NEW DELHI: The Union Budget 2026 has allocated Rs 7.85 lakh crore for defence, a sharp rise from Rs 6.81 lakh crore last year, underscoring the government’s focus on military modernisation in the post Operation Sindoor security environment.
According to official figures, the defence outlay for 2026–27 stands at Rs 7,84,678 crore, compared with Rs 6,81,210 crore in the previous financial year. The allocation amounts to about 2% of the estimated GDP for the coming year and represents a 15.19% increase over the Budget Estimates of FY 2025–26. Defence spending accounts for 14.67% of total central government expenditure, the highest among all ministries.
Of the total outlay, capital expenditure has been pegged at Rs 2,19,306 crore, while revenue expenditure stands at Rs 5,53,668 crore, including Rs 1,71,338 crore for pensions. The armed forces will receive Rs 2.19 lakh crore for modernisation, with key allocations including Rs 63,733 crore for aircraft and aero engines and Rs 25,023 crore for the naval fleet. The defence ministry has several major projects in the pipeline, including contracts for Rafale fighter jets, submarines and unmanned aerial vehicles.
Of this, the capital outlay has been pegged at Rs 2,19,306 crore, while revenue expenditure stands at Rs 5,53,668 crore, including Rs 1,71,338 crore for pensions.
The armed forces will receive Rs 2.19 lakh crore for modernisation, with allocations including Rs 63,733 crore for aircraft and aero engines and Rs 25,023 crore for the naval fleet.
The enhanced allocation is also aimed at meeting financial requirements arising from emergency procurement of arms and ammunition following Operation Sindoor, under both capital and revenue heads. The capital outlay marks a substantial jump from Rs 1,80,000 crore allocated in the 2025–26 Budget, later revised to Rs 1,86,454 crore.
A detailed breakup shows that 27.95% of the Ministry of Defence allocation is earmarked for capital expenditure, 20.17% for revenue expenditure on sustenance and operational preparedness, 26.40% for pay and allowances, 21.84% for defence pensions, and 3.64% for civil organisations. The government said the higher capital provisioning reaffirms its commitment to upgrading military capabilities and advancing the goal of Aatmanirbhar Bharat.
In her budget speech, Finance Minister Nirmala Sitharaman announced customs duty reliefs to support the defence aerospace ecosystem. She proposed exempting basic customs duty on components and parts required for the manufacture of civilian, training and other aircraft, and on raw materials imported for maintenance, repair or overhaul activities by defence sector units.
In a boost to the defence sector, Sitharaman said, "It is proposed to exempt basic customs duty on raw materials imported for the manufacture of parts of aircraft to be used in maintenance, repair or overall requirements by units in the defence sector."
Meanwhile, defence services (Revenue) and Capital Outlay were allocated Rs 3,65,478.98 crore and Rs 2,19,306.47 crore, reflecting increases of 17.24% and 21.84%, respectively.