Budget Overview
The Union Budget 2026-27 allocates a substantial ₹7.85 lakh crore to the defence sector, equivalent to 2% of the estimated GDP. This represents a 15.19%
increase compared to the Budgetary Estimates (BE) of FY 2025-26. This allocation constitutes the largest share of the central government's expenditure, at 14.67%. The Defence Minister, Rajnath Singh, welcomed the budget, highlighting its role in strengthening India's defence capabilities and supporting the vision of 'Atmanirbhar Bharat' (Self-Reliant India) and 'Viksit Bharat 2047' (Developed India by 2047). The overall capital expenditure outlay has risen by 21% to approximately ₹2.9 lakh crore. This underscores a strategic shift towards modernizing the armed forces and achieving technological upgrades. The budget reinforces commitment to strengthen the nation’s defence systems.
Capital Expenditure Boost
The budget emphasizes capital expenditure, which constitutes a significant portion of the total allocation. For FY 2026-27, the capital allocation for the Defence Forces stands at ₹2,19,306.47 crore, a 21.84% increase compared to the BE of FY 2025-26. Within this, ₹1.85 lakh crore is earmarked for capital acquisition, approximately 24% higher than the previous year. This substantial investment in capital acquisition will equip the armed forces with cutting-edge technologies. These include next-generation fighter aircraft, advanced weaponry, ships, submarines, unmanned aerial vehicles, and specialized vehicles. This increase is a strategic imperative given the current geopolitical climate and will empower the military.
Veterans' Welfare
The budget prioritizes the welfare of veterans and their families. The Ex-Servicemen Contributory Health Scheme (ECHS) receives a substantial boost with an allocation of ₹12,100 crore, which is 45.49% higher than the current year's allocation at the BE stage. This increase reflects the government's commitment to providing better healthcare facilities to veterans and their dependents. The allocation to ECHS has surged by over 300% in the last five years compared to the BE allocation for FY 2021-22, indicating a sustained focus on supporting the ex-service community. This provision covers medical treatment-related expenses and ensures that veterans receive the care they deserve.
Infrastructure & Border
Infrastructure development, particularly in border areas, is another key area of focus. The Border Roads Organisation (BRO) sees an increase in its budgetary allocation under capital, rising to ₹7,394 crore for BE 2026-27 from ₹7,146.50 crore for FY 2025-26. This allocation supports strategically significant projects. These projects include tunnels, bridges, and airfields, all of which contribute to regional development and tourism while improving last-mile connectivity in border regions. The focus on border infrastructure highlights the government's commitment to enhancing the nation's strategic capabilities and promoting economic growth in these areas.
Operational Readiness
The defence budget also addresses operational readiness and sustenance. The provision of ₹3,65,478.98 crore under revenue heads, a 17.24% increase from BE 2025-26, underscores this commitment. Within this, ₹1,58,296.98 crore is allocated for operations and sustenance-related expenditure, while the remaining amount covers salaries and allowances. This allocation ensures the procurement of essential operational stores and spare parts. This maintains the functionality of vital platforms and meets day-to-day requirements. This enhances the operational capabilities of the armed forces.
DRDO and Modernization
The Defence Research and Development Organisation (DRDO) receives an increased allocation of ₹29,100.25 crore in FY 2026-27, up from ₹26,816.82 crore in the previous year. A major share of ₹17,250.25 crore is earmarked for capital expenditure within this allocation. The enhanced allocation for DRDO reflects the government’s commitment to indigenous defence research and development. The modernization of the armed forces is a central theme of the budget. An allocation of ₹1.85 lakh crore, approximately 24% higher than the previous year, is dedicated for this purpose. This will equip the armed forces with the advanced technologies needed for future challenges.
Self-Reliance Push
The budget strongly promotes self-reliance (Atmanirbharata) in the defence sector. A significant portion of the capital acquisition budget, approximately ₹1.39 lakh crore or 75%, is earmarked for procurement from domestic industries in FY 2026-27. This initiative reassures domestic manufacturers of the government's commitment to supporting their role in the armed forces' capability development. The focus on indigenous procurement stimulates economic growth and creates job opportunities throughout the country. It also strengthens the nation’s defence ecosystem, reducing reliance on imports and enhancing strategic autonomy.
Financial Breakdown
The total defence budget of ₹7.85 lakh crore for FY 2026-27 represents a strategic allocation of resources. Capital expenditure accounts for 27.95% of this total. Revenue expenditure on sustenance and operational preparedness comprises 20.17%. Revenue expenditure on pay and allowances is 26.40%, and defence pensions represent 21.84%. Civil organizations receive 3.64%. These detailed allocations emphasize a balanced approach, supporting both immediate operational needs and long-term modernization efforts.
