Defence budget pegged at Rs 7.84 lakh cr

New Delhi, Feb 1: In the Union Budget post Operation Sindoor, Defence Services have received an unprecedented allocation amounting to Rs 7.85 lakh crore for the Financial Year (FY) 2026-27. This allocation stands at 2% of the estimated GDP for the next Financial Year and shows a significant increase of 15.19% over the Budgetary Estimates (BE) of FY 2025-26. Total Defence budget is 14.67% of the Central Government expenditure and is the highest among the Ministries.
In addition to the modernisation of the Armed Forces and financing their regular requirement, the significantly enhanced allocation will also cater for the financial requirements that have arisen due to the emergency procurement of arms and ammunition made subsequent to Operation Sindoor under both the categories viz. Capital and Revenue. A large share of the defence budget to the tune of Rs 2.19 lakh crore has been allotted for capital expenditure vis-à-vis Rs 1.80 lakh crore which was allotted as BE of FY 2025-26. Through this enhanced provision, the Government has reaffirmed its resolve to transform the Armed Forces and their capabilities to the world’s highest standards with a strategic shift towards the goal of Aatmanirbhar Bharat.
Out of the total allocation made to the Ministry of Defence (MoD), a share of 27.95% is for capital expenditure, 20.17% for revenue expenditure on sustenance and operational preparedness, 26.40% for revenue expenditure on pay and allowances, 21.84% for Defence Pensions and 3.64% for civil organisations.
Modernisation of Armed Forces – a strategic objective
For FY 2026-27, budgetary allocation under capital head to the Defence Forces stands at Rs 2,19,306.47 lakh crore, which is 21.84% more than the Budget Estimates of FY 2025-26. Out of this, Rs 1.85 lakh crore is earmarked for Capital Acquisition, which is approximately 24% higher than the Capital Acquisition budget for FY 2025-26. In the current geo-political scenario, quantum jump in the modernisation budget is a strategic imperative. During FY 2025-26, up to 3rd quarter i.e., till December 2025, MoD has concluded contracts worth Rs 2.10 lakh crore and has, so far, given Acceptance of Necessity approval for more than Rs 3.50 lakh crore. The upcoming projects under capital acquisition will equip the Armed Forces with next generation fighter Aircraft, smart and lethal weapons, ships/submarines, Unmanned Aerial Vehicles, Drones, Specialist Vehicles, etc.
Thrust on Aatmanirbharta
Interruption in global supply chains and prioritization of domestic requirements over foreign sellers has re-emphasised the need for import substitution and going for indigenisation not only for sustenance but for future modernisation. In line with this, MoD’s policy to earmark funds to boost domestic industries through budgetary policies has been further strengthened by earmarking Rs 1.39 lakh crore i.e., 75% of the Capital Acquisition budget for procurement through domestic industries during the FY 2026-27. Through such earmarking of funds, domestic players have been reassured about their investment and their increasingly greater role in capability development of the Armed Forces. Enhanced allocation for Capital Acquisition, especially for domestic industries, will have long term positive impact on the national economy and will lead to development of many ancillary industries, creating job opportunities in the country.
Defence budget has made a provision of Rs 3,65,478.98 crore for spending under revenue heads. This allocation is 17.24% higher than the allocation for BE 2025-26. Out of this, Rs 1,58,296.98 crore has been allocated for operation and sustenance related expenditure and the remaining for salary and allowances. The budgetary provision made in this regard for the upcoming FY will facilitate procurement of operationally important stores, spare parts etc. and will ensure maintenance of vital platforms in addition to catering for their day-to-day requirements.
Major thrust on border area development
The Government has reiterated its commitment to providing better infrastructure in border areas through higher allocation to the Border Roads Organisation (BRO). Accordingly, budgetary allocation to BRO under Capital for BE 2026-27 has been enhanced to Rs 7,394 crore from Rs 7,146.50 crore for FY 2025-26. The said allocation will cater to many strategically significant projects such as tunnels, bridges, airfields, etc. and will promote regional development and tourism, along with providing last mile connectivity in the border areas.
Healthcare to veterans
The Government is committed to providing best healthcare facilities to the veterans and their dependents through enhanced allocation to the Ex-Servicemen Contributory Health Scheme (ECHS). In the annual budget for FY 2026-27, an amount of Rs 12,100 crore has been allotted to ECHS which is 45.49% higher than the current year allocation at BE stage. The said allocation will fund the Medical Treatment Related Expenditure (MTRE) of veterans. The allocation to ECHS has been increased by more than 300% in the last five years vis-a-vis the allocation made at BE stage for FY 2021-22.
Fostering R&D in defence
The budgetary allocation to Defence Research and Development Organisation (DRDO) has been increased to Rs 29,100.25 crore in FY 2026-27 from Rs 26,816.82 crore in FY 2025-26. Out of this allocation, a major share of Rs. 17,250.25 crore is allocated for capital expenditure.
Increase in defence pension budget
Total Budgetary allocation on account of Defence pensions stands at Rs 1,71,338.22 crore, which is 6.56% higher than the allocation made during 2025-26 at BE stage. It will be spent on the disbursement of monthly pension to more than 34 lakh pensioners through SPARSH and other pension disbursing authorities.
Through a post on X, Defence Minister Rajnath Singh expressed gratitude to Prime Minister Narendra Modi and stated that under his visionary leadership, India’s journey towards a Viksit Bharat continues to gather momentum. He also congratulated Finance Minister Nirmala Sitharaman for presenting a budget that seeks to “transform aspiration into achievement” and “potential into performance”. This “Yuva Shakti–driven Budget” will further strengthen PM Modi’s vision of an Aatmanirbhar and Viksit Bharat, he said.
Rajnath added that inspired by the three ‘Kartavyas’, this budget aims to accelerate and sustain economic growth, fulfil the aspirations of the people and ensure meaningful participation for all. “Together, these priorities will drive inclusive development, promote the manufacturing sector, and create sustainable infrastructure. This budget is designed to ensure that the dividends of growth reach every section of society, with special focus on the poor, the underprivileged, and the disadvantaged,” he said.
Rajnath thanked PM Modi for allocating Rs 7.85 lakh crore to the defence sector in the Union Budget 2026-27, stating that the budget strengthens the security-development-self-reliance balance, and it is in the best interest of the nation. He asserted that the budget, which comes after the historic success of Operation Sindoor, further strengthens the Government’s resolve to bolster the security system of the country and enhance military capabilities.
On the enhanced allocation under ECHS, Defence Minister termed it as a testimony to the Government’s resolve of ex-servicemen welfare.