In a decisive push to strengthen national security in the aftermath of Operation Sindoor and focus on indigenous defence production, the Union Budget has allocated a record ₹7.85 lakh crore to defence services, marking the highest-ever outlay for the sector.
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The allocation accounts for 2% of the estimated GDP for the next financial year 2026-27, and reflects a 15.19% increase over the Budget estimates for the current year. Defence spending now constitutes 14.67% of the Union government’s total expenditure, the highest among all Ministries.
According to the Defence Ministry, the enhanced allocation is aimed not only at accelerating the modernisation of the armed forces and meeting routine operational requirements, but also at addressing additional financial needs arising from emergency procurement of arms and ammunition undertaken after Operation Sindoor, under both capital and revenue heads. Capital expenditure has been raised sharply to ₹2.19 lakh crore, compared to ₹1.8 lakh crore in 2025-26, underlining the government’s resolve to upgrade military capabilities to global standards, with a strategic emphasis on self-reliance.
Modernisation and indigenisation
Of the Ministry’s total allocation, 27.95% has been earmarked for capital expenditure, 20.17% for operational sustenance and preparedness, 26.40% for pay and allowances, 21.84% for defence pensions, and 3.64% for civil organisations.
Capital allocation to the defence forces has risen almost 22% from the previous year’s Budget estimates, to ₹2.19 lakh crore. Within this, ₹1.85 lakh crore has been set aside for capital acquisition, nearly 24% higher than last year. The Ministry has already concluded contracts worth ₹2.1 lakh crore during the current year up to December, with Acceptance of Necessity approvals exceeding ₹3.5 lakh crore. Upcoming projects include next-generation fighter aircraft, ships and submarines, UAVs, drones, smart weapons, and specialist vehicles.
A major thrust has been placed on indigenisation, with ₹1.39 lakh crore, or 75% of the capital acquisition budget, earmarked for procurement from domestic industries, boosting self-reliance, investment and job creation, the Ministry added.
Historic allocation
Revenue expenditure has been enhanced to ₹3.65 lakh crore, while allocations for border infrastructure, veterans’ healthcare, research and development, and pensions have also seen notable increases.
Defence Minister Rajnath Singh thanked Prime Minister Narendra Modi for the historic allocation, saying that the Budget strengthens the balance between security, development, and self-reliance. He said the post-Operation Sindoor budget reinforces the government’s resolve to bolster national security, enhance military capabilities and ensure the welfare of ex-servicemen, while advancing the vision of an Aatmanirbhar and Viksit Bharat.
Published - February 01, 2026 04:47 pm IST
