What the Israel-Hamas war portends for India’s defence sector

livemint.com:

₹15,920 crore, up by 24% versus the previous year. To be sure, countries such as the US, Russia, and France would capitalize on this sort of an opportunity the most and are likely to increase their share of defence exports compared to India, said Amit Anwani, an analyst at Prabhudas Lilladher. This is because India still accounts for a negligible portion of the world’s defence exports.

For India, there could also be risks on the execution front. The conflict could potentially create supply chain disruptions, which would weigh on Indian defence projects and hence impact execution. Note that Israel is one of the key defence equipment suppliers to India.

As per Stockholm International Peace Research Institute, 37% of Israel’s exports were made to India over 2018-22. Besides private companies, public sector undertakings such as Bharat Electronics Ltd, Bharat Dynamics Ltd, and Hindustan Aeronautics Ltd would also bear the brunt of the crisis. On the flip side, Israel prioritizing its defence inventory for the war effort, could possibly drive greater emphasis on local production for India.

The expenditure on defence procurement from foreign sources has dropped to 36.7% in December 2022 from 46% of overall expenditure in 2018-19, according to the defence ministry. If the conflict persists for an extended duration, there is the possibility of an upswing in Indian defence stocks in the interim. For now, investors in shares of defence public sector undertakings seem to be capturing the brighter picture adequately.