Centre earmarks Rs 2.2 lakh crore war chest in Budget to beef up armed forces' ammo

The allocation for the defence in the budget works out to around two per cent of the projected GDP for 2026-27.

• India allocates Rs 7.84 lakh crore for defence in FY 2026-27, up 15 percent
• Rs 2.19 lakh crore set for armed forces' capital expenditure and modernisation
• Customs duty waived on aircraft parts to boost defence aerospace industry

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The government on February 1 announced an allocation of Rs 7.84 lakh crore for India’s defence spending for the financial year 2026-27, with a significant chunk of the outlay reserved for the modernisation of the country’s armed forces.

According to the Budget documents, Rs 2.19 lakh crore has been reserved for capital expenditure of the armed forces, largely for the acquisition of new weapons, warships, aircraft and other military hardware. For FY26, the government had allocated Rs 6.81 lakh crore for defence expenditure, with overall defence budget for the next financial year witnessing a hike of 15 percent.

The announcement comes in the backdrop of the country’s border challenges from China and Pakistan. Last year, India successfully responded to Pakistan-sponsored terrorist attack in Pahalgam, through Operation Sindoor.

Defence minister Rajnath Singh lauded the defence allocation, saying the historic success of Operation Sindoor has further cemented India’s resolve to beef up its defence system.

The capital outlay is over Rs 39,000 crore higher than the current fiscal's budgetary estimate Rs 1.8 lakh crore. The revised capital outlay for 2025-26 has been estimated at Rs 1,86,454 crore.

Under capital expenditure, Rs 63,733 crore has been set aside for aircraft and aero engines, while Rs 25,023 crore is allocated for the naval fleet. The revenue expenditure has been put at Rs 5,53,668 crore that includes Rs 1,71,338 crore for pensions.

In her budget speech, Finance Minister Nirmala Sitharaman proposed exempting basic customs duty on components and parts required for the manufacture of civilian, training and other aircraft.

She also announced waiving basic customs duty on raw materials imported for the manufacture of parts of aircraft to be used in maintenance, repair or overhaul requirements by units in the defence sector.

The two decisions are expected to help the defence aerospace industry.

Defence Minister Singh said the "most important" aspect of the budget is the modernisation of the three services. "I express my heartfelt gratitude to our Prime Minister Modi ji for allocating Rs 7.85 lakh crore for the defence sector," he said.

"The most important aspect of this Budget is the modernisation of our three services. For this, a provision of Rs 1.85 lakh crore has been made this year, which is approximately 24 per cent higher than the previous financial year," he said.

"As a result of this increase, our military capability will become even more powerful," Singh added.

The defence minister said the welfare of ex-servicemen and their families has also been given importance in this budget.

"Under the Ex-Servicemen Contributory Health Scheme, a provision of Rs 12,100 crore has been made, which is an increase of approximately 45 per cent compared to the current year," he said.

"This budget strengthens the balance between security, development, and self-reliance," he noted.

The allocation for the defence in the budget works out to around two percent of the projected GDP for 2026-27.

The defence ministry said the defence outlay focuses on modernisation, technological innovation and streamlined procurement for optimal resource utilisation.