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Defence sector to grow 20% CAGR during FY 2024-2029
On the backdrop of Atma Nirbhar Bharat - make of india initiative and liberalised FDI norms, which have enhanced domestic manufacturing capabilities, attracted international investments in defence innovation and driven notable growth in exports of military equipment.
Defence sector has grown over last 5 years. It is all set to grow @ 20% CAGR over next 5 years
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Atma Nirbhar Bharat -Mazgaon Dock in collaboration with TKMS Germany gets order for submarine worth 70000 crore.
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Union Budget Capex Spends 2025-26 vs Income tax relief.
The Govt has been pumping in capex for the last few years. Standalone Govt Spends on Capex has not been able to support our GDP. growth due to lack of private capex.
So this time , the Govt is trying to play multiple levers to stimulate our economy. While keeping the Govt Capex Spends same as last year, we are trying to create demand by increasing disposable income on the hands of middle/ poor class. This is expected to lead consumption led growth which would force the corporate to increase Private Capex Spends to expand in manufacturing goods and services.
So both Govt Capex and private capex both together are expected to stimulate our economy. So though the immediate effect of disposable income could be spent in consumer durables , automobiles , FMCG , tourism, etc , but finally it is the capital goods sector which would get benefitted due to expansion in manufacturing capacity.
Some figures fior FY 2026 are :
Govt Capex 11.21 Lakh crore ( Last year 11.1 Lakh crore , actual spent 10.18 Lakh crore )
Railway capex 2.52 Lakh crore (remains same as last year)
Defence capex Rs 6,812,10.27 crore ( last year Rs 6,21,940 crore )
The income tax relief can add only 1 Lakh crore liquidity in hands of consumers
From the above figures , there is no reduction in capex and there is no reason why defence sector, railway ,infrastructure , capital goods will not do well.
The added advantage is govt is aiming to have multiple levers by allowing consumers to spend by increasing disposable income with consumers and forcing corporates to spend by expanding its manufacturing by capex spends . So the overall economy is expected to grow.
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Just one clarification. Defence acquistion capex would be 1.8 L. The 6.82 figure includes salaries and pension.
Rest I agree with you.
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This year, Rs 6,812,10.27 crore have been allotted for the Minister of Defence (MoD), which includes Rs 4.88 lakh crore for Revenue Expenditure, and Rs 1.92 lakh crore for Capital Expenditure. This year’s defence outlay will be 8% of the total budget. In the previous financial year, Rs 6,21,940 crore was allocated for the MoD.
I believe the revenue expenditure of 4.88 Lakh crore can not be all salary and pension.
Revenue expenditure includes repair and maintenance of existing defence equipments / machinery , capacity augmentation etc
I stand corrected if I am wrong.
And we should do an apple to apple comparison between last year and thus year
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This is from budget document…what we will be concerned with will be capital expenditure and not revenue.
Do you have comparative data of last year? To see if there is any drastic reduction when compared with last year.
As far as I know revenue expenditure is not only salary pension , but also includes repair maintenance of defence equipments, repair maintenance of defence Machinery, infrastructure maintenance, Raw material. Capital expenditure is for new acquisitions.
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Same for Navy and Army
Next image has total for all 3 services.
155 vs 143 vs 161 for Fy 23 / 24 / 25
Pensions alone is 160
Please let me know where I am wrong.
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So, no one is wrong here…
what all I am saying is revenue expenditure also includes repair and maintenance of defence infrastructure…apart from salary wages
Ok so we are talking around each other then 
The company where I was working earlier , we always used to debate whether to buy an item like a new tool or a small machine under capital or revenue expenditure?
Capital requirements are planned in advance…
if I have not planned my capital budget in advance , and there is an urgent requirement in the middle of the FY, what we do is to buy some major parts as raw material and try to either revamp or repair the existing item or simply assemble the new parts bought as raw material to make the machine under revenue expenditure.
@hardik_shah1
Dear Hardik
You may please refer to the statement from the revenue secretary in link below with regards to Revenue vs capital expenditure.
In many instances revenue expenditure is used for capital formation. so the actual capex is much higher than the budgeted figure. It could go up to 15 Lakh crore.
He exactly says which I made a statement.in my previous message.( link below)
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Thanks Om bhai,
Few points. the Secretary mentions the comment you mentioned in this statetement "
purposes as revenue in our accounts – revenue grants, but it results in creation of capital assets. For example, Jal Jeevan Mission, Pradhan Mantri Gram Sadak Yojana, these lead to the formation of capital assets at the ground level, but for accounting purposes, we count it as a revenue expenditure."
I agree with you that sometimes the two can be interchanged as it happens at company level also. Capex and Opex in some cases is in eyes of beholder or in this the Audit committee.
A few queries…
- how do you see the shipbuilding program now that govt is proposing maritime commission with frontloaded investments. Any non PSU company you are exploring that can contribute on the shipbuilding or even a proxy.
- On defence side, where do you see most movement in future- Aircraft, Naval or Land Systems and any direct or indirect players apart from the known names. (I have HAL, BEL, Astra and Appollo here)
- On power/Railway theme your views…any incremental benefits or is almost everything priced in at current level.
- Any plays on consumer side you may have and how do you observe the sector.
Overall thanks again for this discussion.
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@hardik_shah1
Hardik Bhai
Thanks for your views !
As my investments are long term , short time volatility really don’t bother me. Market at times behaves irrationally , but then corrects it’s behaviour in course of time and gets driven by its financial performance and future earning visibility.
What goes down would also come up if you hold on to good quality stocks with good earning visibility.
While there is no substantial capex increase this budget , but as the capex is maintained, the capex driven stocks with already a healthy order book will.further boost it’s order book.
(1)!Shipping : As of today i prefer to continue with my defence PSU holdings where i am already sitting with 3X returns.even with the current volatility. though I had done some resizing to recover my basic sum.
I have not explored non PSU commercial shipping because all these three are also in to commercial shipping apart from existing defence opportunities - which is huge and have next 3-5 yrs order book.
,(2) on other defence PSU, i continue to ho,ld known names HAL/ BEL/BEML. BEML is a three in one - apart from defence , it is in to railway /metro rail and construction equipments. These again have given me 2X-3,X and I still.feel further 2X possible in next 2-3 years given the capex and earning visibility next 5-8 years orderbook. i also own Zen technology which has given 3X.
,(3) railway , given the current correction , it may be a good opportunity to enter in to some rail way stocks - fundamentals in my view remains in fact…nothing has changed …
(4) On consumer durables I have Dixon, blue star , Amber enterprise , subros.
(5) Consumer - I have zomato , Trent ,
(6) Auto -Bajaj Auto , Maruti , Mahindra , escorts
(7) on semiconductor play I have CG power , Kaynes ,
(8) Power infra …i remain invested in a basket of renewables utilities known names including ABB, Siemens , KEC
(9) FMCG - none …
Discl ; invested and hence may be biased.PSU stocks could be volatile.Not a buy sell recommendation.Please do your own assessment before investing.
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