FICCI Urges Higher Defence Spending in Budget 2026 for Tech Modernization

FICCI Calls for Strategic Defence Boost in Upcoming Budget 2026

Finance Minister Nirmala Sitharaman should prioritize growth-enhancing capital expenditure in the Union Budget 2026, with a special focus on the defence sector. This recommendation comes from FICCI in its pre-Budget memorandum. The industry body emphasizes this move is crucial given the current global environment marked by uncertainty and rising conflicts.

Technology-Driven Defence Innovation Takes Center Stage

According to FICCI, India needs to lay special emphasis on technology-driven defence innovation. The external security environment today faces heightened uncertainty. India's adversaries are investing heavily in advanced military technologies. These include autonomous weapons, hypersonic systems, UAV swarms, and AI-enabled warfare. Such investments pose significant risks to national security.

A strong, modern, and well-resourced defence architecture has become critical. It is essential for safeguarding India's territorial integrity and preserving strategic autonomy. FICCI made this clear in its Budget 2026 wishlist.

Four-Point Approach for Defence Budget 2026

FICCI advocates for higher emphasis on 'Atmanirbharta' in defence. This should involve modern techniques using artificial intelligence, not just platform-driven enhancements. Future warfare will be defined by technology-driven, multi-domain operations. Conflicts will increasingly span multiple domains:

Land
Air
Sea
Cyber
Space
Electromagnetic spectrum

For India, preparing for such challenges requires a shift. The focus should move from platform-centric to networked, integrated, AI-enabled capabilities. These must be backed by robust indigenous defence innovation.

Increasing the defence budget should not just be a budgetary choice. It must be a strategic imperative. So what should the Union Budget 2026 for defence focus on? FICCI advocates a four-pronged approach.

Key Recommendations from FICCI

FICCI notes that in Budget 2025, the Ministry of Defence received an allocation of Rs 6,81,210.27 crore for FY 2025–26. This marked a 9.53% rise over the Budget Estimates for FY 2024–25. The industry body suggests the government maintain approximately 10% growth in overall budgetary support for the Ministry of Defence in the coming year.

However, the share of capital outlay should be increased to 30% from around 26% earlier. Additional capital outlay will help modernize military infrastructure. It will support investments in frontline assets, UAVs, counter UAV systems, electronic warfare systems, and air defence systems in border areas.

FICCI believes the budgetary allocation for the Defence Research and Development Organisation needs stepping up. Last year the budget increased by 12.4% to Rs 26,816.82 crore in FY 2025–26. The overall allocation for DRDO should be increased by Rs 10,000 crore in the upcoming budget.

This financial strengthening will help DRDO develop new technologies. Special focus should be on fundamental research for frontier technologies. Collaboration with private parties through DRDO's flagship scheme, the Technology Development Fund, is crucial. This will assist the development of Deep Technology in the defence sector.

Strengthening Indigenous Defence Capabilities

The industry body notes progress under the Atmanirbhar Bharat initiative. The government has made notable strides in defence indigenisation. This includes setting up Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu. FICCI says this momentum needs further strengthening.

The body advocates for establishing an Eastern India Defence Industrial Corridor. Synchronising with the 'Purvodaya Scheme', it would rejuvenate industrial clusters in Eastern India. This move shall spur job creation, stimulate R&D, and establish India as a global hub for defence exports. It will also secure national interests across all three borders.

Boosting Defence Exports

Budget 2026 should also focus on giving an impetus to defence exports. These have risen at a compound annual growth rate of 46% between 2016–17 and 2023–24. Higher exports from private sector firms largely drive this growth.

The central government aims to achieve defence exports worth Rs 50,000 crore by 2028-29. FICCI suggests the government consider setting up a Defence Export Promotion Council. This council can co-ordinate with various stakeholders: