In the first Union Budget presented after Operation Sindoor, the government has given a significant boost to defence modernisation, allocating ₹2.19 lakh crore for capital expenditure on the armed forces in 2026–27. This marks an increase of around 22% compared to the previous year, with the overall defence budget rising to ₹7.8 lakh crore.
Sources said the defence ministry had sought a 20% hike, and the enhanced allocation will be directed towards strengthening long-range standoff capabilities, acquiring advanced military aircraft, missiles and armed drones in the aftermath of Operation Sindoor. Officials believe the additional funds will accelerate efforts to modernise equipment and enhance operational readiness across the services.
Several key procurement programmes are expected to benefit from the increased outlay, including projects linked to Rafale fighter jets, submarines and unmanned aerial vehicles. Of the total capital expenditure, ₹63,733 crore has been earmarked for aircraft and aero engines.
In comparison, the defence capital outlay in FY26 stood at ₹1.8 lakh crore, while the total defence budget in 2025–26 was ₹6.8 lakh crore. The revised estimates for capital spending last year were raised to ₹1.87 lakh crore.
Announcing further measures in her budget speech, Finance Minister Nirmala Sitharaman said the government will exempt basic customs duty on raw materials imported for manufacturing aircraft parts used in maintenance, repair and overhaul operations within the defence sector. She also announced duty exemptions on components and parts required for manufacturing civilian and training aircraft.
The measures are expected to support indigenous manufacturing, reduce costs and strengthen India’s defence and aerospace ecosystem.