Union Budget 2026: Defence Budget Raised to ₹7.84 Lakh Crore After Operation Sindoor; HAL, BEL and Others in Focus

The Union Budget presented on February 1, 2026, increases the Ministry of Defence allocation for FY27 to ₹7.84 lakh crore, a 15.3% rise from the previous year’s ₹6.81 lakh crore. 

Key Allocation Figures 

The budget earmarks ₹3.65 lakh crore for defence services revenue and ₹2.19 lakh crore for capital outlay, marking a 21.8% rise from the revised estimate of ₹1.86 lakh crore. Defence pensions receive ₹1.71 lakh crore and civil defence is allotted ₹28,554.61 crore. 

Customs Duty Incentives 

Finance Minister Nirmala Sitharaman announced exemption of basic customs duty on components for civilian, training and other aircraft, and a waiver on raw materials used for maintenance, repair and overhaul by defence units. These measures aim to boost the defence aerospace sector. 

Read More: Union Budget 2026: Defence Stocks BEL, HAL, GRSE and More in Focus Ahead of Union Budget on Capex Hopes! 

Indigenous Production and Exports 

In FY24‑25 the ministry recorded indigenous production of ₹1.54 lakh crore and defence exports of ₹23,622 crore, up from under ₹1,000 crore a decade earlier. Indigenous output in FY23‑24 was ₹1.27 lakh crore, a 174% increase from ₹46,429 crore in 2014‑15. Domestic share of equipment now stands at 65%. 

Industrial Corridors and Private Participation 

Two Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu have attracted investments of ₹9,145 crore. The ecosystem includes 788 licences issued to 462 companies, supported by liberalised FDI rules, Production‑Linked Incentives and digital export clearances. Public sector units account for 77% of production, while private sector involvement is growing. 

Procurement Reforms 

Procurement processes are streamlined under the Defence Acquisition Procedure 2020 and Defence Procurement Manual 2025, facilitating faster acquisition of Indian‑designed platforms and specialised electronics. 

Impact on Defence PSUs and Suppliers 

Higher capital allocation is expected to benefit public sector undertakings and private suppliers. Hindustan Aeronautics Ltd holds an order book of ₹1,25,000 crore, projected to generate an average annual pipeline of ₹2,60,000 crore over the next 5 years.  

Mazagon Dock Shipbuilders reports an order book of ₹39,871 crore with an anticipated annual inflow of ₹1,58,000 crore. Bharat Electronics Ltd anticipates a steady pipeline of roughly ₹60,000 crore. Smaller firms such as MIDHANI, BEML and Bharat Dynamics also foresee stable demand. 

Private‑sector participation in defence output is projected to reach nearly 25%, up from 23.5% in FY25, indicating a growing role for private manufacturers and startups. 

Conclusion 

Budget 2026 raises the defence outlay to ₹7.84 lakh crore, allocates additional capital for modernisation, introduces customs duty reliefs, and reflects continued growth in indigenous production and exports. The reforms and corridor investments aim to sustain the upward trajectory of India’s defence manufacturing base. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.