Indian defense market expected to grow 14 percent annually due to government’s indigenization drive: Report

Jefferies in its sectoral report said the potential market opportunity for Indian defence companies is expected to grow at 14 per cent CAGR (compound annual growth rate) during FY2024-FY2030E (projected), driven by the government’s indigenisation focus on the export opportunity.

Citing factors such as global geopolitical tensions and India’s increasing focus on self-reliance, the report said these factors are driving order inflows and revenue growth for domestic defence companies.

“The government’s focus on building country-to-country relationships to boost exports is the icing on the cake,” Jefferies said.

It further added that India’s defence spending will double between FY24 and FY30, which will continue to drive the stock prices of defence companies higher.

India is expected to have a defence market opportunity of USD 90-100 billion over the next 5-6 years, with the defence industry expected to grow at 13 per cent annually from FY24 to FY30.

It said that even though India is among the top three countries in terms of defence expenditure globally, its expenditure in 2022 will be only 10 per cent of that of the US and 27 per cent of that of China.

India is the second-largest importer of defence equipment, accounting for 9 per cent of global arms imports.

The US financial services firm said in its forecast that India’s defence spending on large equipment (capital defence) is expected to continue growing at around 7-8 per cent per year, similar to the last 10 years.

Going forward, it said the export defence opportunity for companies is expected to grow at 18 per cent CAGR over FY24-30. India’s defence exports grew 14-fold to USD 2.6 billion over FY17-24.

“We believe this will grow to US$7 billion by FY30, in line with the government’s target of achieving US$6 billion by FY29,” he/she said.

Italy, Egypt, UAE, Bhutan, Ethiopia and Saudi Arabia are the most attractive defence destinations for Indian exporters. The Middle East (ME) accounts for 33 per cent of global arms imports, worth US$11 billion and offers an opportunity for India. Qatar and Saudi Arabia account for 52 per cent of ME imports, according to the report.