Defence Budget gets a double digit boost to Rs 5.9 lakh crore post Operation Sindoor

Defence Budget gets a boost

India’s defence outlay saw another double-digit increase, underscoring the government’s renewed focus on military preparedness in the aftermath of Operation Sindoor.

Defence spending (sans pensions) was raised to Rs 5.9 lakh crore from Rs 4.9 lakh crore in FY26 (Budget Estimates), marking a growth of around 19 percent year-on-year. Over the past decade, the defence Budget has nearly doubled, reflecting a steady push towards modernisation, indigenisation and higher operational readiness.

A key shift this year is the sharper focus on capital expenditure. The government has earmarked Rs 2.2 lakh crore on capex in the sector, up from Rs 1.8 lakh crore budgeted for FY26. This takes the share of capital spending to around 28 percent from 26.4 percent of the total defence Budget (including pensions and civil defence spending).

The long-term trend shows a clear structural change. Defence capital outlay has more than doubled from Rs 86,357 crore in 2016-17 to Rs 2.2 lakh crore in FY27, even as total defence spending rose from Rs 3.52 lakh crore to over Rs 7.8 lakh crore over the same period.

The increase in capex has been driven by higher allocations for aircraft, naval platforms, missiles, artillery and other high-value equipment, alongside a push for domestic procurement under the government’s indigenisation agenda.

The post-Operation Sindoor Budget also aligns with the broader strategic shift seen in recent years, where India has prioritised spending on force modernisation, air defence systems and next-generation platforms.

Who will benefit?

The pivot towards higher capital spending is expected to benefit both defence public sector undertakings and their private-sector suppliers, especially as order books across the sector have expanded sharply.

Hindustan Aeronautics Ltd’s current FY25 order book of Rs 1.25 lakh crore is expected to translate into an average annual order pipeline of about Rs 2.6 lakh crore over the next five years, driven by fighter aircraft, helicopters and engine programmes.

Mazagon Dock Shipbuilders shows a similar trajectory. From a current order book of Rs 39,871 crore, its average annual order inflow is projected at around ₹1.58 lakh crore, supported by submarine, frigate and destroyer programmes.

Bharat Electronics Ltd is expected to sustain a robust annual pipeline of roughly Rs 60,000 crore, while shipyards such as Goa Shipyard and Garden Reach Shipbuilders are also set for steady inflows.

Even smaller entities such as MIDHANI, BEML and Bharat Dynamics are projected to see stable demand, underlining the depth and breadth of India’s indigenous procurement push.

Alongside defence PSUs, private-sector participation—including startups—is rising steadily. For the first time, private companies are expected to account for nearly a quarter of India’s defence output, up from 23.5 percent in FY25, reflecting a broader shift towards public–private collaboration in defence manufacturing.