Union Budget 2026 : India’s defence budget rises sharply to Rs 7.84 lakh crore for 2026–27

The Centre on Sunday significantly increased India’s defence spending, allocating Rs 7,84,678 crore for 2026–27, marking a sharp rise from Rs 6,81,210 crore in the previous financial year.

The enhanced allocation underscores the government’s continued focus on military modernisation, operational readiness and strengthening indigenous defence manufacturing.

Of the total outlay, Rs 2,19,306 crore has been earmarked for capital expenditure, while Rs 5,53,668 crore has been allocated under revenue expenditure. The revenue component includes Rs 1,71,338 crore for pensions.

Key allocations

• Aircraft and aero engines: Rs 63,733 crore
• Naval fleet: Rs 25,023 crore
• Total capital outlay: Rs 2,19,306 crore
• Revenue expenditure: Rs 5,53,668 crore

For comparison, the defence capital outlay in 2025–26 was initially fixed at Rs 1,80,000 crore and later revised upward to Rs 1,86,454 crore, reflecting growing procurement needs.

Boost to defence aerospace sector

In her Budget speech, Finance Minister Nirmala Sitharaman announced several customs duty exemptions to support the domestic defence and aerospace ecosystem.

These include:

• Exemption of basic customs duty on components and parts used in the manufacture of civilian, training and other aircraft
• Waiver of customs duty on raw materials imported for maintenance, repair and overhaul (MRO) of defence aircraft

The measures are expected to lower production costs, encourage local manufacturing and strengthen India’s defence aerospace supply chain.

The increased defence spending aligns with the government’s broader push for self-reliance in defence under the ‘Atmanirbhar Bharat’ initiative while addressing evolving security challenges.

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