NEW DELHI: The Centre has allocated Rs 7.85 lakh crore for defence in the Union Budget, marking a 15% jump from Rs 6.81 lakh crore last year, even as defence spending remains at 1.9% of the 2026 GDP. In a push to strengthen national security and focus on indigenous defence production, the allocation, the first since the Operation Sindoor, comes amid a three-front security challenge from Pakistan, China and Bangladesh.
In November, Defence Secretary Rajesh Kumar Singh had indicated that the ministry was seeking an increase of around 20% in the 2026 Budget, along with a longer-term objective of raising defence expenditure to at least 2.5% of GDP, a level the current allocation does not meet. Nonetheless, defence continues to receive the largest allocation among all ministries in absolute terms.
A key feature of the 2026 Budget is a sharp increase in capital outlay for defence services, which has been set at Rs 2.19 lakh crore, up from Rs 1.8 lakh crore last year, marking an increase of nearly 22%. The
higher capital allocation comes as the defence ministry has major acquisition programmes in the pipeline, including contracts for 114 Rafale fighter jets, submarines and unmanned aerial vehicles.
The capital expenditure covers procurement of major platforms, such as fighter aircraft, warships, artillery and armoured vehicles, as well as funding for indigenous programmes, including development of an aero-engine. It accounts for 28% of the total defence allocation. Spending on defence research and development (R&D) and the creation of infrastructure assets are also embedded in the capital outlay.
Within the capital allocation, Rs 63,733 crore has been earmarked for aircraft and aero-engines, while Rs 25,023 crore has been allocated for naval fleet. The total defence outlay of Rs 7.85 lakh crore includes Rs 3.65 lakh crore for defence services (revenue), Rs 2.19 lakh crore for capital outlay on defence services, Rs 1.71 lakh crore for defence pensions and Rs 28,555 crore for defence (civil). The civil component covers expenditure on organisations such as the Indian Coast Guard, defence accounts establishments, research and administrative functions.
Defence pensions constitute 22% of total defence allocation. Revenue expenditure for the armed forces has been provided at Rs 3.65 lakh crore, accounting for 47% of the defence budget. This includes spending on pay and allowances, operational sustenance and the
maintenance of readiness across the three services. Of this, Rs 1.18 lakh crore has been earmarked for pay and allowances of the Indian Army, Rs 20,536 crore for the Indian Air Force and `9,662.5 crore for the Indian Navy.
Current allocation does not meet expectations
In November, Defence Secretary Rajesh Kumar Singh had indicated that the ministry was seeking an increase of around 20% in the 2026 Budget, a level the current allocation does not meet.