Defence Budget Rises to ₹7.85 Lakh Crore in FY27

The Union Budget 2026–27 has placed defence at the centre of India’s strategic priorities, with Finance Minister Nirmala Sitharaman announcing a sharply higher allocation of ₹7.85 lakh crore. The enhanced outlay reflects the government’s emphasis on military preparedness, modernisation, and indigenisation amid a challenging regional security environment.

Scale of the Defence Outlay

The defence allocation for FY27 stands at ₹7,84,678 crore, compared with ₹6,81,210 crore in the previous financial year, marking a rise of over 15 per cent. Defence spending now accounts for nearly 14.7 per cent of total central government expenditure and around 2 per cent of the estimated GDP. This makes the Ministry of Defence the single largest recipient of budgetary resources, underlining its priority status.

Modernisation and Capital Spending Push

A key highlight of the Budget is the allocation of ₹2,19,306 crore for capital expenditure, aimed at modernising the armed forces. This is a significant increase over last year and signals faster procurement of platforms, weapons, and technology. Within this, ₹63,733 crore has been earmarked for aircraft and aero engines, while ₹25,023 crore has been allocated for strengthening the naval fleet. Revenue expenditure has been pegged at ₹5,53,668 crore, including ₹1,71,338 crore for defence pensions.

Customs Duty Relief and Industrial Support

To strengthen the domestic defence aerospace ecosystem, the Budget proposes exemptions from basic customs duty on selected aircraft components and parts. Raw materials imported for maintenance, repair and overhaul activities by defence sector units will also get duty relief. These measures are intended to reduce costs, support indigenous manufacturing, and encourage private sector participation.

Important Facts for Exams

• Total defence allocation for FY27: ₹7,84,678 crore, highest among all ministries.
• Capital outlay for defence modernisation set at ₹2,19,306 crore.
• Major heads include aircraft and aero engines (₹63,733 crore) and naval fleet (₹25,023 crore).
• Customs duty exemptions announced for select defence aerospace inputs.

Strategic Rationale Behind Higher Spending

The government has indicated that the higher capital provisioning will help meet requirements arising from recent operational needs and accelerate long-pending acquisitions. At the same time, the focus on duty reliefs and indigenisation aligns defence spending with the broader objective of building a self-reliant defence manufacturing base while maintaining operational readiness.