New Delhi: The defence budget received an all-time high allocation of ₹7.85 lakh crore in the Union Budget 2026–27, marking a 15.19% increase over the Budgetary Estimates of FY 2025–26.
The enhanced allocation underscores the Government of India’s focus on strengthening national security, operational preparedness, and indigenous defence manufacturing in the post-Operation Sindoor environment.
The total defence budget accounts for 14.67% of total Central Government expenditure and stands at nearly 2% of the estimated GDP for FY 2026–27, making it the highest allocation among all ministries.
Defence Budget Allocation Prioritises Modernisation and Readiness
The Union Budget provides for both capital and revenue requirements of the Armed Forces, including funding for emergency procurement of arms and ammunition undertaken after Operation Sindoor.
Of the total defence budget, ₹2.19 lakh crore has been allocated under the capital head, compared to ₹1.80 lakh crore in FY 2025–26, reflecting a substantial rise in modernisation spending.
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The Ministry of Defence’s allocation is distributed as follows:
- 27.95% for capital expenditure
- 20.17% for revenue expenditure on sustenance and operational preparedness
- 26.40% for pay and allowances
- 21.84% for defence pensions
- 3.64% for civil organisations
Capital Outlay Under Defence Budget Sees Quantum Leap
For FY 2026–27, capital outlay for the Defence Forces stands at ₹2,19,306.47 crore, an increase of 21.84% over FY 2025–26 Budget Estimates. Of this, ₹1.85 lakh crore has been earmarked for capital acquisition, representing a 24% jump over the previous year.
During FY 2025–26 up to December 2025, the Ministry of Defence concluded contracts worth ₹2.10 lakh crore and accorded Acceptance of Necessity approvals exceeding ₹3.50 lakh crore.
Upcoming acquisitions under the capital head include next-generation fighter aircraft, advanced weapons systems, ships and submarines, UAVs, drones, and specialised vehicles.
Defence Budget Strengthens Aatmanirbharta Through Domestic Procurement
A key highlight of the defence budget is the continued emphasis on self-reliance. The Government has earmarked ₹1.39 lakh crore, or 75% of the capital acquisition budget, for procurement from domestic industries, including private sector players.
This allocation aims to reinforce investor confidence in India’s defence manufacturing ecosystem and support long-term capability development while reducing dependence on imports. The policy thrust is expected to generate employment and spur growth across ancillary industries.
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Revenue Expenditure Under Defence Budget Rises Sharply
The defence budget provides ₹3,65,478.98 crore under revenue heads, a 17.24% increase over FY 2025–26. Of this, ₹1,58,296.98 crore is allocated for operations and sustenance, with the remaining amount directed towards salaries and allowances.
The enhanced provision will support procurement of critical stores, spare parts, and maintenance of key defence platforms, ensuring uninterrupted operational readiness.
Border Infrastructure Gets Boost Under Defence Budget
The Government has increased capital allocation to the Border Roads Organisation (BRO) to ₹7,394 crore in FY 2026–27, up from ₹7,146.50 crore in the previous fiscal year.
The funds will support construction of strategically important tunnels, bridges, and airfields, while also promoting regional development and connectivity in border areas.
Defence Budget Reinforces Healthcare Support for Veterans
Veterans’ healthcare received a significant boost with ₹12,100 crore allocated to the Ex-Servicemen Contributory Health Scheme (ECHS), a 45.49% increase over FY 2025–26.
The allocation will fund medical treatment-related expenditure for ex-servicemen and their dependents. Over the past five years, ECHS allocations have increased by more than 300%.
Higher Allocation for Defence R&D
The budgetary allocation for the Defence Research and Development Organisation (DRDO) has been raised to ₹29,100.25 crore in FY 2026–27 from ₹26,816.82 crore in FY 2025–26.
Of this, ₹17,250.25 crore is earmarked for capital expenditure, supporting advanced defence research and development.
Defence Pension Allocation Sees Moderate Increase
The defence budget provides ₹1,71,338.22 crore towards defence pensions, a 6.56% increase over the previous year. The allocation will support pension disbursement to over 34 lakh pensioners through SPARSH and other authorised agencies.
Government Reiterates Commitment to Security and Self-Reliance
Raksha Mantri Rajnath Singh thanked the Prime Minister and Finance Minister, stating that the Union Budget 2026–27 strengthens the balance between security, development, and self-reliance.
He noted that the enhanced defence budget reinforces India’s military capabilities while supporting veterans’ welfare and indigenous manufacturing.
Baba Kalyani, CMD, Bharat Forge Ltd., said, “The Union Budget 2026 reflects Prime Minister Narendra Modi’s stable and visionary leadership, balancing fiscal discipline with sustained investment-led growth. At a time of global uncertainty, the strong focus on manufacturing, modern infrastructure, defence modernisation, data centres, semiconductors, rare-earth corridors, and green competitiveness will strengthen India’s economic resilience and global standing. The emphasis on Aatmanirbharta, technology-led growth, and industry–academia collaboration gives industry the confidence to invest, innovate, and build long-term national capabilities.”
