The defence services received an unprecedented allocation amounting to ₹7.85 lakh crore for the Financial Year (FY) 2026-27 in the first Union Budget post Operation Sindoor. This is 2 per cent of the estimated GDP for the next Financial Year and shows an increase of 15.19 per cent over the Budgetary Estimates (BE) of FY 2025-26.
The defence ministry said in addition to the modernisation of the armed forces and financing their regular requirement, the significantly enhanced allocation—14.67 per cent of the Union government expenditure—will also cater for the financial requirements that have arisen due to the emergency procurement of arms and ammunition made post Operation Sindoor.
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The government has allocated ₹2.19 lakh crore for capital expenditure, compared to the ₹1.80 lakh crore which was allotted last year.
Of the total ₹7.85 lakh crore, 27.95 per cent is for capital expenditure, 20.17 per cent is for revenue expenditure on sustenance and operational preparedness, and 26.40 per cent is for revenue expenditure on pay and allowances.
A major thrust in the budget is allocation for modernisation. According to the defence minister, in the current geopolitical scenario, a quantum jump in the modernisation budget is a strategic imperative.
The budgetary allocation under the capital head to the defence forces is at Rs 2,19,306.47 lakh crore, which is 21.84 per cent more than the Budget Estimates of FY 2025-26. Of this, ₹1.85 lakh crore is earmarked for capital acquisition, which is nearly 24 per cent higher than the capital acquisition budget for FY 2025-26.
During FY 2025-26, till December 2025, the defence ministry concluded contracts worth ₹2.10 lakh crore. The ministry has so far given Acceptance of Necessity approval for more than ₹3.50 lakh crore.
The upcoming projects under capital acquisition will equip the armed forces with next-generation fighter aircraft, smart and lethal weapons, ships/submarines, unmanned aerial vehicles, drones, and specialist vehicles, among others, the defence ministry stated.
Operation Sindoor has also highlighted the need to limit dependency on foreign suppliers. Keeping this in mind, the government has earmarked ₹1.39 lakh crore, which is 75 per cent of the capital acquisition budget for procurement through domestic industries during the FY 2026-27.
"Enhanced allocation for capital acquisition, especially for domestic industries, will have long term positive impact on the national economy and will lead to the development of many ancillary industries, creating job opportunities in the country," the defence ministry stated.
Besides, the budgetary allocation to Border Roads Organisation (BRO) under Capital for BE 2026-27 has been increased to ₹7,394 crore from ₹7,146.50 crore for FY 2025-26, which will cater to many strategically significant projects such as tunnels, bridges, and airfields, among others.
Defence Minister Rajnath Singh asserted that the budget, which comes after the success of Operation Sindoor, further strengthens the government’s resolve to bolster the security system of the country and enhance military capabilities.