NEW DELHI: The Centre has allocated Rs. 7.85 lakh crore for defence in the Union Budget 2026-27, marking an increase of about 15% over the previous year's Budget Estimates.
As a percentage of GDP (Gross Domestic Product) though, the total outlay, at around 1.9%, is no better than what it was in 2026.
The allocation, the first since Operation Sindoor, comes amid a three-front security challenge from Pakistan, China and Bangladesh. In absolute terms, it is the largest among all ministries.
In November, Defence Secretary Rajesh Kumar Singh, had indicated that the ministry was seeking an increase of around 20% in the FY27 budget, with a longer-term objective of raising defence expenditure to at least 2.5% of GDP.
Defence services spend sees major hike
Notably, the FY27 Budget has seen a sharp increase in capital outlay for defence services, which at Rs. 2.19 lakh crore has seen an increase of around 18% from the Revised Estimates of Rs. 1.86 lakh crore last year.
The higher capital allocation comes at a time when the defence ministry has several major acquisition programmes, including contracts for 114 Rafale fighter jets, submarines and unmanned aerial vehicles, in the pipeline.
The capital expenditure covers the procurement of fighter aircraft, warships, artillery and armoured vehicles, as well as funding for indigenous programmes, including the development of an aero engine in India. It accounts for about 28% of the total defence allocation.
Spending on defence research and development (R&D) and the creation of infrastructure assets is also embedded within 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 the naval fleet.
Other spends
The total defence outlay of Rs 7.85 lakh crore also includes Rs 3.65 lakh crore for Defence Services (Revenue) covering pay, allowances and operational expenditure, 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 continue to account for a substantial share of the budget at Rs 1.71 lakh crore, constituting about 22% of the total defence allocation.
Revenue expenditure for the armed forces has been provided at Rs 3.65 lakh crore, accounting for nearly 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 Rs 9,662.5 crore for the Indian Navy.
Defence Budget 2026-27 (Break-up)
Total outlay - Rs. 7.85 lakh crore (15% increase over FY 26 BE)
Defence Services (Revenue) - Rs 3.65 lakh crore ( pay, allowances and operational expenditure)
Capital Outlay - Rs. 2.19 lakh crore (modernisation, acquisitions, R&D and infrastructure)
Defence Pensions - Rs. 1.71 lakh crore
Defence (Civil) - Rs. 28,555 crore (ICG, defence accounts, research and administration)