The Union Budget 2025-26 is poised to play a pivotal role in bolstering national security through substantial investments in defence, particularly for the Indian Army. Given the global security quagmire, it is indispensable that the capital expenditure be increased to focus on modernizing the Army with advanced weaponry, 5th generation aircrafts, night-fighting capabilities, advanced air defence missile systems, etc.
Recognizing the significance of disruptive technologies, the budget has long been expected to allocate greater funds to private enterprises focused on AI, cybersecurity and automative innovations. Additionally, human resource initiatives including improved health cover and career transition plans for personnel, as well as benefit enhancements for Agniveers were expected to form a crucial part of the defence budget. Amidst all this, the budget aims to balance immediate security needs with long-term self-reliance and innovation in the Indian defence ecosystem.
Finance Minister Sitharaman allocated ₹ 6,81,210.27 crore to the Ministry of Defence (MoD), which amounts to 13.45 per cent of the budget and 1.9 per cent of the GDP. This is a marginal increase from the ₹ 6.21 lakh crore allocated in the previous financial year. The defence sector received the largest allocation, with a significant portion amounting to ₹ 180,000 crore, being dedicated to Capital Outlay on Defence Services. This is an uptick of 4.6 per cent from the previous year. Here, the main allocations include ₹ 48,614 crore for aircraft and aero engines, and ₹ 24,390 crore for the naval fleet.
It is important to note here that only 27.66 per cent of the budget went to capital expenditure, leaving the major chunk for personnel wages and pensions. Although capital expenditure was raised to 75 per cent of the procurement budget for indigenously produced equipment, the need to increase R&D investment with the help of the private sector remains.
The government has shown commitment to improving border infrastructure and has increased the Border Roads Organisation’s (BRO) allocation to ₹ 7,146 crore for FY 2025-26. This aims to promote strategic infrastructure development amidst border skirmishes and complete critical infrastructure in the region as the neighbourhood witnesses evolving security dynamics.
The Budget has also allocated ₹ 26,816.82 crore to the Defence Research and Development Organisation (DRDO). Moreover, the seven public enterprises, corporatised from Defence Ordnance Factories have been provided ₹ 1,494 crore. Additionally, the capital budget for the Indian Coast Guard witnessed a significant increase of 43 per cent.
With the 2024-2025 Economic Survey and the Union Budget 2025-26, the government has re-asserted its focus on ‘Make in India’ and ‘Atmanirbharta’. This is also illustrated by the ₹ 449.62 crore that the budget sets aside for iDEX (Innovations for Defence Excellence) schemes. This year, the Economic Survey highlighted that India’s Global Capability Centres (GCCs) are fundamentally altering the technology landscape as leading organisations are centralising their tech ecosystems in India. This is particularly evident in the sectors of aerospace, defence, and semiconductors, where companies are advancing their engineering efforts to focus on next-generation platforms, products, and technologies.
Beyond the new announcements, work remains. As economies across the world witnessed an increase in defence budgets and special fund pools for tech advancements, HAL, the highest performing Indian defence manufacturer stood at rank 43 among the SIPRI top global defence manufacturers of 2023. While increasing capital expenditure is fundamental, it is not enough to aid in defence modernization. India has recently been facing difficulty in spending due to supply chain issues from Russia. Even HAL continues to face delays for already ordered aircrafts. Due to such hurdles in capital budget spending, the MoD has previously returned ₹ 12,500 crore unspent under this head.
Geopolitical security is undergoing a turbulent phase and areas like hypersonic weapons, anti-drone systems and quantum tech are crucial technologies for aiding advancements in security infrastructure. Considering the delicate tectonic plates of global security and the imperative need to bridge capability gaps, most defence analysts have long argued that the Indian defence budget should at least form 2.5 percent of GDP for the coming decade. The Indian Union Budget 2025-2026 underscores the government’s commitment to national security through increased allocations and policy focus. While it attempts to balance self-reliance and fiscal constraints, further modernization and timely implementation will prove to be critical. The challenges notwithstanding, there is a serious effort and intent on the part of the government to boost defence capability-building. A collaborative effort amongst all stakeholders to put India on the path of building a modern military for ensuring robust national security is the need of the hour. For without robust hard power, it will be extremely difficult for India to navigate through the complex and conflict-ridden geopolitical environment. A well-executed defence strategy will not only bolster India’s security but also propel its defence industry into a global hub for innovation and manufacturing exports.
