Why the government has increased capital spending for the defence sector

For years, the Indian defence budget has been caught in a classic “guns versus butter” dilemma, attempting to balance the costs of human-power with the need for technological modernisation. If the figures released in the FY2026-27 Union Budget are any indication, the government seems to be turning the tanker. The FY2027 defence budget, hovering near the substantial ₹8 lakh crore mark, has the potential to meet the demands of a rapidly modernising military force and an expanding domestic defence industry.

The absolute figures are robust. The total Ministry of Defence (MoD) expenditure has touched a historic high, nearing ₹7,84,678 crore for FY27 (Budget Estimate). This allocation accounts for 14.7% of the Government’s total expenditure at the BE stage for FY27. While this percentage is a slight dip from the Revised Estimates (RE) of 14.8% in FY26, it marks a significant stabilisation compared to the lean years of FY21 and FY22, when the defence share had shrunk to nearly 13.2%. If New Delhi can continue to floor defence spending at 14-15% of the central spending pie, it would gradually insulate national security imperatives from the vagaries of fiscal consolidation