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Union Budget 2026: This year's Budget marks the first time India has allocated its largest budget for defence funding. The Ministry of Defence has been allocated Rs 7.85 lakh crore, which represents a 15.19 per cent budget increase compared to last year's Budget Estimates. The government states that this significant funding increase will enhance national security while it helps modernise the Armed Forces and develop domestic defence industries, and provide better support to veterans.

The government allocated funds for this project to support Operation Sindoor because it aims to strengthen military readiness and establish self-sufficient defence capabilities for future use.

The defence allocation of Rs 7.85 lakh crore is equal to 2 per cent of the estimated GDP for the coming financial year. It also accounts for 14.67 per cent of total central government spending, the highest among all ministries.

According to the budget details, the defence outlay is divided across several key areas. About 27.95 per cent is for capital expenditure, 20.17 per cent for operational needs, 26.40 per cent for pay and allowances, 21.84 per cent for defence pensions, and 3.64 per cent for civil organisations under the Ministry of Defence.

The government said this balanced structure will help meet both present needs and future goals of the Armed Forces.

A major highlight of the budget is the strong push for capital expenditure. For FY 2026-27, Rs 2.19 lakh crore has been set aside under the capital head, compared to Rs 1.80 lakh crore in FY 2025-26. This is an increase of nearly 22 per cent.

Within this, Rs 1.85 lakh crore is earmarked for Capital Acquisition, which is about 24 per cent higher than last year. This money will be used to buy new fighter aircraft, ships, submarines, drones, unmanned vehicles, weapons, and specialist platforms.

The government said this rise is important in the current global and regional security situation and will help bring the Armed Forces closer to world-class standards.

The budget allocates its main resources for establishing independent defence production capabilities. The Capital Acquisition budget of Rs 1.39 lakh crore allocates 75 per cent of its funds for domestic purchases, which include goods from private companies.

The initiative seeks to decrease import dependency while safeguarding India against worldwide supply chain interruptions. The initiative boosts Indian defence manufacturers' confidence to spend additional resources on research and production activities.

The government expects this policy to create jobs, support small and medium industries, and boost the overall economy over the long term.

The defence budget has allocated Rs 3.65 lakh crore for revenue expenditure, which covers daily operations, maintenance, spare parts, and salaries. This is 17.24 per cent higher than last year’s allocation.

Out of this, Rs 1.58 lakh crore is meant for operational readiness and sustenance. This will help keep equipment running smoothly and ensure that forces remain ready at all times.

There is also a higher focus on border infrastructure. The Border Roads Organisation (BRO) has received Rs 7,394 crore under the capital head, up from Rs 7,146.50 crore last year. This funding will support tunnels, bridges, airfields, and roads in border areas, improving both security and local development.

Veteran welfare has received a strong push. The Ex-Servicemen Contributory Health Scheme (ECHS) has been allotted Rs 12,100 crore, which is 45.49 per cent higher than last year. This money will be used for the medical treatment of ex-servicemen and their families.

Over the last five years, ECHS funding has risen by more than 300 per cent. Defence research has also been strengthened. The allocation for the Defence Research and Development Organisation (DRDO) has increased to Rs 29,100.25 crore, with Rs 17,250.25 crore for capital spending. This will support new technologies and indigenous defence systems.

Defence pensions have gone up as well, with Rs 1.71 lakh crore allocated to support over 34 lakh pensioners.

Reacting to the allocation, Rajnath Singh thanked Narendra Modi for the strong support for the defence sector. He said the budget maintains the right balance between security, development, and self-reliance.

He also praised Nirmala Sitharaman for presenting a budget that turns “aspiration into achievement.” According to him, the enhanced defence allocation after Operation Sindoor shows the government’s firm resolve to strengthen India’s military capabilities while taking care of its soldiers and veterans.