India on Sunday set aside Rs 7,84,678 crore as defence outlay for 2026-27 in a steep hike of 15 per cent over last year’s allocation of Rs 6.81 lakh crore, with its military majorly focusing on boosting combat prowess in the face of increasing security challenges from China and Pakistan.
The increase in the defence outlay, including the budget for capital acquisition, against the backdrop of “historic success of Operation Sindoor” has further strengthened our resolve to make India’s defence system even more robust, Defence Minister Rajnath Singh said.
Out of the total allocation, Rs 2,19,306 crore has been earmarked for capital expenditure to the armed forces that largely includes purchasing new weapons, aircraft, warships and other military hardware. The capital outlay is 21.84 per cent more than the budget estimates of 2025-26.
Under the capital outlay, Rs 63,733 crore has been set aside for aircraft and aero engines, while Rs 25,023 crore is allocated for the naval fleet.
The total capital outlay is over Rs 39,000 crore higher than the current fiscal’s budgetary estimate Rs 1.80 lakh crore. The revised capital outlay for 2025-26 has been estimated at Rs 1,86,454 crore.
According to the defence ministry, Rs 1.39 lakh crore, which is 75 per cent of the capital acquisition budget, has been set aside for procurement through domestic industries during the financial year 2026-27.
The allocation for defence stands at two per cent of the estimated GDP (Gross Domestic Product) for the next financial year and shows a significant increase of 15.19 per cent over the budgetary estimates (BE) for 2025-26, the defence ministry said.
Total defence budget is 14.67 per cent of the Union government’s planned expenditure in the next fiscal and is the highest among the ministries.
The revenue expenditure has been put at Rs 5,53,668 crore which includes Rs 1,71,338 crore for pensions.
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In her budget speech, Finance Minister Nirmala Sitharaman proposed exempting basic customs duty on components and parts required for the manufacture of civilian, training and other aircraft.
She also announced waiving basic customs duty on raw materials imported for the manufacture of parts of aircraft to be used in maintenance, repair or overhaul requirements by units in the defence sector.
The two decisions are expected to help the defence aerospace industry.
The defence industry welcomed the allocation for the armed forces.
Ankur Kanaglekar, the vice-president of Thales’ India operations, said the outlay seeks to reinforce the nation’s commitment to modernising and strengthening the armed forces.
“The announcements around exemption of basic customs duty on components and parts for the manufacture of civilian, training and other aircraft and on the raw materials imported for the manufacture of parts to be used in maintenance, repair and overhaul by defence sector units, further signals India’s long-term strategic intent for strengthening civil aerospace and defence industrial capabilities,” he said.
“We firmly believe that our collective efforts will strengthen India’s industrial base and firmly establish the nation as a major player in global aerospace and defence manufacturing,” he said.
In the defence outlay, the government reiterated its commitment to providing better infrastructure in border areas through higher allocation to the Border Roads Organisation (BRO).
The budgetary allocation to BRO under capital outlay for 2026-27 has been enhanced to Rs 7,394 crore from Rs 7,146 crore in the current fiscal.
The budgetary allocation to the Defence Research and Development Organisation (DRDO) has been increased to Rs 29,100 crore from Rs 26,816.82 crore in 2025-26. Out of this allocation, Rs 17,250.25 crore is allocated for capital expenditure.
The government also increased allocation for the Ex-Servicemen Contributory Health Scheme (ECHS).
An amount of Rs 12,100 crore has been set aside to ECHS which is 45.49 per cent higher than the current year’s outlay.
Defence Minister Singh said the “most important” aspect of the budget is the modernisation of the three services.
“I express my heartfelt gratitude to our Prime Minister Modi ji for allocating Rs 7.85 lakh crore for the defence sector,” he said.
“Coming after the historic success of Operation Sindoor, this budget has further strengthened our resolve to make the country’s defence system even more robust,” he added.
Singh said a provision of Rs 2.19 lakh crore has been made for the overall capital expenditure of the armed forces.
“The most important aspect of this Budget is the modernisation of our three services. For this, a provision of Rs 1.85 lakh crore has been made this year, which is approximately 24 per cent higher than the previous financial year,” he said.
“As a result of this increase, our military capability will become even more powerful,” Singh added.
The defence minister said the welfare of ex-servicemen and their families has also been given importance in this budget.
“Under the Ex-Servicemen Contributory Health Scheme, a provision of Rs 12,100 crore has been made, which is an increase of approximately 45 per cent compared to the current year,” he said.
“This budget strengthens the balance between security, development, and self-reliance,” he noted.
The defence ministry said the defence outlay focuses on modernisation, technological innovation and streamlined procurement for optimal resource utilisation.
