The defence budget for the FY 2026-27 has received maximum boost in the Union Budget 2026 presented by Finance Minister Nirmala Sitharaman on February 1. In the backdrop of the ongoing Operation Sindoor, the defence budget aims at strategic consolidation against the current and future military threats. The last year’s defence budget was more aligned to the Defence Reforms 2025. While the reforms in the defence sector would continue, the new defence budget is expected to set the stage for strategic consolidation of India as a global military power.
The allocation for defence for the financial year 2026-27 has seen a major hike of 15.19 per cent compared to the previous financial year. This year, Rs 7.85 lakh crores have been allotted to the Ministry of Defence whereas the outlay for defence in the previous year was Rs 6.81 lakh crores. Rajnath Singh, Defence Ministerhas hailed that the budget is aimed at modernisation, indigenisation(Atma Nirbharta) and human resource development. Raksha Mantri stated that the new defence budget further strengthens the security, development and self-reliance balance. He added that the defence budget highlights the Government’s resolve to bolster the security system of the country and enhance military capabilities.
First, some statistics. In terms of the Gross Domestic Product(GDP), the defence budget allocation stands at 2.0 per cent of the estimated GDP. Compared to the last year, it is an increase of 0.1 per cent over the 1.9 per cent allocated last year. We must remember that India is world’s fourth largest economy in terms of the GDP and thus this percentage is also substantial. The highest military spending is obviously by the US, at 3.4 per cent of GDP, followed by China at approximately 3.0 per cent of GDP(based on the estimates of proclaimed & actual defence expenditure), Russia at 5.9 per cent of GDP, India is at fourth position at 1.9 per cent and Saudi Arabia is fifth at whopping 7.1 per cent of GDP.
Given the precarious condition of its economy, Pakistan still spends roughly 3.0 per cent of the GDP on defence. Depending on the economic progress of India as the third largest economy in the near future, there is a case to increase the defence budget up to 2.5 per cent of the GDP in a phased manner. The increase in the defence allocation should purely be for the procurement of military hardware, that too of Indian origin.
Now let us look at the breakdown of the defence budget under the major heads. The modernisation of the Armed Forces has been allocated Rs 2.19 lakh crores, which is whopping 21.84 per cent more than the last year’s allocation. Major chunk of the modernisation is consumed by the weapon platforms of Indian Navy and Indian Air Force, which are comparatively much costlier than those of the Indian Army. The revenue budget which is meant for pay & allowances, fuel, ammunition and maintenance has been given Rs 3.65 lakh crore, which is more than 17 per cent increase over last year.
Defence pensions account for Rs 1.71 lakh crore, which supports approximately 34 lakhs defence & civilian defence employees pensionary benefit. The government has further improved One Rank One Pension(OROP) scheme which shows its commitment to the welfare of the veterans. The defence budget also includes Rs 29,100 crore to DRDO, Rs 7394 crore to Border Roads Organisation(BRO) and Rs.12,100 crore for Ex Servicemen Welfare Scheme. Thus, the defence budget is a healthy mix of catering to the needs of soldiers, ex-servicemen, logistics and future operational requirements.
Among the nine Defence Reforms 2025 enunciated, capability development of the armed forces with indigenous military hardware is the focus of Modi government. Accordingly, Rs.1,85,000 crore has been allocated for Capital Acquisition. With the money from the Capital Head, Armed forces would be equipped with state of art weapons, ammunition and equipment which would transform them into a technologically advanced modern fighting force. Even here the focus is on procuring 75 per cent of the modernisation through the domestic sector, thus focus is on Atma Nirbharta.
With the support of the private defence industry and investment in R&D, the defence exports are likely to fetch Rs 30,000 crore this financial year. The armed forces have already lined up proposals for acquiring next generation fighter aircraft, ships, submarines, UAVs, specialist vehicles and other equipment. Shri Rajesh Kumar Singh, IAS, the Defence Secretary has more than one year experience behind him and thus he is in a position to provide continuity in ushering the defence reforms and building critical capability development of the armed forces.
The defence budget accounts for 14.67 per cent of the total budgetary expenditure in the FY 26-27 and is highest amongst the ministries. On the face of it, the allocation on defence may appear high to a common citizen. But I urge the citizens of our country to view it as insurance premium for the national security and defence of the nation. In addition, Indian Armed Forces contribute significantly towards nation-building, directly and indirectly. The defence industry, both public and private provides job opportunities for lakhs of people. The ecosystem for defence manufacturing is also huge. With focus on defence exports, a part of the defence budget gets compensated to the economy. Thus, the defence budget is well spent in the national cause with commensurate dividends in every corner of the country.
The defence budget has signalled Government’s intention to transform the Indian Armed Forces capable of combating the complete spectrum of warfare from terrorism to conventional wars. The impetus to the capability building and strategic consolidation can be conveyed by the Defence Secretary, CDS and three service Chiefs in the presence of Raksha Mantri. In the age of Information Warfare, articulation on the defence matters, particularly on the acquisition front brings clarity to the manufactures, innovators and planners.
Having reached an FTA with the European Union, India now also has the strategic connect with many advanced armed forces of Europe. Thus, this defence budget should focus on the capability development to take on Pakistan, China and Bangladesh together. India has to be prepared to for short and intense long-range attrition as it achieved against Pakistan in Operation Sindoor. At the same time, the country has to be prepared for long drawn wars, with capability of multi-domain integrated operations along the land, air and maritime borders. The defence budget 26-27 is going to be a milestone towards strategic consolidation of India a major net security provider at the global stage.
