Published: March 2, 2016 | Last updated: August 8, 2026
India’s defence budget has grown steadily through two full budgets since 2024, reflecting a clear policy priority on modernisation and self-reliance. This article updates the key figures and what they signal.
The headline numbers
- FY 2025-26: the Ministry of Defence received Rs 6.81 lakh crore, an increase of about 9.5% over the previous year and the largest allocation among all ministries at around 13.5% of the Union Budget.
- FY 2026-27: the defence allocation jumped to Rs 7.85 lakh crore, the highest ever, up about 15.2%, and roughly 14.7% of central government expenditure.
Modernisation at the forefront
- Capital expenditure: the capital head for defence forces stood at Rs 1.80 lakh crore in FY 2025-26 and rises to about Rs 2.19 lakh crore in FY 2026-27, an increase of roughly 22%.
- Capital acquisition: about Rs 1.85 lakh crore is earmarked for modernisation in FY 2026-27, around 24% higher than the previous year, covering next-generation fighter aircraft, advanced weapons, ships, submarines and drones.
- Specific programmes: notable allocations include about Rs 63,733 crore for aircraft and aero engines and Rs 25,023 crore for the naval fleet.
- DRDO: the defence research agency receives about Rs 29,100 crore in FY 2026-27, supporting indigenous technology development.
Self-reliance and domestic industry
- Domestic procurement: about 75% of the capital acquisition budget is reserved for domestic industry in FY 2026-27, with Rs 1.39 lakh crore earmarked for purchases from Indian defence firms.
- Production and exports: defence production reached a record Rs 1.54 lakh crore in FY 2024-25, with exports of about Rs 23,622 crore, up 12%. Roughly 65% of defence equipment is now made domestically.
- Procurement reforms: 2025 was declared the “Year of Reforms”, with a new Defence Procurement Manual and continued emphasis on indigenous design and manufacturing (IDDM).
Veterans and infrastructure
- Pensions: defence pensions are budgeted at about Rs 1.71 lakh crore in FY 2026-27, serving roughly 34 lakh pensioners.
- Veterans’ health: the Ex-Servicemen Contributory Health Scheme (ECHS) allocation rises significantly to Rs 12,100 crore, a jump of about 45%.
- Border infrastructure: the Border Roads Organisation capital allocation is raised to about Rs 7,394 crore, with funds also set aside for a dedicated optical-fibre network for defence.
What this signals
The sustained double-digit growth in the defence budget, the rising share reserved for domestic industry, and the emphasis on capital acquisition point to a defence posture built on indigenisation and modernisation. The challenge remains converting allocation into capability through timely procurement, testing and delivery, and sustaining the reform momentum beyond a single year.
Sources: PIB, Ministry of Defence, Indian Express, Financial Express.