This year’s defence budget may focus on building submarines, drones, warships and aircraft carriers
- The Indian government may not be able to fully utilise the budget it had allocated for the defence equipment and weapons purchases in 2021.
- Strengthening the Navy may be one of the main focus for India's defence ministry as the threat coming from China rises.
- India’s Defence budget has remained consistent roughly at 2% of the GDP in the last five years.
AdvertisementThe Indian government promised to spend 19% — of the ₹4.78 crore crore set aside for the defence sector — in buying new equipment, weapons, fighter jets et al before March 2022. That money may not be fully spent as planned, a national security and defence expert told Business Insider.
The money may go into a corpus and is likely to be spent in the next year, according to Sameer Patil, senior Fellow at ORF, who also believes that the upcoming budget on February 1 may focus more on strengthening India’s Navy.
Not just Patil, another national security analyst Bhartendu Singh, also believes that while India’s allocation for defence will go up in absolute terms, it may remain small as a percentage of gross domestic product (GDP). India’s defence budget has remained consistent roughly at 2% of the GDP in the last five years. Even though the recommended share is 3%.
Here’s why India needs to strengthen the Navy
While India has been constantly battling China on its land borders, the budget this year may focus on building up and modernising its forces on the sea. This is largely because the Chinese threat in the Indian ocean has also been rising simultaneously, according to Patil.
Commodore Anil Jai Singh, a submarine veteran, has also raised concerns over China ‘gifting’ Type 035 Ming class diesel-electric submarine — the oldest class of submarines in the Chinese inventory — to Myanmar last month. China has been growing its presence in the Indian ocean even before the Galwan clash of 2021, Patil added.
Some steps are already visible. “We have seen both L&T and Mazagon dockyard have been shortlisted as India’s strategic partners for building the next set of submarines,” Patil added. This project — which aims to build P75i submarines — is likely to see an investment up to ₹45,000 crore.
The Indian Armed Forces is also looking to defend itself by building anti-submarine warfare capabilities, purchasing more maritime surveillance drones and building a fleet of 300 for the Indian navy.
According to Elara Capital’s report published in October 2021 the Indian Navy's Fleet stands at 150 ships and submarines,and the Coast Guard fleet is at 130 vessels. Each of these is expected to grow to 200 vessels by 2027. Orders are likely to be placed for 165 warships in the medium term, the report added.
Government of India’s undertaking Garden Reach Shipbuilders & Engineers (GRSE), in its red herring prospectus, highlighted that the Navy’s estimated capital budget up to 2027 is expected to be ₹4.5 lakh crore.
If indeed, Finance Minister Nirmala Sitharaman makes provisions for higher spending on the Navy, these are some of the stocks to watch out for on Budget day.
|Stock||Change in last one month|
|Garden Reach Shipbuilders & Engineers||16.52%|
|Hindustan Aeronautics Limited||14.15%|
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