Capital Expenditure Layout Breakdown (FY 2026–27)
Total Capital Expenditure (Modernisation & Assets)
- ₹2,19,306 crore
- ~22% increase from ₹1.80 lakh crore in FY 2025–26
Note: Figures are drawn from Budget documents. These are major capital categories, not service-wise totals. Service-specific allocations are often aggregated under these heads.
Major Capital Allocation Heads
1. Aircraft and Aero Engines
(Primarily Air Force modernisation)
- ₹63,733 crore
- Focus on fighter aircraft, aero engines, and related aviation platforms.
2. Naval Fleet
(Navy shipbuilding and acquisitions)
- ₹25,023 crore
- Supports surface combatants, submarines, and overall fleet expansion.
3. Other Equipment
(Broad category, largely Army-centric)
- ₹82,217 crore
- Covers weapons, platforms, systems, and equipment; shows a significant increase over the previous year.
4. Heavy and Medium Vehicles
(Army logistics and mobility)
- ₹4,580 crore
- For transport, logistics, and mobility enhancement.
5. Joint Staff / Special Projects / Others
- Joint Staff: ₹3,138 crore
- Special Projects: ₹1,989 crore
- Smaller but targeted allocations for joint and classified initiatives.
R&D and Technology Development
Defence R&D (DRDO and related projects)
- ~₹17,250 crore (Capital)
- Up from approximately ₹15,000 crore in the previous year.
Prototype Development (“Make” Procedure)
- Army projects: ~₹89 crore
- Air Force projects: ~₹1,618 crore
In the Union Budget 2026-27 presented on February 1, 2026, the Ministry of Defence received a record allocation of ₹7.85 lakh crore, marking a nearly 15.3% hike from the previous year. This significant increase follows Operation Sindoor, the precision strikes against terror camps in 2025, and emphasizes military readiness, modernization, and self-reliance.
Financial Outlay Breakdown
- Total Defence Budget: Raised to ₹7,84,678 crore (approx. ₹7.85 lakh cr), accounting for roughly 11% of India’s GDP.
- Modernisation (Capital Outlay): Pegged at ₹2.19 lakh crore, a 21.8% increase over FY26 to fund advanced weapon systems and technology.
- Operational Expenses (Revenue): Allocated ₹5.54 lakh crore, which covers day-to-day operations, maintenance, salaries, and ₹1.71 lakh crore specifically for defence pensions.
Key Modernisation & Procurement Projects
The budget prioritizes high-end military hardware and domestic production:
- Air Power: ₹63,733 crore is designated for aircraft and aero engines, including contracts for Rafale fighter jets and unmanned aerial vehicles (UAVs).
- Naval Strength: ₹25,023 crore is allocated for the naval fleet, including advanced submarines and carrier-based Rafale-M fighters.
- Indigenisation (Aatmanirbhar Bharat): 97% of the ₹80,000 crore procurement cleared by the Defence Acquisition Council is focused on “Make in India” systems, such as Pinaka rockets (120km range) and Astra Mk-II missiles (200km range).
Strategic & Policy Initiatives
- Customs Duty Waivers: Basic customs duty is waived on raw materials and components imported for the manufacture of aircraft parts and for Maintenance, Repair, and Overhaul (MRO) units in the defence sector.
- Border Infrastructure: Continued high momentum for road and tunnel construction in border areas, including northern fortification.
- Technology Push: Targeted funding for AI systems, drone swarms, cyber warfare, and space-based enablers to address asymmetric threats.
- FDI Reforms: The government plans to raise the FDI limit to 74% under the automatic route for domestic defence firms to attract global partners from the US, France, and Israel.
- Export Target: The budget aligns with a goal to reach ₹50,000 crore in defence exports by 2029.
The Union Budget 2026-27 allocates a record ₹7.85 lakh crore to the Ministry of Defence. The graph below visualizes the budget breakdown, highlighting the significant push for Modernisation (Capital Expenditure) and the distribution of operational costs.
Graph Insights & Trends
- Modernisation Surge: The ₹2.19 lakh crore Capital Outlay represents a 21.8% increase over the previous year, directly funding new acquisitions like Rafale jets, submarines, and drones.
- Operational Readiness: The largest portion (₹3.82 lakh crore) is dedicated to Revenue Expenditure (excluding pensions), ensuring combat readiness, stockpile maintenance, and salaries for active troops.
- Pension Obligations: ₹1.71 lakh crore is set aside for defence pensions, ensuring the welfare of veterans and their families.
- Total Growth: The overall defence budget rose by 15.3% from ₹6.81 lakh crore in FY26 to ₹7.85 lakh crore in FY27, reflecting heightened security priorities post-Operation Sindoor.
