At ₹7.85 lakh crore, the defence outlay for the Financial Year 2026-27 (FY ’27) ticks most of the right boxes. The year-on-year hike of 15.2% in the Budget Estimates (BE) is significantly more encouraging than last year’s increase of 9.5%. Its share of 1.99% in the estimated gross domestic product, and 14.67% in the total central government expenditure of FY’27, are among the highest in recent years. As always, it remains the highest outlay for any ministry.
As the primary beneficiaries of the defence budget, the armed forces have the largest share of the pie. Of the total capital outlay of ₹2.19 lakh crore, they receive ₹1.86 lakh crore for ‘modernisation’, which is a trope for acquisition of major equipment, platforms, and weapon systems, and another ₹12,990 crore for acquisition of land and construction works.
With a 25% hike, the outlay for modernisation is arguably the high point of the budget. This is welcome news for the Indian industry, as 75% of the procurement budget is earmarked for domestic sources. Within this segment, allocations for aircraft and aero-engines, heavy and medium vehicles, and other equipment have risen by 25–31%.