India’s Defense Budget Jumps 15 Percent

Why It Matters

The expanded budget accelerates India’s push for self‑reliant defence capabilities and reshapes regional power dynamics, signalling heightened security commitments amid Indo‑Pak tensions.

Key Takeaways

• Defense budget rises to ₹7.85 trillion, 15% increase
• India becomes fourth‑largest global military spender
• Capital outlay jumps to ₹2.31 trillion for modernization
• Rafale procurement proposal totals ₹3.25 trillion for 114 jets
• Customs duty waived on aircraft parts to boost aerospace

Pulse Analysis

India’s unprecedented defence allocation reflects a strategic pivot after Operation Sindoor, where air strikes against Pakistani targets underscored vulnerabilities in existing capabilities. By boosting the defence share of central government expenditure to nearly 14 percent, New Delhi signals a willingness to fund high‑end platforms—fighter jets, submarines, and unmanned surface vessels—while keeping overall defence spending at roughly 2 percent of GDP. This fiscal stance not only addresses immediate security concerns but also aligns with broader ambitions to cement a credible deterrent posture in the Indo‑Pacific.

The budget earmarks ₹2.31 trillion for capital projects, with ₹637 billion dedicated to aircraft and aero‑engines and ₹250 billion for naval assets. A landmark ₹3.25 trillion proposal to acquire 114 Rafale jets, largely assembled domestically, exemplifies the Atmanirbharta drive toward indigenous production. Complementary measures, such as waiving customs duties on raw materials for aircraft parts, aim to catalyse the defence aerospace ecosystem, lowering costs and encouraging private‑sector participation. These steps are expected to generate skilled jobs and reduce reliance on foreign suppliers.

Beyond procurement, the budget’s emphasis on modernisation reshapes India’s geopolitical standing. As the fourth‑largest spender, India joins a select group of middle powers—Germany, the United Kingdom, Saudi Arabia—capable of projecting power beyond its borders. Enhanced naval capabilities, including Project 75‑I submarines and amphibious warships, bolster maritime security in the contested Indian Ocean. Collectively, these investments position India to influence regional security architectures, attract foreign defence partnerships, and sustain long‑term economic growth through a vibrant defence industrial base.

India’s Defense Budget Jumps 15 Percent

By Ajai Shukla · February 06, 2026

Defense officials say that the inflated spending reflects a new focus on military modernization triggered by Operation Sindoor.

![Ajai Shukla]

The government of India has signaled its resolve to be militarily prepared to retaliate against terrorist strikes launched from Pakistani‑controlled territory at Indian targets. Presenting the Union Budget for the financial year 2026‑27, India’s Finance Minister Nirmala Sitharaman allocated an all‑time high of 7.85 trillion rupees (≈ $87 billion) to defence.

The defence outlay for 2026‑27 is Rs 7.85 trillion compared with Rs 6.36 trillion in the previous financial year – a 15 percent increase over last year’s allocation.

With this, India will become, according to the London‑based International Institute for Strategic Studies (IISS), the world’s fourth‑largest military spender, behind only the United States, China, and Russia. Just behind the top three spenders, India will join a trio of middle powers that include Germany, the United Kingdom, and Saudi Arabia.

Over the past decade, New Delhi’s broad pattern of defence spending has not significantly varied. As a share of Gross Domestic Product (GDP), the amount the government has allocated for defence has remained in the region of 2 to 2.5 percent. In the coming year, defence spending will be almost 2 percent. As a percentage of Central Government Expenditure (CGE), the amount allocated to defence has hovered consistently in the region of 13 to 14 percent.

![Defense allocation of the government shown in a table]

According to India’s Ministry of Defence (MoD) officials in New Delhi, the inflated spending reflects a new focus on military modernisation triggered by Operation Sindoor, a series of retaliatory air strikes in May 2025 by the Indian Air Force (IAF) on Pakistani ground targets, in response to a terrorist attack at Pahalgam in Jammu and Kashmir on April 22 that resulted in the death of 26 unarmed civilians.

With the need for equipment modernisation a high priority for India’s military, the coming year’s capital outlay has been raised to Rs 2 310.1 billion. Meanwhile, revenue expenditure stands at Rs 5 536.68 billion, including Rs 1 713.38 billion for military pensions.

The capital outlay in 2025‑26 was initially put at the budget stage at Rs 1 800 billion. Later, at the revised estimates stage in December, this was raised to Rs 1 864.84 billion.

The armed forces will also receive allocations for modernisation, including Rs 637.33 billion for aircraft and aero‑engines, and Rs 250.23 billion for the naval fleet.

India’s MoD has several major projects in the procurement pipeline, including fighter jets, submarines, unmanned systems, and helicopters. Indian weapons systems slated for 2026‑27 include the Rafale and the Sukhoi‑57. India’s supply of fighters will follow three parallel tracks:

1. A large‑scale expansion of the Rafale fleet through indigenous manufacturing.

2. Renewed technical talks with Russia on the fifth‑generation Sukhoi‑57.

3. Continued focus on domestic programmes.

The Defence Ministry is preparing to take up a Rs 3.25 trillion proposal to acquire 114 Rafale fighter jets from France. If realised, this would be India’s largest‑ever defence procurement cleared under the proposal. Most of the Rafale aircraft would be manufactured in India under a government‑to‑government deal, with around 30 percent indigenous content; officials are wary of a commitment that could rise to over 60 percent during production.

Finance Minister Sitharaman also announced the waiver of basic customs duty on raw materials imported for the manufacture of aircraft parts used for maintenance, repair, or overhaul by defence‑sector units. This move is expected to boost the defence aerospace industry.

For the navy of the future, the MoD is considering the acquisition of a fleet of weaponised, unmanned surface vessels. Under Project 75‑I, the Navy seeks to acquire six submarines fitted with air‑independent propulsion, costing Rs 700‑720 billion, to be built at Mazagon Dock Limited in partnership with Germany’s Thyssenkrupp Marine Systems (TKMS).

Additionally, large landing‑platform docks (LPDs) with amphibious capability will be required for expeditionary operations across the Indo‑Pacific littoral. The Defence Acquisition Council (DAC) cleared the U.S. offer of large amphibious warships designed for island‑based DAC and Humanitarian Assistance and Disaster Relief (HADR) missions. India is also readying the induction of the Light Combat Helicopter (LCH) for high‑altitude air‑force missions.

The small‑arms programme is evaluating indigenous carbines and assault rifles, with a preference for domestic manufacturers. High‑mobility platforms, protected vehicles, and troop carriers are also being considered, though there remains resistance within the military, with domestic industry emphasizing the importance of Atmanirbharta (self‑reliance) for long‑term economic resilience. This budget provides a clear thrust in that direction.

Another encouraging proposal is to scale up manufacturing across seven strategic and frontier sectors—including bio‑pharma, critical minerals, electronics, and capital goods—to strengthen India’s research and design capability, reduce import dependence, and create large‑scale employment opportunities for the youth.