Defence Spending to Remain Key Focus in Budget 2026 Amid Geopolitical Tensions
As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026 on February 1, defence spending is expected to remain a key focus area amid rising geopolitical uncertainty and sustained emphasis on military modernisation. The upcoming budget comes at a critical juncture when global security dynamics are rapidly evolving, necessitating robust defence preparedness.
Defence Outlay Shows Steady Rise Over Five Years
Over the last five years, India's defence expenditure has followed a clear upward trajectory, reflecting the government's unwavering commitment to national security. Spending has increased significantly from Rs 4.85 lakh crore in FY21 to Rs 6.41 lakh crore in FY25 (Revised Estimates). For the upcoming fiscal year FY26, the Budget Estimates place defence expenditure at Rs 6.81 lakh crore, marking another substantial allocation.
This consistent annual increase underlines the government's priority on enhancing national security and military preparedness. The data reveals that defence spending has grown by nearly Rs 2 lakh crore since FY21, with sharper increases observed in recent years as border tensions and global conflicts have reshaped security calculations and strategic priorities.
Shift Towards Modernisation and Capital Expenditure
The rising defence allocations have increasingly been aligned with modernisation efforts and capital expenditure. According to the PIB release on Budget 2025-26, Rs 1.80 lakh crore, representing approximately 26% of the total defence outlay, was earmarked specifically for capital expenditure. This allocation comes with a strong push for domestic procurement under the Atmanirbhar Bharat initiative.
A significant share of the modernisation budget has been reserved for procurement from Indian industries, including private sector players. Industry body FICCI, in its pre-Budget 2026 memorandum, has argued that this trend needs to deepen further. The organization has called for capital outlay to be raised to around 30% of the total defence budget, emphasizing that future warfare will be technology-driven, multi-domain and information-centric, requiring substantial investments beyond traditional platforms.
Budget 2026 Expectations: Technology, R&D and Exports
With defence spending already on a rising path, Budget 2026 is expected to focus on qualitative upgrades rather than just headline increases. FICCI has pitched for higher allocations for defence research and development, including a Rs 10,000 crore increase for DRDO, and greater support for AI-enabled systems, UAVs, cyber capabilities, and space technologies.
Defence exports represent another priority area for the upcoming budget. Exports have grown at an impressive compound annual rate of 46% between 2016-17 and 2023-24, driven largely by private firms. The government has set an ambitious target of Rs 50,000 crore by 2028-29 for defence exports. Analysts suggest that the upcoming Budget will indicate whether India's steadily rising defence spending can translate into sustained self-reliance and enhanced global competitiveness in the defence sector.
