Union Budget 2025: Defence Sector anticipates for investment in infrastructure, green tech

With Finance Minister Nirmala Sitharaman all set to present the Union Budget on February 1, the defence weapons and equipment manufacturing industries anticipate investments in infrastructure, incentivize green technologies, and create export opportunities for the Indian companies. 

What are defence companies expectations from Union Budget 2025?

Vivek Merchant, Director, Swan Defence and Heavy Industries (formerly Reliance Naval and Engineering Limited or RNEL)

"The Indian government’s emphasis on improving shipping infrastructure and promoting indigenous shipbuilding has significantly transformed the sector. India holds a mere 0.05% of the global market share in shipbuilding, in stark contrast to China (~47%), South Korea (~30%), and Japan (~17%), which currently dominate the industry.

Therefore, new Government initiatives and improved budgetary allocations for ports and shipyards could be game changers, showcasing a clear vision for a robust maritime economy. 

The announcement of India’s Maritime Development Fund (MDF) for long-term indigenous manufacturing projects and the anticipated Shipbuilding Subsidy (SBS) Policy 2.0 could further strengthen the ecosystem, encouraging greater self-reliance and competitiveness.

“As we approach 2025, it is crucial for the Union Budget to prioritize investments in shipbuilding infrastructure, incentivize green technologies, and create export opportunities for Indian shipyards."

Rishab Gupta, Managing Director, Rossell Techsys Limited

The Union Budget 2024 outlined a clear pathway to drive growth and innovation within India’s Aerospace and Defencesector. The defence budget allocation of ₹6.21 lakh crore, representing 13.04% of the overall Union Budget, signaled a strong intent to modernize defence capabilities. 

While the budget for capital outlay continues to drive essential infrastructure development, we anticipate even greater focus on capital expenditure in the upcoming budget to support long-term capability building in the sector.

"The ₹13,043 crore allocation to the Space Sector, along with a ₹1,000 crore venture capital fund for space-tech startups, highlights the government’s commitment to expanding India’s footprint on the global space economy. At Rossell Techsys, we are hopeful that Budget 2025 will further support indigenous manufacturing, strengthen public-private partnerships, and empower the private sector to deliver comprehensive solutions. 

With the right policy framework, India is on track to become a global leader in aerospace innovation and self-reliant defence-manufacturing.

Kiran Raju, CEO & Co-Founder of Indrajaal.

Indrajaal is the world's first AI-powered wide-area Counter-Unmanned Aerial System, commonly referred to as the Anti-Drone System and now leading Indian drone infrastructure sector.

"As India looks ahead to Budget 2025, there’s a lot of focus on boosting the defence sector and stepping up infrastructure spending, while staying true to the idea of Atmanirbhar Bharat. The government is likely to prioritise modernising our armed forces, strengthening border and coastal security, and taking future-ready decisions to propel India to the next stage of progress.

“One area that will help accelerate this shift is drone infrastructure. Many states have already started investing in drone usage and have established drone policies. This will foster innovation.”

“However, the infrastructure to support a high volume of drones is still lacking. Along with strengthening our drone capabilities, the government should also look at strengthening home-grown drone infrastructure. With a stronger focus on Indigenous production, Budget 2025 could mark an important step toward making India more self-reliant and secure in the years to come.”

Amey Belorkar, Fund Manager - Defence and Aerospace Venture Fund, IDBI Capital Markets & Securities Ltd

“We anticipate that Budget for FY 2025-26 will be pivotal in accelerating India’s journey towards self-reliance in the defence and aerospace sectors, both of which are on the brink of significant growth. 

The government’s emphasis on Atmanirbhar Bharat and Make in India is likely to be bolstered by strategic budgetary allocations that promote innovation, support MSMEs, and streamline defence procurement processes. 

A particular focus on emerging areas such as unmanned aerial systems (UAS), advanced materials, cyber defence, and space technology could unlock substantial opportunities for private capital engagement.

The burgeoning space tech industry, driven by advancements in satellite development, launch capabilities, and space exploration, offers significant potential for innovation and investment. 

In line with the government’s indigenization drive, we foresee a projected growth of 15-20% in the defence sector, propelled by supportive budgetary measures, incentives for private sector involvement, and a robust push for indigenous manufacturing. 

The government’s planned introduction of a new scheme focused on R&D in deep-tech technologies, such as AI, robotics, and advanced weapon systems, is expected to further catalyze innovation and development within the sector. 

Initiatives targeting the modernization of India’s armed forces, along with anticipated attention on Defence Industrial Corridors and production-linked incentives (PLIs), are set to provide crucial momentum for the sector’s expansion. 

Increased opportunities for indigenous manufacturing, public-private partnerships, and the empowerment of the private sector to strengthen the country's defence capabilities.

Notably, the defence sector was allocated Rs 6.21 lakh in the previous Union Budget, which was the highest fund allocated to any ministry. This allocation was 4.79 per cent higher compared to what it was allocated in 2023.