Defence Budget Sees Sharp Rise as Capital Outlay Touches ₹2.31 Lakh Crore, Focus on Modernisation

India has significantly increased its defence allocation in the latest Union Budget, underscoring a renewed focus on military modernisation, faster procurement, and strengthening domestic manufacturing capabilities. The total defence outlay has been raised to ₹7.85 lakh crore, marking a rise of over 15 per cent compared to the previous financial year’s budgeted estimate.

A major highlight of the allocation is the sharp increase in capital expenditure, which has gone up by about 20 per cent to ₹2.31 lakh crore. Capital outlay is primarily used for the acquisition of new platforms, weapons systems, equipment, and technology, and is seen as a critical component of long-term capability building for the armed forces.

According to government data, defence capital expenditure has more than doubled over the past eight years, rising from around ₹0.95 lakh crore in 2019 to the current level. Capital spending now accounts for nearly 30 per cent of the overall defence budget, reflecting a sustained policy shift towards modernisation and indigenisation.

Emphasis on Modernisation and Self-Reliance

Officials said the latest allocation reinforces the government’s strategy of reducing dependence on imports and expanding domestic defence production. Within the capital budget, funds earmarked specifically for modernisation have been increased by nearly one-fourth, indicating a sharper push towards upgrading existing platforms and inducting advanced technologies.

India’s defence spending has grown at an average annual rate of over 9 per cent since 2020, driven by evolving security challenges and the need to maintain operational readiness across multiple domains. The emphasis on modernisation is aimed at addressing capability gaps while ensuring that procurement processes are streamlined and time-bound.

The budget also aligns with the broader objective of promoting self-reliance in defence manufacturing. Over the past few years, the government has introduced several policy measures to encourage domestic production, including positive indigenisation lists, higher foreign direct investment limits in select segments, and reforms in defence acquisition procedures.

Growth in Domestic Production and Exports

India’s defence manufacturing sector has shown steady growth, with domestic production reaching a record level in the last financial year. Defence exports have also continued to expand, posting double-digit growth compared to the previous year. The government has set ambitious targets to further scale up production and exports over the next few years, positioning India as a key player in the global defence supply chain.

Officials believe the enhanced budgetary support will provide greater visibility to industry players and help accelerate investment in research, development, and advanced manufacturing. Capital expenditure is expected to create demand for a wide range of products, from armoured vehicles and aircraft components to electronics, cyber systems, and space-based capabilities.

Industry Response and Policy Measures

Industry stakeholders have broadly welcomed the scale and direction of the defence allocation, noting that the higher capital outlay provides confidence for long-term planning. They have also pointed to recent policy measures, including customs duty exemptions on select components and raw materials used in aircraft manufacturing and maintenance, repair and overhaul activities.

Such measures are aimed at strengthening both defence and civil aerospace ecosystems by lowering input costs and improving competitiveness. Analysts say these steps could help attract greater private sector participation and foster deeper collaboration between public sector units, private firms, and global technology partners.

Balancing Security and Fiscal Discipline

The increase in defence spending comes at a time when the government is attempting to balance national security requirements with fiscal consolidation goals. While the overall allocation has risen substantially, officials have stressed that the focus remains on efficient utilisation of resources and outcome-based spending.

Experts note that sustained investment in defence infrastructure and technology is essential for long-term preparedness, but caution that effective implementation will be key. Timely execution of contracts, avoidance of delays, and improved coordination among stakeholders will determine the actual impact of the higher outlay.

Looking Ahead

As India advances its long-term development vision, defence modernisation is being positioned as both a strategic necessity and an economic opportunity. The expanded budget signals continuity in policy and intent, with capital expenditure expected to remain a central pillar of defence planning in the coming years.

With rising allocations, a strong push for indigenisation, and growing export ambitions, the latest defence budget reflects a concerted effort to build robust military capabilities while nurturing a globally competitive domestic defence industry.