Gaurav Mehndiratta, Partner and Head, Aerospace and Defence, KPMG in India

The overall Defence Budget 2025 witnesses a 10% increase with an allocation of INR 6.8 lakh crore (~USD 79 Bn). Considering an upward trajectory in Defence Production and exports in past few years with amounts standing at INR 1.28 lakh crore (~USD 15 Bn) and INR 0.21 lakh crore (~USD 2.4 Bn) respectively for FY 2023-24, the industry was brimming with an expectation of corresponding higher capex allocation. In this backdrop, the capex allocation of INR 1.8 lakh crore (~USD 21 Bn) for 2025 saw only a modest 5% increase against the budget estimate (‘BE’) of 2024 (lowest increase when compared to defence revenue budget and defence pension budget), and 13% increase against the revised estimate of 2024. Thus, capex budget allocation does not seem to align with government’s vision of modernisation and ‘atmanirbharta’ in the sector.

Having said the above, the R&D allocation of INR 0.14 lakh crores (~USD1.7 Bn) accounting for 8% of the total defence capital budget, with a 13% year-on-year increase from BE of 2024 seems promising towards spurring innovation and enhancing global competitiveness. On a separate note, in a forward-thinking move, announcements have also been made for the following in the union budget/economic survey 2025:

Maritime: Set-up of a Maritime Development Fund with a corpus of INR 25,000 crore (~USD2.9 Bn) (with 49% government contribution) to provide long-term financing for the maritime industry.

Space: As part of India’s Space Vision 2047, the Union Cabinet has approved four key projects: the Gaganyaan follow-on mission; the Chandrayaan-4 Lunar Sample Return Mission; the Venus Orbiter Mission; and the development of the Next Generation Launch Vehicle.

Aviation Sector: India is recognized as the fastest growing aviation market globally. To further strengthen the sector a modified UDAN (Ude Desh Ka Aam Naagrik) scheme has been announced with focus on enhancing regional air connectivity. Additionally, the sunset dates for commencement of operations of IFSC units for tax concessions for several incomes (including aircraft leasing) has been proposed to be extended to 31st March 2030.

President FICCI Harsha Vardhan Agarwal

“Through the Budget the government has made a strong effort to address the immediate challenges being faced by the economy, particularly on the consumption front, while keeping an eye on the long-term target of ‘Viksit Bharat’. FICCI would like to compliment the Finance Minister for a comprehensive, inclusive and forward-looking budget that encompasses a heavy dose of reforms, fiscal stimulus and a clear focus on the farm sector, MSMEs, youth and women of the country. “

ASSOCHAM President Sanjay Nayar 

” The finance minister has placed her confidence in the middle class for leading the consumption-led growth . At the same time, there is a clear focus on unleashing the potential of the MSMEs, Startups and exports. Leaving annual income of individuals up to Rs 12 lakh a year tax -free and rationalising TDS/TCS thresholds and slabs would not only provide ease of living for common citizens but also provide an ease of doing business for small and micro entrepreneurs. As was indicated by Prime Minister Shri Narendra Modi, his government has foregone a revenue of Rs 1 lakh crore, on account of direct tax exemptions and reliefs, mainly to the middle class. This is quite a bold approach and should pay off to the economic growth.”

Amey Belorkar – Fund Manager – Maharashtra and Aerospace Venture Fund at IDBI Capital Markets & Securities Limited

“The Budget has focused on strenthening India’s MSME and Startup ecosystem through enhanced credit access by way of expanded fund-of-funds (FOF) of ₹10,000 crores as well as a proposal for setting up a Deep Tech FOF. Further the investment limits for MSME classification have been increased by 2.5 times which means that businesses can now invest significantly more while still qualifying as MSMEs. Also startups are benefited with the increase in Incorporation period by 5 years. The allocation of ₹500 crore for MRO sector and the establishment of a ₹25,000 crore corpus for shipbuilding shows India’s commitment to promote India’s self-reliance. Additionally, India is focused to accelerate clean energy to develop at least 100 GW of nuclear power by 2047 and encourage private sector involvement. A dedicated ₹20,000 crore R&D initiative for Small Modular Reactors (SMRs) will be launched, with the goal of having at least five indigenously developed SMRs operational by 2033. The Budget also aims to create self reliance in EV and mobile phone battery manufacturing.”

Ankit Mehta, CEO, ideaForge basis the Union Budget 2025 for the Drone Technology Sector

“The Union Budget 2025 reaffirms the government’s commitment to deep tech innovation. The rise in PLI spending for drones and drone components—from INR 33 crore to INR 57 crore within the total outlay of INR 120 crore—reflects the increasing scale of industry participation and adoption. This trend highlights the sector’s growing momentum and the need for sustained support. However, to fully unlock the potential of this technology, a significantly larger scheme of INR 1,000-2,000 crore over at least five years is essential. Additionally, the INR 20,000 crore allocation for private-sector-led R&D and the launch of the National Geospatial Mission will accelerate advancements in autonomous systems, precision mapping, and next-generation infrastructure planning. Together, these initiatives position India as a global leader in drone and geospatial intelligence, driving innovation and self-reliance in this critical sector.”

Vinay Dube, Founder and CEO, Akasa Air

‘’The Union Budget 2025 marks a significant step in supporting the sustained growth of India’s aviation sector. We commend the government’s commitment to infrastructure which will make air travel more accessible, thereby boosting tourism and the economy on the whole.  Aligned with the vision of Viksit Bharat 2047, this focus on aviation strengthens India’s position as a  global hub, ensuring greater mobility for all and contributing to a more connected, inclusive nation.  As India’s fastest-growing airline, we applaud the government’s continued efforts to fuel the sector’s  growth and make air travel accessible to a greater number of Indians.’’

Sai Pattabiram, Founder & MD, Zuppa Geo Navigations Pvt Ltd

“The demand for secure non Chinese drones is growing the world over and more so in India . India has the opportunity to leverage its  own domestic consumption and global reputation as a trustworthy technology partner built by the IT sector to evolve into a global drone hub . This can only be achieved by India moving deeper into the component level supply chain from the current assembly of imported components level that it is in today . Drone cybersecurity is turning out to be an absolute must-have for India in particular and global users in general especially after the often quoted electronic warfare threats in Ukraine and the Hezbollah pager attack in Lebanon . The Government should recognise this huge National as well as global opportunity and support companies involved in Component manufacturing , Cyber , Data Security  and analysis  for drones . A Design linked Incentive ( DLI ) coupled with a PLI that supports use of only Domestically produced components by OEMs will boost the sector in a big way. ”

Kiran Raju, CEO & Co-Founder of Indrajaal

“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.”

Dr. Sampath Ravinarayanan, Chairman of AXISCADES Technologies

“The Union Budget 2025 lays a strong foundation for India’s tech-driven future. The focus on upskilling through the National Centres of Excellence and expanding IIT capacity will nurture the talent the industry needs to power research and innovation . The new Centre of Excellence in AI for education is set to be a game-changer, paving the way for creating indigenous innovative solutions that can transform learning. The ₹20,000 crore boost for private sector-led R&D and the Deep Tech Fund of Funds is a welcome move which will fuel groundbreaking inventions and support businesses driving change. The increase in allocation for defense capex to 1.80 lakh crores provide a huge philip to domestic defence manufacturing and atmarnirbhar bharat. The ease of access to PM Gati Shakti’s data will make project planning smarter and more efficient for Public-Private Partnerships, which will be the catalyst for the country’s infrastructural growth. Plus, with initiatives like the Export Promotion Mission and support for global supply chain integration, India is clearly gearing up to become a global tech hub. This budget is therefore a bold step towards building a domestic ecosystem where technology, talent, and innovation thrive together.”

Sanjay Choudhari, Chairman, SBL Energy

“The government’s renewed focus on manufacturing and energy security marks a transformative shift for India’s industrial landscape. The National Manufacturing Mission under the Make in India initiative is a timely and much-needed move that will strengthen small, medium, and large industries. We see this as a crucial step toward building a robust supply chain for mining and infrastructure, enhancing domestic production of critical materials, and reducing import dependency. The Nuclear Energy Mission, with its ambitious target of 100 GW capacity by 2047, is a bold move toward energy transition. The ₹20,000 crore investment in small modular reactor R&D and incentives for capacity augmentation will create opportunities for energy-intensive industries, including mining and explosives. Reliable and scalable power sources are fundamental to driving industrial growth, and this initiative is a step in the right direction. At SBL Energy, we are optimistic about these developments and look forward to leveraging these opportunities to contribute to India’s self-reliance in mining, energy, and industrial explosives.”

 Amit Takte, Chief Technology Officer, DroneAcharya Aerial Innovations Limited

“As the Union Budget 2025 approaches, it is essential to emphasize the pivotal role of skill development in the burgeoning drone industry, particularly in areas like drone operations, Geographic Information System (GIS), and data processing. Drones, combined with advanced GIS and data analytics, are transforming sectors such as agriculture, urban planning, infrastructure, and defense. To meet the growing demand for skilled professionals, the government must prioritize comprehensive training programs that encompass drone technology, GIS, and data processing. We urge the government to allocate resources in the upcoming budget towards establishing specialized training centers, subsidizing certification programs, and incorporating drone-related skills into vocational education. This holistic approach to skill development will not only equip the workforce with cutting-edge capabilities but also drive innovation, job creation, and economic growth. At DroneAcharya Aerial Innovations, we are committed to fostering expertise in drones, GIS, and data processing. With the right governmental support, India can position itself as a global leader in drone technology by cultivating a highly skilled and competitive workforce.”

 Jaikaran Chandock, Director, Balu Forge Industries Ltd

“The budget has proposed some effective measures to build self-reliance in defence manufacturing. Earmarking a sizable part of the modernisation outlay for procurement through domestic sources and domestic private industries is a move in the right direction to boost bolster capacity and capability. It will also pave the way for a stronger private sector’s participation in the country’s defence ecosystem. The focus on AI and deep tech innovation also augurs well for the defence and precision engineering domain as it will lead to the development of a future-ready talent pipeline. In a way, new-age tech interventions will also bolster defence manufacturing capabilities. From a holistic perspective, the budget has set the progress path to drive defence exports to attain the defence exports target of ₹50,000 crore by 2029.”

Aravind Melligeri, Chairman & CEO, Aequs

“The continuing tilt towards strengthening India’s manufacturing sector in the Union Budget presented by Finance Minister Nirmala Sitaraman today is more than welcome and a positive for growth. The all-round emphasis on MSMEs, which the minister termed as the 2nd engine of growth. is the backbone of Indian manufacturing, is in the right direction. Having said that, we are awaiting some PLI announcements in the near future for components for consumer electronics, and manufacturing of toys which will provide a further fillip to Make in India.”

Vivek Merchant, Director, Swan Defence and Heavy Industries Limited:

“The Union Budget 2025-26 sends a strong message about India’s ambitions in shipbuilding and maritime infrastructure. The ₹25,000 crore Maritime Development Fund is a game-changer, signaling the government’s serious intent to make India a global hub for shipbuilding. This investment, coupled with the push for port-led development and logistics efficiency, will drive growth for companies like ours. The ₹1.5 trillion allocation for infrastructure development is another positive step, ensuring better connectivity for shipyards and ports, which is crucial for scaling up operations. However, the industry still needs policy reforms that encourage private sector participation and reduce dependency on imports for critical components. A clear roadmap for defence shipbuilding and incentives for indigenous manufacturing will further strengthen India’s maritime ambitions. The increased defence budget allocation and emphasis on modernization present a significant opportunity for private players in the defence sector. Encouraging strategic partnerships and fostering a robust domestic ecosystem for naval defence manufacturing will be key to enhancing India’s self-reliance in maritime security.”

 Rajendra K Chodankar, Chairman, RRP S4E Innovations Ltd (Defence Sector)

“The 10% increase in the budget for Defence to Rs 6.81 lakh crore is indeed a major boost by the Government of India. The visionary thought process of the Government is well aligned on acquiring new defence systems in the face of security challenges. Government’s greater focus on purchasing more weapons, military hardware, aircrafts and warships and allocating lion share of Rs. 1.8 lakh crore in the total defence budget is very encouraging for MSME and corporates.”

Venkatesh Mudragalla, Co-founder & COO, Jeh Aerospace

“India’s aerospace manufacturing sector has made significant strides over the past year, highlighting its potential as a global leader. The 2025 budget should focus on increasing R&D investments to drive innovation in propulsion systems, advanced materials, and automation. Tax incentives and collaborations between the private sector, academia, and research institutions are essential to accelerate progress. Establishing dedicated aerospace hubs with state-of-the-art infrastructure will support end-to-end production and foster startups and SMEs. A “National Aerospace Manufacturing Policy” can provide a roadmap for sustainable practices, technology transfer, and local capacity building. Skill development programs in advanced manufacturing, AI, and robotics will equip a future-ready workforce. By promoting green aviation technologies like electric propulsion and lightweight materials, India can align its growth with global sustainability goals while strengthening its position in the global aerospace value chain.”