The defence sector is likely to receive a significant push in the upcoming Union Budget, with the government considering a sharp increase in allocations
and a series of structural reforms aimed at deepening private sector participation, sources indicated. According to sources, the Defence Ministry has already submitted its proposals for the Union Budget 2026–27, seeking a substantial enhancement in overall spending. The defence budget allocation for FY27 could be increased by nearly 20-25%, reflecting the government’s focus on modernisation, capacity building and indigenisation. In addition to higher allocations, the government is expected to overhaul existing rules and processes governing defence manufacturing and procurement. Sources say acquisition norms in the defence sector may be simplified to improve efficiency, shorten timelines and encourage greater private participation. The Defence Ministry has also sought a significantly higher outlay for defence research and development. Spending on defence R&D is likely to be raised to around Rs 35,000–40,000 crore from the current level of approximately Rs 27,000 crore. Greater financial and policy support is expected to be extended to defence R&D projects, with an emphasis on innovation and development of advanced technologies.
Importantly, private sector companies are likely to receive financial support on par with public sector undertakings, marking a move towards a more level playing field. Amendments to existing rules are expected to ensure fair competition between public and private players in the defence ecosystem.
Sources further indicate that private defence companies may soon be allowed to bid for a wider range of projects alongside major defence PSUs such as Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL), Mazagon Dock Shipbuilders Limited (MDL) and Bharat Dynamics Limited (BDL).
If these proposals are approved, the measures could significantly reshape India’s defence manufacturing landscape, attract greater private investment and accelerate the country’s push towards self-reliance in defence.
