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2 Feb 2026·Source: The Hindu
4 min
EconomyPolity & GovernanceNEWS

Budget 2026: Defence allocation surges after Operation Sindoor, focusing on indigenization

₹7.85 lakh crore defence budget emphasizes self-reliance and military upgrades.

Budget 2026: Defence allocation surges after Operation Sindoor, focusing on indigenization

Photo by SaiKrishna Saketh Yellapragada

In the aftermath of Operation Sindoor, the Union Budget allocated a record ₹7.85 lakh crore to defence services. This is the highest-ever outlay for the sector, accounting for 2% of the estimated GDP for the financial year 2026-27. This reflects a 15.19% increase over the Budget Estimates for the current year. Defence spending now constitutes 14.67% of the Union government’s total expenditure. The enhanced allocation aims to accelerate the modernisation of the armed forces and meet routine operational requirements. It also addresses additional financial needs arising from emergency procurement of arms and ammunition undertaken after Operation Sindoor. Capital expenditure has been raised to ₹2.19 lakh crore from ₹1.8 lakh crore in 2025-26. Of the Ministry’s total allocation, 27.95% has been earmarked for capital expenditure. A major thrust has been placed on indigenisation, with ₹1.39 lakh crore, or 75% of the capital acquisition budget, earmarked for procurement from domestic industries.

Key Facts

1.

Defence allocation: ₹7.85 lakh crore

2.

Increase over previous year: 15.19%

3.

Capital expenditure: ₹2.19 lakh crore

4.

Indigenisation allocation: ₹1.39 lakh crore (75%)

UPSC Exam Angles

1.

GS Paper 3: Economy - Government Budgeting

2.

GS Paper 3: Security - Defence and Internal Security

3.

Link to 'Make in India' initiative and its impact on defence sector

4.

Potential for statement-based MCQs on defence budget allocation and indigenization

Visual Insights

Key Defence Budget Highlights 2026

Dashboard highlighting key statistics from the Union Budget 2026 related to defence allocation, indigenization, and capital expenditure.

Total Defence Allocation
₹7.85 lakh crore

Highest-ever defence outlay, crucial for modernization and operational readiness. Increased allocation after Operation Sindoor.

Defence Spending as % of GDP
@@2%@@

Indicates the proportion of the nation's economic output dedicated to defence. Reflects strategic importance and security concerns.

Increase over Previous Year
@@15.19%@@

Significant increase due to modernization needs and emergency procurement after Operation Sindoor.

Capital Expenditure
₹2.19 lakh crore

Funds allocated for acquiring new equipment, infrastructure development, and modernization of armed forces.

% of Capital Acquisition Budget for Domestic Procurement
@@75%@@

Emphasis on indigenization and supporting domestic defence industries under Make in India initiative.

Defence Spending as % of Total Union Govt. Expenditure
@@14.67%@@

Shows the relative importance of defence spending in the overall government budget.

More Information

Background

The history of defence allocation in India is closely linked to geopolitical realities and economic conditions. Initially, after independence, defence spending was relatively modest, focusing on nation-building. However, events like the 1962 Sino-Indian War and subsequent conflicts led to increased allocations. The need for self-reliance in defence production has been a long-standing goal, influencing policies related to indigenization. Over the decades, various committees and policies have shaped India's defence procurement and spending strategies. The Defence Procurement Procedure (DPP), revised periodically, aims to streamline the acquisition process and promote domestic manufacturing. The emphasis on indigenization has grown, with initiatives like 'Make in India' in defence seeking to reduce dependence on imports. The Atmanirbhar Bharat Abhiyan further accelerated this push. Several factors influence defence budget allocations, including perceived threats, technological advancements, and economic growth. The recommendations of the Finance Commission also play a role in determining the overall resource envelope available to the government, impacting defence spending. The need to balance defence modernization with other developmental priorities remains a key challenge. The Comptroller and Auditor General of India (CAG) audits defence expenditures, ensuring accountability and transparency. Globally, defence spending trends vary significantly across countries, influenced by their strategic priorities and economic capabilities. Comparing India's defence expenditure as a percentage of GDP with other major powers provides insights into its relative commitment to defence. International arms trade and geopolitical alliances also shape defence procurement decisions.

Latest Developments

Recent years have seen a renewed focus on boosting domestic defence production. The government has introduced policy reforms to encourage private sector participation in defence manufacturing. The establishment of Defence Industrial Corridors aims to create ecosystems for defence industries. The increasing use of technology in warfare is driving the need for investments in research and development. Areas like artificial intelligence, cyber warfare, and drone technology are receiving greater attention. The Defence Research and Development Organisation (DRDO) plays a crucial role in developing indigenous defence technologies. Geopolitical developments in the region continue to influence India's defence preparedness. Border tensions and evolving security challenges necessitate continuous modernization of the armed forces. International collaborations and joint military exercises are also important aspects of India's defence strategy. The Ministry of Defence is actively working on streamlining procurement processes and enhancing transparency. Looking ahead, the focus is expected to remain on achieving greater self-reliance in defence production. The government has set ambitious targets for defence exports. The long-term integrated perspective plan outlines the future requirements of the armed forces. The emphasis on cybersecurity and space-based assets is also likely to increase.

Frequently Asked Questions

1. What is the total defence allocation in the Union Budget 2026, and what percentage of GDP does it constitute?

The total defence allocation in the Union Budget 2026 is ₹7.85 lakh crore, which constitutes 2% of the estimated GDP for the financial year 2026-27.

2. How much has the defence budget increased compared to the previous year's budget estimates?

The defence budget has increased by 15.19% compared to the Budget Estimates for the current year.

3. What percentage of the Union government's total expenditure does defence spending constitute in the Budget 2026?

Defence spending constitutes 14.67% of the Union government’s total expenditure.

4. What is the significance of 'Operation Sindoor' in the context of the increased defence allocation?

The enhanced defence allocation addresses additional financial needs arising from emergency procurement of arms and ammunition undertaken after Operation Sindoor. The operation likely highlighted gaps in defence preparedness.

5. What is the capital expenditure allocated for defence in the Budget 2026, and how does it compare to the previous year?

Capital expenditure for defence has been raised to ₹2.19 lakh crore in Budget 2026, from ₹1.8 lakh crore in 2025-26.

6. What percentage of capital acquisitions will be from domestic industries, and what is the allocated amount?

75% of capital acquisitions, amounting to ₹1.39 lakh crore, will be from domestic industries, emphasizing indigenization.

7. What are the potential benefits and drawbacks of increasing the defence budget to 2% of GDP?

Increased defence spending can modernize the armed forces and boost domestic defence production. However, it might divert funds from other crucial sectors like education and healthcare. A strong domestic defence industry can reduce reliance on imports but requires careful planning and execution.

8. How might the increased focus on indigenization in defence impact the Indian economy and its strategic autonomy?

Increased indigenization can stimulate domestic manufacturing, create jobs, and reduce dependence on foreign suppliers. This enhances strategic autonomy, allowing India to make independent decisions on defence matters. However, it requires significant investment in research and development and a supportive policy environment.

9. Why is the defence budget in news recently?

The defence budget is in the news due to the record allocation of ₹7.85 lakh crore in the Union Budget 2026, especially after Operation Sindoor, highlighting the government's focus on military modernization and self-reliance.

10. What government initiatives are driving the increased focus on domestic defence production?

The government has introduced policy reforms to encourage private sector participation in defence manufacturing and established Defence Industrial Corridors to create ecosystems for defence industries. These initiatives aim to boost domestic defence production and reduce reliance on imports.

Practice Questions (MCQs)

1. Consider the following statements regarding the Union Budget 2026 allocation for defence: 1. The defence allocation constitutes 14.67% of the Union government’s total expenditure. 2. Capital expenditure has been raised to ₹2.19 lakh crore. 3. 27.95% of the Ministry’s total allocation has been earmarked for revenue expenditure. Which of the statements given above is/are correct?

  • A.1 and 2 only
  • B.2 and 3 only
  • C.1 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: A

Statement 1 is CORRECT: The defence allocation constitutes 14.67% of the Union government’s total expenditure as per the Budget 2026. Statement 2 is CORRECT: Capital expenditure has been raised to ₹2.19 lakh crore in the Budget 2026. Statement 3 is INCORRECT: 27.95% of the Ministry’s total allocation has been earmarked for CAPITAL expenditure, not revenue expenditure, as per the Budget 2026.

2. With reference to the Union Budget 2026, what percentage of the capital acquisition budget is earmarked for procurement from domestic industries?

  • A.50%
  • B.65%
  • C.75%
  • D.85%
Show Answer

Answer: C

According to the Union Budget 2026, ₹1.39 lakh crore, or 75% of the capital acquisition budget, is earmarked for procurement from domestic industries. This reflects a major thrust on indigenization in defence procurement.

3. Which of the following factors generally influence the allocation of funds to the defence sector in India? 1. Perceived external threats 2. Overall economic growth rate 3. Recommendations of the Finance Commission Select the correct answer using the code given below:

  • A.1 only
  • B.2 and 3 only
  • C.1 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: D

All the given factors influence the allocation of funds to the defence sector in India: 1. Perceived external threats: Increased threat perceptions often lead to higher defence spending. 2. Overall economic growth rate: A stronger economy allows for greater allocation to defence. 3. Recommendations of the Finance Commission: The Finance Commission's recommendations influence the overall resource envelope available to the government, impacting defence spending.

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