NEW DELHI: Finance minister Nirmala Sitharaman on Sunday proposed a record Rs 7.85 lakh crore allocation in the Union Budget 2026-27 for the Defence Ministry. This is 15.19 per cent more than last year and makes up nearly 2 per cent of India’s estimated GDP.
A key part of the Budget is the big rise in capital spending, which has gone up by over 2 per cent to Rs 2.19 lakh crore from Rs 1.80 lakh crore last year.
Capital spending now makes up 27.95 per cent of the total defence Budget. The Capital Acquisition Budget, or modernisation Budget, has also grown by nearly 24 per cent, from Rs 1.48 lakh crore in 2025-26 to Rs 1.85 lakh crore in 2026-27. According to the government, this rapid modernisation is needed because of changing global situations and supply chain issues.
The enhanced capital support is planned to be used not only for improving the operational capabilities of the Armed Forces but also for meeting the financial requirements that have arisen out of the emergency procurement of arms and ammunition carried out after Operation Sindoor last summer, officials said.
The upcoming acquisition plans include next-generation fighter aircraft, advanced weapon systems, ships and submarines, unmanned aerial vehicles, drones, and specialised military platforms.
In a major reaffirmation of its self-reliance initiative, the defence ministry has allocated Rs 1.39 lakh crore, or close to 75 per cent of the Capital Acquisition Budget, for procurement from domestic industries in FY 2026-27. This is expected to give a long-term boost to Indian defence manufacturers and create jobs in the defence production chain.
The revenue expenditure side of the defence Budget has also registered a significant increase. An allocation of Rs 3.65 lakh crore has been made on the revenue side, which is an increase of 17.24 per cent over the Budget Estimates of the last year. Of this, Rs 1.58 lakh crore has been allocated for operations, maintenance, and sustenance, and the balance amount has been allocated for salaries and allowances.
This allocation is expected to ensure the uninterrupted supply of operationally critical stores and spares, as well as the maintenance of critical military platforms.
The Budget has further strengthened the focus of the centre on strategic infrastructure, especially in the border regions. The Border Roads Organisation has been allocated Rs 7,394 crore under the capital head for FY 2026-27, which is slightly higher than the allocation of Rs 7,147 crore in the last fiscal. The allocation will help in the implementation of strategic projects like tunnels, bridges, and airfields, besides encouraging regional development, tourism, and last-mile connectivity in the border areas.
Whereas, the veteran welfare services have got a substantial impetus, with the Ex-Servicemen Contributory Health Scheme having been allocated Rs 12,100 crore for FY 2026-27.
This is a substantial increase of 45.49 per cent over the Budget Estimates of the current year and will be utilised for meeting the expenditure of the veterans and their dependents in respect of medical treatment. It may be noted that the allocations made to ECHS have increased by over 300 per cent in the last five years as compared to FY 2021-22.
The Defence pensions have been allocated Rs 1.71 lakh crores, registering an increase of 6.56 per cent over the last year. This will help disburse pensions to over 34 lakh pensioners through the SPARSH facility and other designated means.