New Delhi: Finance Minister Nirmala Sitharaman has allocated ₹7.8 lakh crore for the defence sector in the Union Budget 2026-27. This represents an increase of nearly 15 percent compared to ₹6.81 lakh crore allocated in the previous fiscal year.
Out of this, ₹2.19 lakh crore has been earmarked for the purchase of military equipment, forming part of the capital expenditure. This is about 21.8 percent higher than the ₹1.80 lakh crore set aside in 2025-26.
The rise in the defence budget comes at a time when India recently conducted Operation Sindur following terrorist attacks in Kashmir, amid increasing geopolitical tensions worldwide. The move aligns with the government’s ‘Atmanirbhar Bharat’ policy, which promotes domestic research and manufacturing.
The Finance Minister also proposed exemption of basic customs duty on raw materials imported for manufacturing spare parts used in aircraft maintenance, repair, and overhaul. This step is expected to benefit defence companies.
Defence Minister Rajnath Singh welcomed the budget, saying it reflects the government’s resolve to strengthen the country’s defence system after the historic success of Operation Sindur. He added that the budget strikes a balance between security, development, and self-reliance.
The budget continues the ongoing strategy of focusing more on the modernisation of the armed forces, enhancing air defence systems, and investing in next-generation platforms.
The increase in capital expenditure is mainly due to higher allocations for fighter jets, warships, missiles, artillery, and other advanced defence equipment.
The higher defence procurement budget is expected to benefit public sector defence companies as well as private suppliers, as orders across the sector have surged.
Public sector companies likely to gain include Hindustan Aeronautics Limited (HAL), Mazagon Dock Shipbuilders, and Bharat Electronics Limited (BEL), which manufacture equipment for the Army, Navy, and Air Force.
Additionally, smaller private firms like MIDHANI, BEML, India Dynamics, and startups in the drone sector are also expected to benefit. This supports the government’s policy to boost domestic defence equipment purchases.
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