Union Budget
Post-Operation Sindoor budget supercharges India’s military modernisation
In the first Union Budget presented months after India conducted Operation Sindoor, the Defence Services have been allocated a record ₹7.85 lakh crore for the Financial Year (FY) 2026–27.
The allocation amounts to 2% of the estimated GDP for the upcoming financial year and marks a 15.19% increase over the Budget Estimates (BE) for FY 2025–26. The defence outlay accounts for 14.67% of total Central Government expenditure — the highest among all ministries.
In addition to funding modernisation and routine operational requirements of the Armed Forces, the enhanced allocation will also meet financial needs arising from emergency procurement of arms and ammunition undertaken after Operation Sindoor under both capital and revenue heads.
Capital expenditure and modernisation push
A substantial ₹2.19 lakh crore has been earmarked for capital expenditure, compared with ₹1.80 lakh crore in BE 2025–26. This enhanced provision underscores the government’s resolve to transform the Armed Forces to the highest global standards, with a strategic emphasis on Aatmanirbhar Bharat.
Of the total allocation to the Ministry of Defence (MoD), 27.95% is for capital expenditure, 20.17% for revenue expenditure on operational sustenance and preparedness, 26.40% for pay and allowances, 21.84% for defence pensions, and 3.64% for civil organisations.
Under the capital head, ₹2,19,306.47 crore has been allocated to the Defence Forces — 21.84% higher than BE 2025–26. Of this, ₹1.85 lakh crore is earmarked specifically for Capital Acquisition, reflecting an increase of approximately 24% over the previous year’s allocation.
In the prevailing geopolitical environment, the government described the significant jump in the modernisation budget as a strategic imperative. During FY 2025–26 (up to December 2025), the MoD concluded contracts worth ₹2.10 lakh crore and accorded Acceptance of Necessity approvals exceeding ₹3.50 lakh crore.
Upcoming capital acquisition projects include next-generation fighter aircraft, advanced weapon systems, ships and submarines, unmanned aerial vehicles (UAVs), drones, specialist vehicles and other high-end platforms.
Thrust on Aatmanirbharta
Amid global supply chain disruptions and prioritisation of domestic requirements by exporting nations, the government has renewed focus on indigenisation and import substitution.
In line with this objective, ₹1.39 lakh crore — 75% of the Capital Acquisition budget — has been earmarked for procurement from domestic industries in FY 2026–27. The move aims to strengthen indigenous defence manufacturing, provide assurance to domestic industry players and encourage long-term investment in capability development.
Officials said the enhanced capital allocation, particularly for domestic procurement, is expected to generate positive spillover effects across the economy, promote ancillary industries and create employment opportunities.
Revenue expenditure and operational readiness
The defence budget has allocated ₹3,65,478.98 crore under revenue heads — 17.24% higher than BE 2025–26. Of this, ₹1,58,296.98 crore has been set aside for operational and sustenance-related expenditure, with the remainder allocated for salaries and allowances.
The provision will facilitate procurement of operationally critical stores, spare parts and maintenance of vital platforms, while meeting day-to-day requirements of the Armed Forces.
Border infrastructure boost
The government has also reiterated its commitment to strengthening infrastructure in border areas. Allocation to the Border Roads Organisation (BRO) under the capital head has been increased to ₹7,394 crore for BE 2026–27, up from ₹7,146.50 crore in FY 2025–26.
The enhanced funding will support strategically significant projects including tunnels, bridges and airfields, while promoting regional development, tourism and last-mile connectivity in border regions.
India-Pakistan Conflict
India and Pakistan agreed to a ceasefire after days of launching Operation Sindoor last year in May to target Pakistan's terror camps and hubs of terrorist training.
Idnia launched the attack after terrorists killed tourists, mostly Hindus, on April 22 in Jammu and Kashmir's Pahalgam area.
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