Defence preparedness is the enforcer of the choice of strategic autonomy, the nation has made, as is evident from the worldwide geopolitical tremors which have been witnessed in the last few months.  Enhanced operational readiness is also the the route to achieving punitive deterrence against the western neighbour and other emerging threats while the nation needs to have credible deterrence with respect to the northern neighbour. Against this backdrop, Defence Budget, this year, had an air of expectation, unlike any earlier budget.  

The ongoing Op Sindoor, had also confirmed the inadequacy of earlier defence budgetary allocations, when emergency procurements from additional fund allocation had to be undertaken. Defence spending is also poised to increase significantly worldwide; in NATO countries, the rise target is 5 per cent of GDP by the year 2035 from the existing average spends of 2% approximately. The defence expenditure in India, as a percentage of GDP has seen a secular decline over the last three decades, reaching a nadir of approx 1.9 per cent of GDP as per budget estimates of last year. Due to the inadequacies in modernization and capability development, as well as international developments, The Parliamentary Standing Committee on Defence had recommended that defence budget should be fixed at 3 per cent of GDP while the Defence Secretary had remarked last year that India’s defence budget should ideally rise to 2.5 per cent of GDP by the year 2030. 

As per the Budget 2026-27 presented yesterday, the budgetary allocation for Defence is ₹7.84 Lakh Crore, compared to ₹6.81 Lakh Crore last year.  

An increase of 15.12 per cent in overall allocation is significant as this is the first time after several years when the defence budget has actually gone up in real terms after discounting inflation. The defence allocation corresponds to about 1.99 per cent (say 2 per cent) of GDP as per early estimates and is approximately 13.44 per cent of budgeted Central Govt Expenditure of ₹58.31 Lakh Crore for FY 2027. It is a welcome departure from the declining trend of earlier years, albeit a modest reversal. 

The Capital Outlay of the budget, which covers modernization, procurement of equipment (aircraft, naval platforms, weapons), infrastructure and defence R&D, has seen a more robust growth of 21.67 per cent and is a recognition of the need to plug gaps in capability development. The allocation under the Revenue head has also increased approximately 17% and will give a much-needed fillip to the efforts in making up deficiencies in ammunition, stores, MRO and recapitalization of major weapon platforms. The much-maligned Pension head sees a comparatively paltry increase of 6.2 per cent and is in consonance with the inflation trends. 

It is desirable that Capital and Operational Sustenance portion of defence budget increase at a higher rate in order to enhance the operational capability and readiness of Forces.  Apparently, this is exactly the philosophy in the defence budget this year, as evident from the figures tabulated above. However, the combined total of Capital outlay and Revenue allocation (less Salary as well as Pension) is still approximately only 46 per cent of the total defence budget. The total allocation towards modernisation and operational sustenance needs to be increased substantially to have a defence capability matching our global geopolitical and geoeconomic aspirations. Since, the pay and pension budget is relatively inelastic, the overall defence budget needs to be increased substantially beyond 2% of GDP to execute the modernization plans. A fair target for defence allocation by 2030 could be 2.2 – 2.3 % of GDP, considering other competing and critical sectors of Indian economy. If the target of 2.25% is achieved, it will also result in at least 50% of budget being dedicated to capability development and operational sustenance. 

The boost to capital spending in this year’s defence budget underscores emphasis on modernization, indigenization and readiness. The growth in defence spending also aligns with India’s geopolitical needs and focus on Atmanirbhar Bharat in defence production. Military prowess, being a critical component of Comprehensive National Power, needs to be further bolstered in the years to come in consonance with an aspirational India. The increase in defence allocation this year is just a small beginning. 

The writer is a retired Lt. General, Indian Army

Published on February 2, 2026