By N. C. Bipindra

New Delhi: In the defence budget for 2026-27 fiscal post the May 2025 Operation Sindoor, India’s Narendra Modi government will spend more on buying aircraft, aeroengines, warships, and submarines to shore up its military capabilities to meet the twin threat from Pakistan and China.

India’s Finance Minister Nirmala Sitharaman’s eighth budget on February 1, 2026, saw the capital budget for the armed forces to buy these advanced weapon-carrying platforms see an uptick to INR 90,747 crore in FY27, nearly INR 16,010 crore more than what it was allocated in FY26.

New Delhi will spend INR 63,733.94 crore on buying aircraft and aeroengines, INR 25,023.63 crore on warships, and INR 1,989.12 crore on special projects, which is a euphemism for building nuclear submarines.

Committed Liabilities Take the Capital Outlay Cake

Of these budgets for these weapons platforms, India already has a committed liability to pay state-run Hindustan Aeronautics Limited for the 180 ‘Tejas’ Light Combat aircraft it has ordered in two tranches for the Indian Air Force in 2021 and 2025.

India also signed a deal with French aircraft maker Dassault Aviation for 26 Rafale-M jets in 2025 as carrier-borne combat aircraft, apart from the on-order nuclear-armed submarines being built at the Submarine Building Centre in Visakhapatnam.

These committed liabilies are part payments made to the contractor for fulfilling the procurement and delivery promises from time to time, and these take away a large chunk of the capital budget for asset acquisitions.

Rafale May Be the New Priority for Air Force

As fresh procurements, India is already pursuing the purchase of 114 Rafale jets for the IAF, a proposal for which got the approval of the Defence Secretary-headed Defence Procurement Board in recent days.

However, the additional Rafale procurement, along with a project to assemble the aircraft in India, could take much longer than just a year to fructify.

The proposal has to go through a long-drawn defence acquistion process, before the contract can be approved by Prime Minister Modi-led Cabinet Committee on Security, the highest decision-making body on military matters.

Huge Jump in India’s Total Defence Spend

The total capital budget allocated for 2026-27 stands at INR 2.31 lakh crore. However, only INR 2.19 lakh crore would be utilised for procuring new weapons and military systems apart from building new defence infrastructures.

In a statement, the Ministry of Defence (MoD) claimed in a statement that the the nation’s budget after Operation Sindoor brought “an unprecedented” allocation wroth INR 7.85 lakh crore for the next fiscal from April 2026 to March 2027.

“This allocation stands at 2% of the estimated GDP for the next Financial Year and shows a significant increase of 15.19% over the Budgetary Estimates (BE) of FY 2025-26,” it said. In the recent consecutive years, India could only spend less than 2% of the GDP on defence, and the percentage increase managed to only balance out the inflationary effects on the budget.

The ministry also claimed that the total defence budget was 14.67% of the Indian government’s overall expenditure, the highest among the all government ministries.

Post-Sindoor Emergency Procurements Get Traction

“In addition to the modernisation of the armed forces and financing their regular requirement, the significantly enhanced allocation will also cater for the financial requirements that have arisen due to the emergency procurement of arms and ammunition made subsequent to Operation Sindoor under both the categories, namely, Capital and Revenue,” the statement said.

A “large share” of the defence budget worth INR 2.19 lakh crore was allotted for capital expenditure, nearly 39,747 crore more than this year’s budget of INR 1.80 lakh crore.

“Through this enhanced provision, the government has reaffirmed its resolve to transform the armed forces and their capabilities to the world’s highest standards with a strategic shift towards the goal of Aatmanirbhar Bharat (Self-Reliant India),” it said.

Budget Numbers Tell a Story of Their Own

Of the total allocation for the MoD, a share of 27.95% was for capital expenditure, 20.17% for revenue expenditure on sustenance and operational preparedness, 26.40% for revenue expenditure on pay and allowances, 21.84% for Defence Pensions and 3.64% for civil organisations.

The FY27 allocation under capital head to the defence forces stood INR 2,19,306.47 lakh crore, a 21.84% increase from the Budget Estimates of FY26.

Of this, INR 1.85 lakh crore was earmarked for Capital Acquisition, which is approximately 24% higher than the Capital Acquisition budget for FY26.

“In the current geo-political scenario, quantum jump in the modernisation budget is a strategic imperative. During FY26, up to third quarter, that is, till December 2025, MoD has concluded contracts worth INR 2.10 lakh crore and has, so far, given Acceptance of Necessity approval for more than Rs 3.50 lakh crore,” the ministry said.

“The upcoming projects under capital acquisition will equip the armed forces with next generation fighter aircraft, smart and lethal weapons, ships/submarines, Unmanned Aerial Vehicles, Drones, Specialist Vehicles, etc.,” it said.

Contracts for Indian Defence Firms Takes Priority

The MoD said, interruption in global supply chains and prioritisation of domestic requirements over foreign sellers re-emphasised the need for import substitution and going for indigenisation, not only for sustenance but for future modernisation.

“In line with this, MoD’s policy to earmark funds to boost domestic industries through budgetary policies has been further strengthened by earmarking INR 1.39 lakh crore, that is, 75% of the Capital Acquisition budget for procurement through domestic industries during the FY27,” it said.

“Through such earmarking of funds, domestic players have been reassured about their investment and their increasingly greater role in capability development of the armed forces,” the MoD added.

Enhanced allocation for Capital Acquisition, especially for domestic industries, would have long term positive impact on the national economy and will lead to development of many ancillary industries, creating job opportunities in the country, the statement noted.

Military Operations Sustenance Gets Attention

The defence budget also made a provision of INR 3.65 lakh crore for spending under revenue heads, 17.24% higher than the allocation for FY26 under budgetary estimates.

Of this, INR 1.58 lakh crore was allocated for operation and sustenance-related expenditure (meaning, for procuring ammunition, ect.) and the remaining for salary and allowances.

The budgetary provision made in this regard for the upcoming fiscal would facilitate procurement of operationally important stores and spare parts, and ensure maintenance of vital platforms in addition to catering for their day-to-day requirements.

Border Infrastructure, R&D Are Key Military Enablers

For border area development, a key to faster and smoother military deployments against Pakistan and China, the government reiterated its commitment to provide better infrastructure through higher allocation to the Border Roads Organisation (BRO). 

Accordingly, the BRO budgetary allocation under Capital Head for FY27 was enhanced to INR 7,394 crore from INR 7,146.50 crore for FY26.

“The said allocation will cater to many strategically significant projects such as tunnels, bridges, airfields, etc. and will promote regional development and tourism, along with providing last mile connectivity in the border areas,” the ministry said.

The budgetary allocation to Defence Research and Development Organisation (DRDO) was also increased to INR 29,100.25 crore for FY27 from INR 26,816.82 crore in FY26. “Out of this allocation, a major share of INR 17,250.25 crore is allocated for capital expenditure,” the MoD said.

Defence Minister Gung-Ho Over Military Budget

In a post on microblogging site X, India’ Defence Minister Rajnath Singh expressed gratitude to the Prime Minister, stating that India’s journey towards a ‘Viksit Bharat’ (Developed India) continued to gather momentum through the budget for FY27.

He also congratulated Nirmala Sitharaman for presenting a budget that sought to “transform aspiration into achievement” and “potential into performance”.

Rajnath Singh thanked Modi for the defence sector in the national budget for 2026-27, noting that it strengthened the security, development, and self-reliance balance, and national interest.

He asserted that the budget, which came after the historic success of Operation Sindoor, further strengthened the government’s resolve to bolster the nation’s defence and enhance military capabilities.

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