Geopolitical tensions are on the rise due to the longer-than-expected stretch of the Russia-Ukraine war. The increasing tension due to war all over the world may prompt countries like India to increase their defense spending in the coming years. Against this background, today i.e. on March 4, there was a rise in the shares of defense companies. Russia’s invasion of Ukraine has raised concerns for countries with disputed geopolitical areas.
India, for its part, is considered a geopolitical hotspot due to border tensions with China in the north and strained relations with Pakistan in the west. Overall, India’s military spending saw a sharp rise to 2.88 per cent of GDP in 2020 due to rising tensions with China. Earlier, since 2009, military spending as a percentage of GDP used to be low.
In recent years, India has spent heavily on procuring aircraft, artillery and other defense equipment from various countries. Furthermore, given the Air Force’s heavy reliance on Soviet-era machinery, India is looking to improve its military arsenal.
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Prime Minister Narendra Modi has made it the primary objective of the government to encourage indigenous production of military equipment. Recently the government directed the armed forces to reduce or stop imports wherever possible.
Against this background, analysts expect a rise in the stocks of Bharat Electronics, Hindustan Aeronautics, Bharat Dynamics and other indigenous defense companies. He expects the order book of these companies to increase in the coming years.
“The Government of India continues its drive to reduce defense imports while building strategic capability,” brokerage firm ICICI Securities said in a recent note.
Today i.e. on March 4 at 10:30 am, the shares of Bharat Dynamics, Hindustan Aeronautics and Bharat Electronics were trading up 1.2-1.8 percent on the National Stock Exchange.
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