A total of ₹1,92,387 crore has been allocated for capital expenditure which largely includes purchasing new weapons, aircraft, warships and other military hardware

The Indian government has allocated ₹6.81 lakh crore for defence in the 2025-26 Union Budget, marking a 9.5% increase from the previous year's ₹6.21 lakh crore. This allocation underscores India’s focus on modernizing its armed forces and bolstering national security amid geopolitical tensions.

The Indian government has allocated a record ₹6.81 lakh crore to the defence sector in the Union Budget 2025-26, marking an increase of 9.53% from the previous year's allocation of ₹6.21 lakh crore. Finance Minister Nirmala Sitharaman announced this significant budget during her presentation in the Lok Sabha, emphasizing the government's commitment to enhancing India's military capabilities and security infrastructure. This allocation represents approximately 1.91% of India's estimated Gross Domestic Product (GDP) and constitutes about 13.45% of the total Union Budget, underscoring the priority given to defence among various sectors.

The budget includes a substantial capital outlay of ₹1.80 lakh crore, aimed at modernizing the armed forces through the acquisition of new weapons, aircraft, and warships. Additionally, ₹1.12 lakh crore is earmarked for indigenous procurement, reinforcing the government's push for self-reliance in defence manufacturing under initiatives like Atmanirbhar Bharat. The budget also allocates funds for various other critical areas, such as a 14% increase for defence pensions and a 12% rise in funding for Defence Research and Development.

Notably, the allocation for the Indian Coast Guard has seen a remarkable 43% increase, reflecting a focus on enhancing coastal security capabilities. The budget also supports infrastructure development through an allocation of ₹7,146 crore to the Border Roads Organisation, which is vital for strengthening India's border infrastructure.

Allocation Breakdown 

Capital expenditure: ₹1.8 lakh crore for modernisation, including: 

  ₹48,614 crore for aircraft and aero engines
  ₹24,390 crore for naval fleet upgrades
  ₹63,099 crore for other equipment

Revenue Expenditure: ₹4.88 lakh crore, covering:

  Personnel salaries: ₹1.97 lakh crore
  Pensions: ₹1.6 lakh crore (14% increase year-on-year)

Indigenous Procurement: 75% of capital outlay (₹1.12 lakh crore) reserved for domestic defence purchases. 

Defence R&D: ₹26,817 crore allocated to DRDO, a 12.4% hike

Strategic Priorities 

1. Modernisation And Self-Reliance 

Focus on Make in India with record indigenous defence production (₹1.26 lakh crore in 2024)
Targets to triple defence production to ₹3 lakh crore and boost exports to ₹50,000 crore by FY29
New projects include the TATA Aircraft Complex and light tank 'Zorawar' induction

2. Border Infrastructure And Security 

₹6,500 crore allocated for border roads and infrastructure
Funds for extended deployments along disputed borders with China

3. Welfare Enhancements

Defence pensions increased by 13.8% to support retired personnel
₹8,317 crore allocated for the Ex-Servicemen Contributory Health Scheme (ECHS)

Challenges And Criticisms

Capital expenditure share: Only 27.66% of the defence budget allocated for modernization, with the rest tied to salaries and pensions

Underutilised funds: Armed forces returned ₹13,000 crore from last year’s capital budget
GDP allocation: Defence spending remains at 1.9% of GDP, below the 3% target advocated by experts

This budget reflects India’s balancing act between addressing immediate security needs and long-term goals of self-reliance, while grappling with fiscal constraints and operational inefficiencies. This year's defence budget reflects a robust commitment to modernizing India's armed forces and ensuring operational readiness in response to evolving global security challenges.

Agencies