New Delhi, Feb 1 (LatestNewsX) The 15 per cent hike in defence sector allocation in Budget 2026-27 will not only help modernise the armed forces and finance their regular requirement but also cater for the financial requirements that have arisen due to the emergency procurement of arms and ammunition made subsequent to Operation Sindoor under both the categories — Capital and Revenue, the government said on Sunday.
In the Union Budget, defence services have received an unprecedented allocation amounting to Rs 7.85 lakh crore for the Financial Year (FY) 2026-27.
This allocation stands at 2 per cent of the estimated GDP for the next Financial Year and shows a significant increase of 15.19 per cent over the Budgetary Estimates (BE) of FY 2025-26.
The total defence budget is 14.67 per cent of the Central government expenditure and is the highest among the ministries.
A large share of the defence budget to the tune of Rs 2.19 lakh crore has been allotted for capital expenditure, vis-a-vis Rs 1.80 lakh crore, which was allotted as BE (budget estimate) of FY 2025-26.
Through this enhanced provision, the government has reaffirmed its resolve to transform the armed forces and their capabilities to the world’s highest standards with a strategic shift towards the goal of Aatmanirbhar Bharat.
“Out of the total allocation made to the Ministry of Defence (MoD), a share of 27.95 per cent is for capital expenditure, 20.17 per cent for revenue expenditure on sustenance and operational preparedness, 26.40 per cent for revenue expenditure on pay and allowances, 21.84 per cent for defence pensions, and 3.64 per cent for civil organisations,” the Defence Ministry said.
In the current geopolitical scenario, a quantum jump in the modernisation budget is a strategic imperative. The upcoming projects under capital acquisition will equip the armed forces with next-generation fighter aircraft, smart and lethal weapons, ships/submarines, unmanned aerial vehicles, drones, specialist vehicles, etc.
The ministry’s policy to earmark funds to boost domestic industries through budgetary policies has been further strengthened by earmarking Rs 1.39 lakh crore – 75 per cent of the Capital Acquisition budget for procurement through domestic industries during the FY 2026-27.
Through such earmarking of funds, domestic players have been reassured about their investment and their increasingly greater role in the capability development of the armed forces.
Enhanced allocation for capital acquisition, especially for domestic industries, will have long term positive impact on the national economy and will lead to the development of many ancillary industries, creating job opportunities in the country, the ministry said.
The budgetary allocation to the Defence Research and Development Organisation (DRDO) has been increased to Rs 29,100.25 crore in FY 2026-27 from Rs 26,816.82 crore in FY 2025-26. Out of this allocation, a major share of Rs 17,250.25 crore is allocated for capital expenditure.
The total budgetary allocation on account of defence pensions stands at Rs 1,71,338.22 crore, which is 6.56 per cent higher than the allocation made during 2025-26 at the BE stage. It will be spent on the disbursement of monthly pension to more than 34 lakh pensioners through SPARSH and other pension disbursing authorities, said the ministry.
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