Union Budget 2026 | Defence Budget pegs at Rs 7.85 lakh crore; capital expenditure allocation up by 24%

New Delhi: In her first budget after Operation Sindoor, Union Finance Minister Nirmala Sitharaman on Sunday raised the Defence Ministry’s budget to Rs 7.85 lakh crore with nearly 22 per cent hike in capital outlay, enabling the central government to buy key military hardware for modernising the forces.

The Defence Ministry’s allocation of Rs 6.81 lakh crore in the last fiscal has been raised to Rs 7.85 lakh crore with a pension component of Rs 1.71 lakh crore.

The capital outlay for defence has been pegged at around Rs 2.19 lakh crore as against last fiscal’s budgetary estimate of Rs 1.8 lakh crore.

Out of the total amount earmarked for capital outlay, Rs 1.85 lakh crore has been budgeted for capital acquisition. This is nearly 24 per cent higher than the procurement budget for FY 2025-26.

“After the historic success of Operation Sindoor, this budget has intensified our efforts to further strengthen our defence. The overall allocation is more than 15 per cent of what was earmarked last year,” Defence Minister Rajnath Singh said.

Compared to last year’s BE, the maximum allocation has been made in the categories of “aircraft and aero-engines” and “other equipment”, both receiving a hike of over 30 per cent.

During FY 2025-26, up to December 2025, the Defence Ministry has concluded contracts worth Rs 2.10 lakh crore and has, so far, given Acceptance of Necessity approval for projects worth more than Rs 3.50 lakh crore.

The upcoming projects under capital acquisition will equip the forces with new fighter aircraft, smart and lethal weapons, ships/submarines,  unmanned aerial vehicles, drones, specialist vehicles.

In line with the Defence Ministry’s policy to boost domestic industries, nearly 75 per cent of the procurement budget – Rs 1.39 lakh crore – has been set aside for domestic industries.

Presenting the budget, Sitharaman also proposed to exempt basic customs duty on raw materials imported for manufacture of parts of aircraft to be used in maintenance, repair, or overhaul requirements by units in the defence sector.

Development of border infrastructure would continue to receive a push as the allocation for Border Roads Organisation has been enhanced to Rs 7,394 crore from Rs 7,146 in 2025-26 to cater to strategic projects like tunnels, bridges and airfields besides providing the last mile connectivity in border areas.

Rajnath said Rs 12,100 crore have been allocated to the Ex-Servicemen Contributory Health Scheme, which is 45 per cent higher than the BE of 2025-26. Also the Defence research budget has been increased to over Rs 29,000 crore from last fiscal’s allocation of Rs 27,000 crore.