Defence Budget Allocation
The Ministry of Defence (MoD) has been granted a substantial budget for the fiscal year 2026-27, with the total allocation reaching ₹7.85 lakh crore. This
amount represents a significant increase of 15.19 percent compared to the Budgetary Estimates (BE) of FY 2025-26. This allocation amounts to 2 percent of the estimated GDP for the upcoming fiscal year. Furthermore, the defence budget accounts for 14.67 percent of the Central Government expenditure, making it the largest allocation among all ministries. The allocation has been distributed across various areas, including 27.95 percent for capital expenditure, 20.17 percent for revenue expenditure on sustenance and operational preparedness, 26.40 percent for revenue expenditure on pay and allowances, 21.84 percent for defence pensions, and 3.64 percent for civil organizations.
Capital Expenditure Boost
A major focus of the budget is the enhancement of capital expenditure, which has been allocated ₹2,19,306.47 crore for the Defence Forces, reflecting a 21.84 percent increase from FY 2025-26. Within this, ₹1.85 lakh crore has been earmarked for capital acquisition, indicating a 24 percent rise compared to the previous year's budget. This considerable increase in capital expenditure aligns with the government's strategic goal of modernizing the Armed Forces. It will enable the acquisition of advanced equipment, including next-generation fighter aircraft, smart weapons, and other technological upgrades, significantly enhancing the operational capabilities of the defence forces. Moreover, the Defence Research and Development Organisation (DRDO) will receive an increased allocation of ₹29,100.25 crore in FY 2026–27, with a major share of ₹17,250.25 crore specifically for capital expenditure.
Boosting Domestic Industry
The budget strongly emphasizes the promotion of domestic industries through the allocation of funds. The MoD’s policy of earmarking funds to boost domestic industries has been reinforced by allocating ₹1.39 lakh crore, which constitutes 75 percent of the capital acquisition budget, for procurement through domestic industries during FY 2026–27. This measure assures domestic players about their investments and their increasing role in developing the Armed Forces' capabilities. This strategic shift towards self-reliance will have a long-term positive impact on the national economy and foster the development of ancillary industries, creating job opportunities across the country. The enhanced allocation for capital acquisition, especially for domestic industries, is set to boost the 'Atmanirbhar Bharat' vision.
Veterans and Healthcare
The budget also prioritizes the welfare of veterans and their families. An amount of ₹12,100 crore has been allocated to the Ex-Servicemen Contributory Health Scheme (ECHS), which represents an increase of about 45.49 percent compared to the current year. This increased allocation is dedicated to covering medical treatment-related expenses for veterans, reflecting a commitment to providing better healthcare facilities to these individuals. Over the past five years, the allocation to ECHS has increased by more than 300 percent, demonstrating a significant improvement in the support for ex-servicemen and their dependents.
Enhanced Revenue Spending
In addition to capital expenditure, the defence budget also allocates a substantial amount for revenue expenditure. A provision of ₹3,65,478.98 crore has been made under revenue heads, marking a 17.24 percent increase from FY 2025-26. Within this, ₹1,58,296.98 crore is allocated for operations and sustenance-related expenditure. The remaining portion will be utilized for salaries, allowances, and the procurement of operationally critical stores and spare parts. This allocation ensures the maintenance of essential platforms and supports the Armed Forces' day-to-day requirements, thereby maintaining operational readiness.
Border Infrastructure Development
The government is committed to improving infrastructure in border areas, as evidenced by an increased allocation to the Border Roads Organisation (BRO). The budgetary allocation to the BRO under capital for BE 2026–27 has been enhanced to ₹7,394 crore from ₹7,146.50 crore for FY 2025–26. This funding will be used for strategically significant projects such as tunnels, bridges, and airfields. These infrastructure developments will promote regional development and tourism while ensuring last-mile connectivity in border regions, contributing to national security and regional progress.
Modernization Imperative
The significant increase in the modernization budget, approximately 24 percent higher than the previous fiscal year, demonstrates a strategic imperative in the current geopolitical scenario. The focus on modernization extends to all three wings of the Armed Forces. The budget aims to equip the Armed Forces with next-generation fighter aircraft, smart weapons, ships and submarines, unmanned aerial vehicles, drones, specialist vehicles, and more. During FY 2025–26, up to December 2025, the MoD concluded contracts worth ₹2.10 lakh crore and approved Acceptance of Necessity for more than ₹3.50 lakh crore, reflecting the commitment to modernization.
