Budget 2026: Defence gets all-time high of Rs 7.85 lakh crore after 15% jump - where the money goes

Union Budget 2026 | India's defence budget has taken a big jump in the Budget 2026–27. Finance Minister Nirmala Sitharaman, who presented the budget on Sunday, allocated Rs 7.85 lakh crore for the Financial Year (FY) 2026-27. The Ministry of Defence (MoD) described it as an "unprecedented allocation" in the post-Operation Sindoor period.

"In the Union Budget post Operation Sindoor, Defence Services have received an unprecedented allocation amounting to Rs 7.85 lakh crore for the Financial Year (FY) 2026-27," the ministry said. "This allocation stands at 2% of the estimated GDP for the next Financial Year and shows a significant increase of 15.19% over the Budgetary Estimates (BE) of FY 2025-26. Total Defence budget is 14.67% of the Central Government expenditure and is the highest among the Ministries."

Where is the money going?

The MoD said the allocation is meant to support both long-term capability building and immediate needs that emerged after Operation Sindoor. In addition to the modernisation of the armed forces and financing their regular requirement, the enhanced allocation will also cater for the financial requirements that have arisen due to the emergency procurement of arms and ammunition made subsequent to Operation Sindoor, the ministry said.

A large part of the increase, therefore, is linked to: routine operational needs, modernisation spending, and emergency procurement of arms and ammunition.

The MoD provided a category-wise breakup of the total allocation. Out of the total allocation made to the defence ministry, a share of 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.

That means the Rs 7.85 lakh crore envelope is broadly spread across five big heads: Capital expenditure (27.95%), Revenue expenditure for operational preparedness (20.17%), Pay and allowances (26.40%), Defence pensions (21.84%), and Civil organisations (3.64%).

Capital expenditure: The modernisation engine

One of the most closely watched parts of the defence budget is the capital head - because this is where big-ticket purchases and modernisation spending typically show up. The MoD said that a large share of the defence budget to the tune of Rs 2.19 lakh crores has been allotted for capital expenditure, higher than Rs 1.80 lakh crore in FY 2025-26. "Through this enhanced provision, the Government has reaffirmed its resolve to transform the Armed Forces and their capabilities to the world’s highest standards with a strategic shift towards the goal of Aatmanirbhar Bharat."

Rs 1.85 lakh crore for acquisitions

The ministry said modernisation remains a strategic objective. For FY 2026-27, budgetary allocation under the capital head to the Defence Forces stands at Rs 2,19,306.47 lakh crore, which is 21.84% more than the Budget Estimates of FY 2025-26.

Within this, acquisitions take up a major share. "Out of this, Rs 1.85 lakh crore is earmarked for Capital Acquisition, which is approximately 24% higher than the Capital Acquisition budget for FY 2025-26," the MoD said. "In the current geo-political scenario, quantum jump in the modernisation budget is a strategic imperative."

What the MoD plans to fund

The MoD said that the upcoming projects under capital acquisition will equip the armed forces with the next-generation fighter Aircraft, smart and lethal weapons, ships/submarines, unmanned aerial vehicles, drones, and specialist vehicles.

The ministry also flagged the pace of contracting and approvals already underway. Till December 2025, the MoD said it had concluded contracts worth Rs 2.10 lakh crore "and has, so far, given Acceptance of Necessity approval for more than Rs 3.50 lakh crore."

Higher outlay for defence R&D

Another key pocket of spending is defence research and development. "The budgetary allocation to Defence Research and Development Organisation (DRDO) has been increased to Rs 29,100.25 crore in FY 2026-27 from Rs 26,816.82 crore in FY 2025-26," the statement said. "Out of this allocation, a major share of Rs. 17,250.25 crore is allocated for capital expenditure."

Defence pensions: RS 1.71 lakh crore and 34 lakh pensioners

Pensions continue to be a major component of defence spending. "Total Budgetary allocation on account of Defence pensions stands at Rs 1,71,338.22 crore, which is 6.56% higher than the allocation made during 2025-26 at BE stage," the MoD said. "It will be spent on the disbursement of monthly pension to more than 34 lakh pensioners through SPARSH and other pension disbursing authorities."