The Indian Government has allocated Rs7.85tn ($86.7bn) to the Ministry of Defence (MoD) in the Union Budget for the 2026–27 financial year, marking a 15.19% rise compared to the previous year’s estimates.
This funding, announced on 1 February 2026, represents 14.67% of the total national budget, the largest share among all ministries.
The defence budget has nearly tripled since 2013–14, when it stood at Rs2.53tn.
Within the defence allocation, capital expenditure accounts for 27.95%, while revenue spending on sustenance and operational readiness receives 20.17%.
Pay and allowances represent 26.40%, pensions make up 21.84%, and civil organisations are allocated 3.64%.
The government has earmarked over Rs2.19tn for capital expenditure for the armed forces in 2026–27, an increase of 21.84% over the previous year’s budget estimate.
Of this amount, Rs1.85tn is specifically designated for capital acquisitions, reflecting a rise of approximately 24%.
The Ministry of Defence plans to utilise these funds to procure next-generation fighter aircraft, advanced weaponry, ships, submarines, uncrewed aerial vehicles and drones, aiming to modernise all three services and strengthen future capabilities.
The Border Roads Organisation will see an increased capital allocation of Rs73.94bn for strategic infrastructure projects such as tunnels, bridges, and airfields.
Defence services have also received an allocation of Rs9.75bn for an optical fibre cable network.
The focus on indigenous manufacturing continues under the ‘Aatmanirbhar Bharat’ or ‘self-reliant India’ initiative, with Rs1.39tn allotted for procurement from domestic defence industries in FY 2026–27.
Approximately three-quarters of the capital acquisition budget is reserved for Indian companies, including private sector entities.
The government will exempt basic customs duty on raw materials imported for parts used in aircraft maintenance, repair or overhaul in the defence sector to further support domestic production.
For research and development, the Defence Research and Development Organisation (DRDO) will receive an increased budget of Rs291bn in FY 2026–27, up from Rs268bn in the previous year, with Rs172bn set aside for capital expenditure.
Since December 2025, several initiatives have sought to promote research and development (R&D) in defence manufacturing. About one-quarter of the DRDO R&D budget has been made available to industry, start-ups, and academia following earlier policy announcements.
Between FY 2022–23 and FY 2024–25, cumulative spending on defence R&D reached Rs682bn with a further Rs268bn allocated for FY 2025–26 in addition to this figure. DRDO sanctioned 148 new research projects during this period.
Business intelligence and analytics company GlobalData projected India’s defence expenditure to reach $543.1bn between 2026 and 2030.
