Budget 2026: 15 percent increase in defense budget, allocation of Rs 7.8 lakh crore

New Delhi (The Uttam Hindu): Finance Minister Nirmala Sitharaman has allocated ₹7.8 lakh crore for the country's defense sector in the Union Budget 2026-27. This amount is approximately 15 percent higher than the ₹6.81 lakh crore allocated in the previous fiscal year.

The budget has allocated ₹2.19 lakh crore for the purchase of military equipment for the defence forces. This amount is part of capital expenditure and is approximately 21.8 percent higher than the ₹1.80 lakh crore allocated for the 2025-26 fiscal year.

This increase in the defense budget comes at a time when India recently launched Operation Sindoor following the terrorist attack in Kashmir and geopolitical tensions are rising around the world. This move is in line with the government's "Atmanirbhar Bharat" policy, which promotes research and manufacturing within the country.

The Finance Minister also proposed waiving basic customs duty on imports of raw materials used to manufacture aircraft parts for maintenance, repair, and overhaul. This will benefit defense sector companies.

Responding to the 2026-27 Budget, Defense Minister Rajnath Singh said that following the historic success of Operation Sindoor, this budget reflects the country's resolve to further strengthen its defenses. He said that this budget strikes a balance between security, development, and self-reliance.

The approach of this budget furthers the existing strategy of spending more on military modernisation, air defence systems and new generation platforms.

The reason for the increase in capex is the higher budget allocated for fighter jets, warships, missiles, cannons and other modern defence equipment.

The increased budget for procurement of defence equipment is expected to benefit both government defence companies as well as private sector suppliers, as orders have increased rapidly across the sector.

Public sector companies likely to benefit include Hindustan Aeronautics Limited (HAL), Mazagon Dock Shipbuilders and Bharat Electronics Limited (BEL), which manufacture equipment for the Army, Navy and Air Force.

Smaller private companies like MIDHANI, BEML, Bharat Dynamics, and drone-related startups are also expected to benefit. This is part of the government's policy to promote the procurement of defense equipment in India.