By N. C. Bipindra
New Delhi: In pursuance of Prime Minister Narendra Modi-led government’s vision of ‘Viksit Bharat @ 2047’’ (Developed India by 2047) with technologically advanced and ‘Aatmanirbhar’ (Self-Reliant) armed forces, India’s budget for 2025-26 fiscal has provisioned Rs. 6,81,210.27 crore (~US$79 billion) to the Ministry of Defence (MoD).
The MoD said in a statement after India’s Minister of Finance Nirmala Sitharaman presented the national budget to parliament that this allocation is 9.53% more than the budgetary estimate of FY25 and stands at 13.45% of the national budget, which is the highest among the ministries. Sitharaman previously served as India’s defence minister in Modi’s 2014-2019 government.
Of this MoD budget, Rs 1,80,000 crore (~US$20 billion) was provided for the capital procurement head, which is meant for the purchase of new arms and weapons. The capital allocation for defence constitutes 26.43% of the total allocation for MoD.
For revenue head, which deals with maintenance and sustenance of existing weapons and infrastructure, garnered Rs 3,11,732.30 crore (~US$36 billion). This is 45.76% of the total allocation for defence of India.
Defence Pension receives a share of Rs 1,60,795 crore (~US$19 billion), which is 23.60% of the MoD budget for FY26. The balance Rs 28,682.97 crore(~US$3 billion) for the civil organisations under the MoD, and this is 4.21% of the defence budget.
The defence ministry has decided to observe FY26 as the ‘Year of Reforms,’ under which armed forces modernisation would for a key element and this would included simplifying arms acquisition procedures to use the funds optimally,
Addressing the media here after the budget was announced, India’s Minister of Defence Rajnath Singh congratulated Nirmala Sitharaman for a budget that would fulfill Modi’s resolve of ‘Viksit Bharat’ (Developed India). “This budget will promote the development of youth, poor, farmers, women, and all other sections of society. Recognising the contribution of the middle class, the budget has brought an unprecedented gift (meaning, income tax reductions),” he said.
Defence Capital Outlay
“In the current geopolitical scenario where the world is witnessing a changing paradigm of modern warfare, Indian armed forces need to be equipped with state-of-the-art weapons and be transformed into a technologically advanced combat-ready force. With this in view, Rs 1,80,000 crore has been allocated to the Capital Outlay of the defence forces. This allocation is 4.65% higher than the budgetary estimate (BE) of FY25,” the MoD statement said.
The reference to the geopolitical situation includes India’s immediate national security threat coming from Communist China, through illegally occupied Tibet. The Indo-Tibetan border, as it stands today and called the Line of Actual Control (LAC) in eastern Ladakh, witnessed a bloody military battle in the Galwan Valley and conflict between the Indian and Chinese armed forces between May 2020 and October 2024, including casualties on either side in hand combat.
Of this, Rs 1,48,722.80 crore (~US$17 billion) is planned to be spent on ‘Capital Acquisition,’ termed as the armed forces modernisation budget and the remaining Rs 31,277.2 crore (~US$3.6 billion) is for capital expenditure on Research & Development and creation of military infrastructure across the country.
During FY21, the MoD decided to strengthen the domestic industries and to make the armed forces self-reliant. Since then, a substantial share of modernisation budget has been earmarked for capital procurement from domestic industries.
To encourage the Indian private sector into arms manufacturing and technological development in the defence sector, a notable percentage of the capital budget for the MoD is further earmarked for acquisition from domestic private industries.
Accordingly, for FY26, Rs 1,11,544.83 crore (~US$13 billion) would be spent on arms and weapon systems bought from India’s defence sector companies. This expenditure constitutes 75% of the modernisation budget. This allocation is expected to boost the domestic defence industrial base. Of this, about 25%, or Rs 27,886.21 crore (~US$3.2 billion) has been provisioned for buying arms from Indian private industries.
“This allocation will take care of major acquisitions planned in the ensuing FY and bolster jointness & integration initiatives. This allocation of funds will further facilitate MoD’s plan to venture into new domains such as Cyber & Space and emerging technologies such as Artificial Intelligence (AI), Machine Learning and Robotics,” the MoD statement said.
Some major acquisitions planned in the next year such as Long Endurance Remotely Piloted Aircraft of High and Medium altitude, stage payment of Deck-based Aircraft, and next-generation submarines/ships/platforms will be funded out of this allocation.
The capital investment in defence manufacturing sector has a cascading and multiplier effect on the national economy, which will boost the GDP and provide greater job opportunities to the youth.
Operational, Sustenance Budget
The Revenue Head allocation would meet the Pay & Allowances of the armed forces personnel and sustenance & operational preparedness of the defence services.
Accordingly, Rs 3,11,732.30 crore (~USD36 billion) has been allocated, which is 10.24% higher than the budgetary allocation of FY25. Of this, Rs 1,14,415.50 crore (~US$13 billion) would be the payout for non-salary expenditure such as procurement of ration, fuel, ordnance stores, and maintenance-repair of existing equipment.
The government has been continuously allocating higher amounts for sustenance and operational preparedness of the armed forces since the mid-year review during FY23 and accordingly has given a significant jump of 24.25 % in the next FY in comparison to the budgetary estimate of the current FY.
This allocation will address the requirement due to additional deployment of the forces in the border areas, hiring of vessels, increase in expenditure on longer sea deployment of ships, and increase in flying hours for the aircraft.
Under the Salary Head of revenue expenditure, Rs 1,97,317.30 crore (`US$23 billion) has been allocated for Pay & Allowances of the three services and any further requirement will be addressed during the mid-year review.
Enhanced Allocation for DRDO
The budgetary allocation to the Defence Research and Development Organisation (DRDO) has been increased to Rs 26,816.82 crore (~US$3 billion) in FY26, an increase of 12.41% to the budget estimates of FY25 worth Rs 23,855.61 crore (~US$2.8 billion).
Of this, a major share of Rs 14,923.82 crore (~US$1.7 billion) would go for capital expenditure and to fund the R&D projects. “This will financially strengthen the DRDO in developing new technologies with a special focus on fundamental research and hand-holding of the private parties through Development-cum-Production Partner.”
The increased allocation under the Capital Head of DRDO will further provide adequate financial resources in funding the projects to be taken up in collaboration with private parties through the flagship Technology Development Fund scheme of DRDO.
Encouraging Start-up Ecosystem for Innovation in Defence
For making the armed forces self-reliant in defence technology and encouraging innovation, it is imperative to engage the private players and strengthen the start-up ecosystem in the country for technological development and innovation in the defence sector.
For this purpose, Rs 449.62 crore (~US$52 million) has been allocated to iDEX scheme, including its sub-scheme Acing Development of Innovative Technologies with iDEX (ADITI). Allocation in this head shows a jump of almost three times in two years.
Capital Budget of Indian Coast Guard
The Indian Coast Guard (ICG) has been allotted Rs 9,676.70 crore (~US$1.1 billion) under the Capital and Revenue Head which is 26.50% more than the allocation for FY25 at the budgetary estimate stage.
This increase is primarily in line with the government’s focus on the capability development of ICG and equipping them with modern equipment. ICG not only strengthens coastal security but also provides assistance to neighboring countries and commercial ships during emergencies through faster response.
A jump of 43% in Capital Budget from Rs 3,500 crore (~US$404 million) for FY25 to Rs 5,000 crore (~US$578 million) for FY26 will provide adequate financial space for the acquisition of Advanced Light Helicopters (ALH), Dornier Aircraft, Fast Patrol Vessels (FPVs), Training Ships, and Interceptor Boats.
On revenue head, the allocation has been increased from Rs 4,151.80 crore (~US$480 million) for FY25 to Rs 4,676.70 crore (~US$540 million) for FY26, an increase of 12.64%. This will fund additional manpower and resources deployments and address inflation.
Strengthening Border Infrastructure
To further improve the border Infrastructure and facilitate the movement of armed forces personnel through tough terrains, Rs 7,146.50 crore (~US$826 million) has been allocated to Border Roads Organisation (BRO) under the capital head, which is 9.74% higher than the BE of FY25.
The financial provision made for the FY26 for BRO will promote the nation’s strategic interest in border areas by constructing tunnels, bridges, and roads such as LGG-Damteng-Yangtse in Arunachal Pradesh, Asha-Cheema-Anita in J&K and Birdhwal-Puggal-Bajju in Rajasthan. It will also boost socio-economic development, provide employment opportunities, and encourage tourism.
BRO has created substantial employment opportunities by employing 70,000 local youths and has contributed to the local economies by fostering long-term employability and skill development.
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