Union Budget 2026-27 Boosts Defence Spending to Rs7.85 Lakh Crore

Defence Takes Centre Stage in Union Budget 2026–27

Union Finance Minister Nirmala Sitharaman has placed national defence at the heart of India’s fiscal and strategic planning in the Union Budget 2026–27, announcing a substantially higher allocation of Rs7.85 lakh crore. The enhanced outlay reflects the government’s priority on military readiness, rapid modernisation, and strengthening indigenous defence manufacturing in a complex regional security environment.

Scale and Significance of the Allocation

For FY27, defence spending has been fixed at Rs7,84,678 crore, up from Rs6,81,210 crore in the previous year, representing an increase of over 15 per cent. Defence now accounts for nearly 14.7 per cent of total central government expenditure and about 2 per cent of the estimated GDP. This makes the Ministry of Defence the single largest budgetary recipient, underscoring its strategic importance.

Strong Push for Capital Expenditure and Modernisation

A major highlight of the Budget is the sharp rise in capital expenditure for defence, which has been set at Rs2,19,306 crore. This allocation is aimed at accelerating the acquisition of modern platforms, advanced weapon systems, and cutting-edge technologies for the armed forces. Within the capital budget, Rs63,733 crore has been earmarked for aircraft and aero engines, while Rs25,023 crore is allocated for strengthening naval capabilities. Revenue expenditure stands at Rs5,53,668 crore, including Rs1,71,338 crore for defence pensions.

Customs Duty Relief to Support Indigenous Industry

To reinforce the domestic defence industrial base, the Budget proposes exemptions from basic customs duty on select aircraft components and parts. In addition, raw materials imported for maintenance, repair, and overhaul activities by defence sector units will also receive duty relief. These measures are intended to lower production and lifecycle costs, encourage private sector participation, and strengthen India’s defence aerospace ecosystem.

Important Facts for Exams

• Defence allocation for FY27: Rs7,84,678 crore, the highest among all ministries.

• Capital outlay for defence modernisation: Rs2,19,306 crore.

• Key allocations include aircraft and aero engines (Rs63,733 crore) and naval fleet (Rs25,023 crore).

• Customs duty exemptions announced for select defence aerospace components.

Strategic Context and Policy Direction

The government has indicated that the enhanced capital provisioning will help meet emerging operational requirements and speed up long-pending procurements. At the same time, the focus on duty relief and indigenisation aligns defence spending with the broader objective of building a self-reliant defence manufacturing ecosystem. Together, these measures aim to balance immediate operational readiness with long-term strategic autonomy.