst at Samco Securities, pointed out that given India’s current fiscal deficit scenario, the allocation for defence remains under pressure.
Defence Budget expectation
OmniScience's Gupta expects the Defence budget to be around Rs 6.6 lakh crore. “It is possible that it could be even higher given the importance of shoring up the country’s defence forces which are lagging on quite a few weapons systems for several years and the imminent threats in the neighbourhood,” he said.
According to Gupta, the Air Force will need the highest allocation for capital equipment, followed by the Navy and then the Army which have lagged in being adequately armed with the latest weapons systems.
According to Samco's Shah, the defence sector has been in limelight because of the government's Make in India push for defence products. This has opened doors for Indian defence companies which are receiving orders from the Indian government and the foreign companies.
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She also said that the allocation to defence in the Union Budget is expected to be marked up given the importance and the need for protection.
What to do with defence stocks
OmniScience Capital is bullish on the Omni Bharat Defence portfolio.
According to Samco, defence and aerospace are at the beginning of a multi-year uptrend, with companies such as HAL, BDL and BEL likely to benefit from the Budget.
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