India increased the allocation for the defence sector in the Union Budget 2026 after Operation Sindoor. The defence sector was allocated ₹7.85 lakh crore in the budget presented by Union Finance Minister Nirmala Sitharaman on Sunday (February 1).
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.
As per the Defence Ministry, over ₹2.19 lakh crore has been allocated under the capital head to the Defence Forces. Out of this, ₹1.85 lakh crore is earmarked for capital acquisition, which is approximately 24 per cent higher than the capital acquisition budget for FY 2025–26.
Rs 63,733 crore has reportedly been set aside for aircraft and aero engines as part of capex allocations. The budgetary allocation for defence services (revenue) was also hiked by 17.24 per cent. This allocation is meant for day-to-day operations, including maintenance, salaries, and recurring expenses.
The amount for pensions was also increased by 6.53 per cent to ₹1.71 lakh crore. Total defence spending has been increased to 11 per cent of GDP in the financial year 2026, compared to eight per cent in 2025.
This is expected to provide a major impetus to India’s defence capabilities.
Meanwhile, ₹12,100 crore has been allocated to the Ex-Servicemen Contributory Health Scheme (ECHS), which is 45.49 per cent higher than the budgetary estimates for FY 2025–26.
The budgetary allocation to the Defence Research and Development Organisation (DRDO) has been increased to ₹29,100.25 crore in FY 2026–27 from ₹26,816.82 crore in FY 2025–26. Out of this allocation, a major share of ₹17,250.25 crore is for capital expenditure.
Major Thrust on Border Area Development
The government has reiterated its commitment to providing better infrastructure in border areas through higher allocation to the Border Roads Organisation (BRO). Accordingly, the budgetary allocation to BRO under capital expenditure for BE 2026–27 has been enhanced to ₹7,394 crore from ₹7,146.50 crore in FY 2025–26. This allocation will cater to many strategically significant projects such as tunnels, bridges, and airfields, and will promote regional development and tourism while providing last-mile connectivity in border areas.
Healthcare for Veterans
The government is committed to providing the best healthcare facilities to veterans and their dependents through enhanced allocation to the Ex-Servicemen Contributory Health Scheme (ECHS). In the annual budget for FY 2026–27, an amount of ₹12,100 crore has been allotted to ECHS, which is 45.49 per cent higher than the current year’s allocation at the BE stage. This allocation will fund the medical treatment-related expenditure (MTRE) of veterans. The allocation to ECHS has increased by more than 300 per cent over the last five years compared to the allocation made at the BE stage for FY 2021–22.
The government also exempted certain raw materials used in the production of defence equipment. “It is proposed to exempt basic customs duty on raw materials imported for the manufacture of parts of aircraft to be used in maintenance, repair, or overhaul requirements by units in the defence sector,” Sitharaman said during her budget speech.
Defence Minister Rajnath Singh hailed the Union Budget as a “Yuva Shakti–driven Budget.”
“Under the visionary leadership of PM Shri @narendramodi, India’s journey towards a Viksit Bharat continues to gather momentum. In this spirit, I congratulate Finance Minister Smt. @nsitharaman for presenting a budget that seeks to ‘transform aspiration into achievement’ and ‘potential into performance’. This ‘Yuva Shakti–driven Budget’ will further strengthen PM Modi’s vision of an Aatmanirbhar and Viksit Bharat,” Singh said in an X post.
“Inspired by the three ‘Kartavyas’, this budget aims to accelerate and sustain economic growth, fulfil the aspirations of our people, and ensure meaningful participation for all. Together, these priorities will drive inclusive development, promote the manufacturing sector, and create sustainable infrastructure,” he added.
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