India targetting bigger defence budget, Rs 2 lakh crore in contracts this fiscal

The ministry has cleared 10 capital acquisition proposals worth over Rs 1 lakh crore, all of which fall under the Indigenous Design, Development and Manufacturing (IDDM) category

The Defence Ministry will seek to increase the share of its expenditure in GDP from present 1.9 percent to 2.5 percent over the next five years, Defence Secretary RK Singh told CNBC-TV18 in an exclusive interview on July 7, adding that the ministry is aiming to sign defence contracts worth Rs 2 lakh crore during FY26, matching the record levels achieved last year.

RK Singh added that 75 percent of India’s capital defence outlay will now be spent domestically, covering high-priority areas such as aerospace, shipbuilding, land systems, missiles, and munitions.

Rs 1 lakh crore in indigenous defence deals cleared

In a major policy push for self-reliance, the ministry has cleared 10 capital acquisition proposals worth over Rs 1 lakh crore, all of which fall under the Indigenous Design, Development and Manufacturing (IDDM) category.

“These are 100 percent indigenous projects. They rely on domestic technology, domestic design, and therefore, the entire IPR will remain with us,” Singh said.

Defence Secretary said several of these proposals are based on DRDO technologies, while others are derived from different Indian technology sources. Private companies are expected to play a larger role in production through the Development-cum-Production Partner (DCPP) model.

“Most of these projects will be done by a combination of public and private sector industry partners using domestic technology,” Singh added.

Big opportunities for private sector

RK Singh laid out major areas where Indian industry, particularly private firms, can expect investment and production opportunities.

“Out of 60-odd ships currently under construction, 59 are being built within the country. There’s a strong push in naval shipbuilding, missiles and munitions, communication systems, electronics, drones, AI and robotics,” he said.

He also underlined that the defence ecosystem now has "significant allocation" available for Indian companies, especially in emerging tech sectors.

AMCA fighter programme to take flight over next decade

Defence Secretary RK Singh also told CNBC-TV18 that work is progressing on the indigenous fifth-generation Advanced Medium Combat Aircraft (AMCA) programme. The Aeronautical Development Agency (ADA) has already issued an Acceptance of Necessity (AoN) and Request for Information (RFI), and preliminary discussions with prospective bidders have taken place.

“I would imagine it'll take something between three to six months to reach the contract award stage. Thereafter, development and flying of AMCA prototypes will take about 10 years,” Singh said.

Fast-track procurements may trigger mid-year budget revisions

On whether the Defence Ministry will seek a higher allocation in the revised budget estimates (RE), Singh said it's too early to confirm but did not rule it out.

“We’ve done some fast-track procurements under emergency provisions, and there may be more. If required, we’ll consider seeking additional allocation at the RE stage,” he said.

'No constraint on capex, only execution speed matters'

Singh emphasised that capital funding has never been a constraint; the real challenge lies in faster execution.

“Our ability to spend quickly and sign contracts efficiently is what matters. Last year, we signed contracts worth Rs 2 lakh crore, which was double the previous high. If we continue at that pace, I’m confident the Finance Ministry will support us with additional capex,” he said.

He also confirmed that the ministry will push for a higher defence share of GDP, from 1.9 percent to 2.5 percent, in submissions to the 16th Finance Commission for the next five-year planning cycle.