The Union Budget 2026 allocates ₹7.85 lakh crore to defence, a sharp 15 per cent increase from last year's ₹6.81 lakh crore. This hike reflects heightened focus on military modernisation following Operation Sindoor.

Official figures show the 2026–27 outlay at ₹7,84,678 crore, up from ₹6,81,210 crore. Capital expenditure stands at ₹2,19,306 crore, while revenue spending reaches ₹5,53,668 crore, including ₹1,71,338 crore for pensions.

This marks the first budget since Operation Sindoor, with Finance Minister Nirmala Sitharaman signalling strong security priorities. Capital outlay jumps 21.84 per cent to ₹2.19 lakh crore, aiding key acquisitions.

Aircraft and aero engines receive ₹63,733 crore, and the naval fleet gets ₹25,023 crore. Major projects include fighter jets, submarines, unmanned systems, and helicopters.

Sitharaman proposed exempting basic customs duty on components for civilian, training, and other aircraft manufacturing. She also waived duties on raw materials for defence sector maintenance, repair, and overhaul, boosting the aerospace industry.

Defence services' revenue and capital allocations rise 17.24 per cent and 21.84 per cent respectively. These measures support indigenisation and cost reduction.

India's fighter fleet evolves along two tracks: expanding Rafale production domestically and restarting talks on Russia's Su-57. The Rafale proposal, worth ₹3.25 lakh crore for 114 jets, eyes government-to-government approval.

Most Rafales would be built in India with initial 30 per cent indigenous content, rising to over 60 per cent. It includes 12–18 fly-away jets for urgent IAF needs, potentially totalling 176 Rafales in service.

Integration of Indian weapons is sought, though source codes stay French. Rafales excelled in Operation Sindoor against Chinese missiles via the Spectra suite. A Hyderabad MRO facility for Rafale M-88 engines involves Indian private firms.

Russia pushes the Su-57E export variant for licensed production at Su-30MKI facilities. Talks emphasise Indian systems and industry involvement. Moscow offers AMCA assistance, bridging to indigenous goals.

India prioritises Rafale short-term, alongside Su-30MKI upgrades, LCA Mk1A, and AMCA post-2035. Offers from the US F-35 persist but take a backseat.

Project 75(I) nears a $8 billion deal with Germany for six AIP submarines, finalisation by March. It surpasses the 2016 Rafale contract as India's largest.

The submarines, based on Type-214, counter ageing fleets amid Chinese and Pakistani expansion. Built at Mazagon Dock with TKMS, they feature advanced AIP for extended submersion.

Indigenous content starts at 45 per cent, reaching 60 per cent. The deal includes technology transfer, fostering a submarine ecosystem and MSME benefits.

India operates ageing Russian and Scorpène submarines. These new boats enhance denial, surveillance, and deterrence in the Indian Ocean.

This aligns with naval indigenisation, with 51 vessels under construction worth ₹90,000 crore and over 40 delivered since 2014.

The Navy inducts India's first weaponised unmanned fast interceptor crafts (FICs) from Sagar Defence Engineering. Two debut on the western coast, part of a 12-unit iDEX order.

These crafts join elite unmanned swarm capabilities, expanding beyond Israeli mine countermeasures. Armed with 12.7 mm guns, missiles, and loitering munitions, they target asymmetric threats.

Swarm control from one station multiplies force without risking crews. GPS-denied navigation ensures resilience in EW environments, with 48-hour endurance. Flexible for 14 personnel in special ops, they offer 400+ nautical mile range for patrols and defence.

This shifts naval doctrine to autonomous warfare, securing coasts and assets.

Budget capital fuels missiles, UAVs, drones, radars, air defence, and networks. Duty exemptions cut costs and draw investment.

Since January 2025, DAC approved ₹3.84 lakh crore in acquisitions across services.

DAC cleared ₹79,000 crore for naval warships, docks, guns, missiles, vehicles, and drones. Army and IAF get 156 LCH Prachand helicopters with 65 per cent indigenous content.

Smaller deals cover 4.25 lakh carbines and 48 Black Shark torpedoes.

TEJAS MK-1A contracts for 97 jets (64 per cent indigenous) start 2027–28 deliveries. AMCA opens to private firms. HAL boosts to 24 Tejas yearly.

Ammunition self-reliance advances with ₹15,899 crore for 32 variants by 2027–28. BrahMos facility in Lucknow dispatches missiles.

In 2024–25, 193 contracts worth ₹2.09 lakh crore went 92 per cent to domestic firms, building a public-private ecosystem.

Agencies