Big firepower for forces in Budget 2026: Capital outlay for defence surges 22% as India prepares for dual-front challenges

Fulfilling the long-standing demands of armed forces to increase capital outlay for defence to provide fiscal headroom for modernisation, the Union Budget 2026 set aside Rs 7.85 lakh crore for defence, a sharp uptick from Rs 6.81 lakh crore last year--a hike of around 15 per cent. This hints at the centre's renewed focus on military readiness and modernisations amid a volatile geopolitical scenario and heightened threats on both eastern and western borders with China and Pakistan, respectively.

As per official data, the defence outlay for 2026-27 is pegged at Rs 7,84,678 crores, compared to Rs 6,81,210 crores in the previous fiscal. The most significant part of the increase was the steep increase in defence capital expenditure, which was increased by 28 per cent to Rs 2.31 lakh crore vis-a-vis Rs 1.80 lakh crore last year. Of this, Rs 63,733 crore is allocated for aircraft and aero engines, and Rs 25,023 crores for the naval fleet.

However, the union government has been expanding the defence budget; it reached Rs 29 lakh crore in 2014-15 and has grown to Rs 7.85 lakh crore in 2026-27.

The increased capital outlay is set to fund major acquisitions of advanced weapon systems, including the biggest-ever fighter aircraft deal worth Rs 3.25 crore, India inked with France to purchase 114 Rafale jets and domestic defence manufacturing.

Finance Minister Nirmala Shitaraman also announced exemption of basic customs duty on raw material imported forthe manufacturing of parts used in the maintenance, rapair and overhaul of defence units.

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Breakup of the Defence budget

The defence budget allocates Rs 3,65,479 crore for revenue expenditure to meet the armed forces’ day-to-day operational needs, including salaries, maintenance, and combat readiness. The government has earmarked a record Rs 2,19,306 crore for capital outlay, reflecting a 21.8 per cent increase aimed at modernisation and the acquisition of advanced military equipment.

In addition, Rs 1,71,338 crore has been set aside to meet pension liabilities for more than 34 lakh retired defence personnel. The remaining Rs 28,555 crore will go to civil organisations under the Ministry of Defence, including the Border Roads Organisation and the Indian Coast Guard, to support infrastructure development and strategic operations.