Union Finance Minister Nirmala Sitharaman has allocated a total of Rs 7.85 lakh crore to the Ministry of Defence, covering both revenue and capital heads. This represents an overall increase of around 15 per cent over last year’s allocation (FY 2025–26) and stands at 2 per cent of the estimated GDP for the next Financial Year.
Out of the total allocation made to the Ministry of Defence (MoD), 27.95 percent is for capital expenditure. Capital Expenditure (Capex) has been set at Rs 2.19 lakh crore, marking a 21.83 per cent rise over the previous year. In defence budgeting, Capex refers to funds earmarked for the acquisition, upgradation, or creation of long-term military assets, including weapons systems, platforms, infrastructure, and advanced technology.
During FY 2025-26, up to the third quarter, till December 2025, MoD has concluded contracts worth Rs 2.10 lakh crore and has, so far, given Acceptance of Necessity approval for more than Rs 3.50 lakh crore.
Beyond meeting the routine operational needs and ongoing modernisation of the Armed Forces, the substantially increased allocation will also address the additional financial demands arising from the emergency procurement of arms and ammunition following Operation Sindoor, under both Capital and Revenue heads. A significant portion of the defence outlay—amounting to Rs 2.19 lakh crore—has been earmarked for capital expenditure, compared to Rs 1.80 lakh crore provided in the Budget Estimates for FY 2025–26.
From the remaining budget, 20.17 percent has been allocated for revenue expenditure on sustenance and operational preparedness, 26.40 percent for revenue expenditure on pay and allowances, 21.84 percent for Defence Pensions and 3.64 percent for civil organisations.
Last year, the Budget Estimate for capital expenditure stood at Rs 1.80 lakh crore, which was later revised upward to Rs 1.86 lakh crore in the Revised Estimates. Under Capex, aero-engines and aircraft have been allocated Rs 6.37 lakh crore for new projects, including the induction of the Rafale fighter jet from France’s defence major Dassault Aviation.
Last month, the Defence Procurement Board approved a proposal to acquire 114 Rafale fighter jets, following a wait of nearly two decades. Once the Defence Acquisition Council (DAC) clears the project, it will move to the Cabinet Committee on Security (CCS), chaired by the Prime Minister, for final approval.
In addition, keeping the P75(I) submarine programme in view, a budgetary allocation of Rs 4,333.70 crore has been made for naval dockyards and related projects.
Defence pensions continue to form a significant component of expenditure, amounting to Rs 1.71 lakh crore this year out of the total allocation for the Ministry of Defence.
As a result of major thrust on the development of border areas, the budgetary allocation to BRO under Capital for BE 2026-27 has been enhanced to Rs 7,394 crore. It was Rs 7,146.50 crore for FY 2025-26. The said allocation will cater to many strategically major infrastructure projects, which include tunnels, bridges and airfields, which help in last-mile connectivity in the border areas.
Furthermore, in terms of healthcare facilities for the veterans and their dependents, there has been an enhanced allocation to the Ex-Servicemen Contributory Health Scheme (ECHS). In the annual budget for FY 2026-27, an amount of Rs 12,100 crore has been allotted to ECHS, which is 45.49 percent higher than FY 2025-2026.
Defence Minister Rajnath Singh expressed gratitude to Prime Minister Narendra Modi for allocating Rs 7.85 lakh crore to the defence sector in the Union Budget 2026-2027. He stated that the budget, which comes after the historic success of Operation Sindoor, further strengthens the Government’s resolve to create a robust and foolproof security system of the country. In a post on X, he said that the budget augments the security-development-self-reliance balance.
Rajnath Singh noted that over Rs 2.19 lakh crore has been allocated under the capital head to the Defence Forces, out of which Rs 1.85 lakh crore has been earmarked for capital acquisition. Modernisation of the Armed Forces is an important aspect of this budget, he said.
“This budget strengthens the balance between security, development, and self-reliance. I heartily congratulate my fellow citizens on this budget, presented in the national interest,” he said.