Union Budget 2026 Boosts Defence Spending by 15% to Rs 7.85 Lakh Crore
In a significant move to strengthen national security, the Union Budget 2026 has allocated a substantial Rs 7.85 lakh crore for defence, marking a sharp 15 per cent increase from the previous year's allocation of Rs 6.81 lakh crore. This enhanced budgetary focus comes as the government prioritises military modernisation in the evolving security landscape following Operation Sindoor.
Detailed Breakdown of Defence Outlay
According to official figures, the defence outlay for the financial year 2026–27 stands at Rs 7,84,678 crore, compared to Rs 6,81,210 crore in the previous fiscal year. The allocation is strategically divided between capital and revenue expenditures to balance immediate needs with long-term modernisation goals.
- Capital Outlay: Pegged at Rs 2,19,306 crore, this segment has seen a remarkable 21.84 per cent jump from the revised estimates of 2025–26, reflecting the government's commitment to acquiring advanced military hardware and technology.
- Revenue Expenditure: Amounting to Rs 5,53,668 crore, which includes Rs 1,71,338 crore allocated for pensions, this component supports the operational costs and personnel welfare of the armed forces.
Key Modernisation Initiatives and Projects
The armed forces are set to receive Rs 2.19 lakh crore specifically for modernisation, with targeted allocations for critical domains. Notably, Rs 63,733 crore has been earmarked for aircraft and aero engines, while Rs 25,023 crore is dedicated to enhancing the naval fleet. The Defence Ministry is advancing several major projects, including contracts for fighter jets, submarines, unmanned systems, and helicopters, to bolster India's defence capabilities.
Customs Duty Exemptions to Boost Defence Aerospace
In her budget speech, Finance Minister Nirmala Sitharaman announced pivotal measures to support the defence aerospace industry. These include:
- Exempting basic customs duty on components and parts required for manufacturing civilian, training, and other aircraft.
- Waiving basic customs duty on raw materials imported for manufacturing aircraft parts used in maintenance, repair, or overhaul by defence sector units.
These exemptions are expected to reduce costs, attract private investment, and foster a robust domestic aerospace ecosystem under the Make in India initiative.
Comparative Analysis and Strategic Implications
The capital outlay in 2025–26 was initially pegged at Rs 1,80,000 crore, later revised to Rs 1,86,454 crore. The current budget's allocation represents a significant upward trajectory, aligning with India's strategic needs in a complex global security environment. The defence services' revenue and capital outlays have increased by 17.24 per cent and 21.84 per cent, respectively, underscoring a holistic approach to military readiness.
Future Trajectory and Indigenous Focus
This budget cycle marks a decisive phase in shaping India's defence trajectory, with a strong emphasis on indigenisation. Since January 2025, the Defence Acquisition Council has approved capital acquisitions worth over Rs 3.84 lakh crore, spanning missiles, electronic warfare systems, drones, and air defence platforms. Additionally, 92 per cent of defence contracts signed in 2024–25 were awarded to domestic industry, highlighting a shift towards a self-reliant defence manufacturing ecosystem.
Overall, the Union Budget 2026 not only amplifies financial support for defence but also strategically channels resources towards modernisation, technological advancement, and indigenous production, ensuring that India's armed forces are well-equipped to address contemporary and future security challenges.
