New Delhi is expected to escalate defence expenditure by approximately ₹45,000 crore in Financial Year 2025-26 (FY26). This increase is part of the broader Union Budget announced by Finance Minister Nirmala Sitharaman, which allocated a record ₹6.81 lakh crore to the Ministry of Defence, marking a rise of about 9.5% over the previous fiscal year.
Details of the Increase & Where the Funds Will Go
Some of the key facets of this increase include:
- Capital Outlay & Modernisation: Part of the extra allocation is being directed toward capital expenditure. In FY26, the capital outlay has been set at ₹1.80 lakh crore, slightly up from about ₹1.72-1.73 lakh crore in the previous budget.
- Domestic Procurement: The government is emphasising “Make in India” with a large portion of procurement to be done from domestic manufacturers (both public and private). Around 75% of the capital acquisitions are earmarked for purchases from Indian sources.
- Revenue Components: The rise also shows in revenue expenditure – including maintenance, operational costs, salaries, and pensions. Defence pensions alone have seen a significant increase. India Today
- R&D & Infrastructure: Additional funds are allocated toward defence research & development, and for infrastructure (border roads, coastal security, etc.).
Strategic Significance
This increase in defence spending has multiple motivations and implications:
- Modernisation & Readiness: With evolving security challenges, both along India’s northern borders and maritime fronts, higher military readiness and capability upgrades (air, naval, land) are crucial.
- Self-Reliance (“Atmanirbhar Bharat”): Greater emphasis on indigenous development and procurement will help reduce import dependence, develop domestic defence industry, and generate jobs.
- R&D Boost: Enhanced funding will allow for accelerated research, particularly in areas like drones, advanced missiles, electronics, AI & cyber warfare.
- Geopolitical Context: The increase comes in context of regional tensions, global instability, and India’s desire to strengthen its strategic deterrence and defence posture.
Challenges & What to Watch
- Procurement Delays: India has historically seen delays in defense procurement. Even with higher allocations, execution matters. Delays reduce effectiveness and can lead to underutilised budgets.
- Inflation & Currency Risks: Rising costs, especially for imported components or foreign technology, can eat into the benefit of increased budget.
- Balancing Expenditure Types: Ensuring that increase doesn’t overly favor pensions/revenue at the cost of modernization. Capital allocation must lead to tangible equipment & capability upgrades.
- Private Sector Participation: Ensuring that private and MSME defence firms can scale up, maintain quality, get timely contracts, and compete fairly.
Summary
If India indeed increases its FY26 defence budget by around ₹45,000 crore, it would reinforce the government’s commitment to strengthening military strength, boosting indigenous production, and ensuring India is better prepared for both conventional and emerging security threats. The increase is not just about numbers—it represents policy priorities around modernization, self-reliance, and readiness.
