Defence Received Record Budget of ₹7.85 Lakh Crore: Up 15% Over Previous Budget

The Union Budget 2026 marks a historic milestone for national defence, with an unprecedented allocation of ₹7.85 lakh crore to the Defence Services for the Financial Year 2026–27. This outlay represents nearly 2% of the projected GDP for the coming year and reflects a substantial increase of 15.19% over the Budget Estimates of FY 2025–26. Accounting for 14.67% of total Central Government expenditure, the defence budget remains the largest among all ministries.

Beyond meeting routine operational and modernisation needs of the Armed Forces, the enhanced allocation also addresses additional financial commitments arising from emergency procurement of arms and ammunition undertaken after Operation Sindoor, under both Capital and Revenue heads. 

Capital expenditure has received a major boost, with ₹2.19 lakh crore earmarked for FY 2026–27, compared to ₹1.80 lakh crore in FY 2025–26. This significant enhancement underscores the Government’s commitment to upgrading military capabilities to global benchmarks, while advancing the strategic objective of Aatmanirbhar Bharat in defence production.

Distribution of the Defence Budget

Within the overall Ministry of Defence (MoD) allocation, 27.95% has been designated for capital expenditure, 20.17% for revenue expenditure related to sustenance and operational readiness, 26.40% for pay and allowances, 21.84% for defence pensions, and the remaining 3.64% for civil organisations.

Modernisation of the Armed Forces

For FY 2026–27, the capital outlay for the Defence Forces stands at ₹2,19,306.47 crore, reflecting an increase of 21.84% over the Budget Estimates of FY 2025–26. Of this, ₹1.85 lakh crore has been allocated specifically for Capital Acquisition—approximately 24% higher than the corresponding allocation in the previous financial year. Given the prevailing geopolitical environment, this sharp rise in the modernisation budget is both timely and strategically essential.

Also Read: Budget 2026 Keeps Gold Import Duty Unchanged Amid Trade Balance Concerns

During FY 2025–26, up to the third quarter (ending December 2025), the MoD concluded defence contracts worth ₹2.10 lakh crore and accorded Acceptance of Necessity (AoN) approvals exceeding ₹3.50 lakh crore. The forthcoming capital acquisition programmes are expected to significantly enhance combat readiness through the induction of next-generation fighter aircraft, advanced and precision weapon systems, ships and submarines, unmanned aerial vehicles, drones, and specialised military platforms.

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