Investments in railways

Railway investments to touch Rs 8.0 trillion over fiscal 2020 to 2023. CRISIL Research expects a 13 to 15%
decline in investments in Railways in fiscal 2021 owing to the Covid-19 pandemic. Investments in fiscal 2022 are
seen rising by 10-15%, led by the dedicated freight corridor and deferral of fiscal 2021 capex. A construction
capex of Rs 3.3 trillion is seen over the next five years, compared with Rs 2.4 trillion over the past 5 years, led by
investments in network decongestion. CRISIL Research expects construction expenditure in railway projects to
increase 1.4 times (4-6% CAGR) between fiscals 2021 and 2025, compared with the previous five years.

Railway investments to grow 1.4X in next five years compared with past five years

Construction spends Capex investments
Rs. stn)
7 1660-1608
1600
1333
Rs. 2.4 tr. 1400
1099
1200 1019
1000
800
0
400
200
BFY1G-FY20E SFY2IP-FY25P G47 FYI8  FYIMRE) FYZO(RE) FY21(BE)
= Budgetary Support gIEBR

Source: Budget documents, CRISIL Research
Defence sector

India has the third largest military in the world and is the sixth biggest defence spender globally. India is also one
of the largest importers of conventional defence equipment and spends ~30% of its total defence budget on capital
acquisitions. 60% of defence related requirements are currently met through imports. The ‘Make in India’
initiative by the government focuses on increasing indigenous defence manufacturing and becoming self-reliant.
The opening up of the defence sector for private sector participation is helping foreign original equipment
manufacturers (OEMs) enter into strategic partnerships with Indian companies and leverage opportunities in the
domestic market, as well as globally.

India’s focus on indigenous manufacturing in the defence space is paying off as the Ministry of Defence, over the
last few years, has unveiled several products manufactured in India like HAL Tejas light combat aircraft,
composites sonar dome, a portable telemedicine system for the armed forces, penetration-cum-blast and
thermobaric ammunition specifically designed for Arjun tanks, a heavyweight torpedo called Varunastra
manufactured with 95% locally sourced parts, and medium range surface to air missiles.

Trend in India’s defence budget expenditure (Rs trillion)

5.0

35 a6 40 45
: ip
3.0 es 0.9 10 ay
° Or] -
1.0

-1.0 FY16A FY17A FY18A FY19A FY20RE FY21BE
=Capital Expenditure ™ Revenue Expenditure

Note: Includes defence pensions, A: Actuals, RE: Revised Estimates, BE: Budget Estimates
Source: Union Budget, CRISIL Research

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