Defence Budget for FY27 up 15% at ₹7.84 lakh crore, capital outlay pegged at ₹2.19 lakh crore

The government has allocated around ₹7.84 lakh crore as defence outlay for the fiscal year 2026-27 as against last year's allocation of over ₹6.81 crore.

The defence budget for the FY 2026-27 marks more than 15% rise from last year.

The total capital outlay, to be used for asset creation and long-term investments, has been pegged at ₹2,19,306 crore. Around ₹1.80 lakh crore was allocated as budgetary estimates for FY 2025-26.

The revenue expenditure has been put at ₹5,53,668 crore that included ₹1,71,338 crore for pensions.

Under capital expenditure, ₹63,733 crore has been set aside for aircraft and aero engines while ₹25,023 crore is allocated for the naval fleet.

"Defence leads with the highest allocation at Rs 7.85 lakh crore, accounting for 14.68% of the Union Budget-strengthening preparedness, driving innovation, and reinforcing India’s national security," defence ministry said in a post on X.

Of the total allocation, 27.95% is for capital expenditure, 20.17% for revenue expenditure on sustenance and operational preparedness, 26.40% for revenue expenditure on pay and allowances, 21.84% for Defence Pensions and 3.64% for civil organisations, according to ministry of defence.

Defence spending has been a priority area of the Prime Minister Narendra Modi-led government, with special focus on domestic manufacturing.

India’s defence expenditure has seen a steady rise over the last five years, increasing from ₹4.85 lakh crore in FY21 to ₹6.81 lakh crore in FY26. This is an addition of nearly ₹2 lakh crore.

In the Union Budget 2025, Nirmala Sitharaman allocated ₹6.81 lakh crore for the Ministry of Defence. It was a 9.53% increase over the Budget Estimates of FY 2024-25.

The allocation accounted for 13.45% of the total Budget outlay, the highest among all ministries. Of the total allocation for the Defence Ministry, ₹1.8 lakh crore was earmarked for capital expenditure for the armed forces.

The government allocated ₹3.11 lakh crore for revenue expenditure, covering pay, allowances, operational costs and maintenance. Within this, ₹1.14 lakh crore was set aside for non-salary expenses such as fuel, rations, spares and equipment maintenance.

The allocation for defence research and development rose to ₹26,817 crore. Funding for innovation was also increased, with ₹449.62 crore provided for the iDEX scheme to support start-ups and technology development.

Spending on defence pensions was set at ₹1.61 lakh crore, up nearly 14% from the previous financial year.

The Indian Coast Guard received a total allocation of ₹9,677 crore. The Border Roads Organisation was allocated ₹7,146 crore under the capital head to fund infrastructure projects in border areas.