NEW DELHI: The Union Budget for the fiscal year 2026-27 has earmarked a substantial Rs 7.85 lakh crore for the defence sector, representing a significant escalation from the previous year's allocation of Rs 6.81 lakh crore. This marks a notable increase of approximately 15.2 percent, underscoring the government's heightened focus on bolstering national security and military capabilities.
Detailed Breakdown of Defence Expenditure
According to the official figures released, the total defence outlay for 2026-27 stands at Rs 7,84,678 crore, compared to Rs 6,81,210 crore in the 2025-26 financial year. This allocation is strategically divided between capital and revenue expenditures to ensure both modernization and operational efficiency.
Capital Outlay for Modernization
The capital outlay has been pegged at Rs 2,19,306 crore, which reflects a robust increase of 21.84 percent from the revised estimate of Rs 1,86,454 crore in 2025-26. This substantial boost is aimed at accelerating the modernization of the armed forces, with specific allocations including Rs 63,733 crore for aircraft and aero engines, and Rs 25,023 crore dedicated to enhancing the naval fleet.
The defence ministry is actively pursuing several major projects in the pipeline, such as contracts for advanced Rafale fighter jets, submarines, and unmanned aerial vehicles. These initiatives are expected to significantly upgrade India's defence infrastructure and technological edge.
Revenue Expenditure and Pensions
On the revenue side, the expenditure stands at Rs 5,53,668 crore, which includes a substantial Rs 1,71,338 crore allocated for pensions. This component ensures the welfare of retired defence personnel while maintaining the operational readiness of the forces.
Key Announcements by Finance Minister Nirmala Sitharaman
In her budget speech, Finance Minister Nirmala Sitharaman introduced several measures designed to stimulate the defence aerospace industry. She proposed exempting basic customs duty on components and parts required for the manufacture of civilian, training, and other aircraft. Additionally, a waiver of basic customs duty was announced on raw materials imported for the production of aircraft parts used in maintenance, repair, or overhaul by defence sector units.
These fiscal incentives are anticipated to reduce costs, encourage domestic manufacturing, and enhance the self-reliance of India's defence sector. Sitharaman emphasized that these steps would provide a significant boost to the industry, fostering innovation and competitiveness.
Comparative Analysis with Previous Year
The Defence Services (Revenue) and Capital Outlay for 2026-27 have been allocated Rs 3,65,478.98 crore and Rs 2,19,306.47 crore, respectively. This represents impressive jumps of 17.24 percent in revenue and 21.84 percent in capital expenditures compared to the previous fiscal year.
Such increments highlight the government's commitment to not only maintaining but expanding the defence capabilities in response to evolving security challenges. The increased funding is poised to support ongoing and future projects, ensuring that India remains prepared and resilient in the global defence landscape.
