Plans of companies like Larsen & Toubro, Mahindra & Mahindra and Reliance Infrastructure are riding on the government’s budgetary allocation for defence. These players expect orders for the manufacture of single-and double-engine fighter jets, naval helicopters and submarines, and export of defence systems to pick up in the next financial year.
Excluding pensions, Rs 2,58,589 crore was allocated for defence in 2016-17, up from Rs 2,46,727 crore in 2015-16 and Rs 2,22,370 crore in 2014-15. India’s defence budget is 1.71% of its gross domestic product (GDP) and a parliamentary standing committee has recommended raising this to 3% of GDP.
Mahindra group president and chief executive officer, aerospace and defence, S P Shukla said he expected the budgetary allocation to increase for defence capital Budget 2017-2018 procurement and induction of certain high-value equipment. “There is a case for the allocation to be made non-lapsable at the end of the financial year. This will see a higher use of the allocated amount,” he said.
Shukla said the forthcoming budget was an opportunity to announce big-ticket projects, especially when most nations and defence manufacturers were willing to set up facilities in India.
Jayant D Patil, L&T’s senior vice-president and head of defence, aerospace and heavy engineering, said, ”Besides increasing the capital budget allocation, the finance ministry could look at extending lines of credit to friendly nations to boost Indian defence exports. Further, the industry expects incentives for research and tax breaks on a par with government-funded programmes,” he added.
”With private companies signing contracts that involve manufacturing organised aerospace and defence hubs will come up in states that are able to offer incentives, capabilities and infrastructure,” PwC said in a recent report.