Defence Budget 2025-26

In pursuance of technologically-advanced and 'Aatmanirbhar' Armed Forces, Union Budget of India has made a provision of ₹6,81,210.27 crore for Financial Year (FY) 2025-26 for the Ministry of Defence (MoD). This allocation is 9.53 per cent more than the Budgetary Estimate of FY 2024-25 and stands at 13.45 per cent of Union Budget, which is highest among the Ministries. Out of this, ₹1,80,000 crore i.e. 26.43 per cent of total allocation will be spent on Capital Outlay on Defence Services. On Revenue Head, allocation for the Armed Forces stands at ₹3,11,732.30 crore which is 45.76 per cent of total allocation. Defence Pension receives a share of ₹1,60,795 crore i.e. 23.60 per cent and balance ₹28,682.97 crore i.e. 4.21 per cent is for civil organisations under MoD. The Ministry has taken a decision to observe 2025- 26 as 'Year of Reforms' which will further strengthen the resolve of the Government for modernisation of Armed Forces and is aimed for simplification in the Defence Procurement Procedure to ensure optimum utilisation of the allocation.

CAPITAL OUTLAY

In the current geopolitical scenario where the world is witnessing a changing paradigm of modern warfare, Indian Armed Forces need to be equipped with stateof- the-art weapons and have to be transformed into a technologically-advanced combat-ready force. Keeping this in view, ₹1,80,000 crore has been allocated on Capital Outlay of the Defence Forces. This allocation is 4.65 per cent higher than the Budgetary Estimate (BE) of FY 2024-25.

Out of this, ₹1,48,722.80 crore is planned to be spent on Capital Acquisition, termed as modernisation budget of the Armed Forces and remaining ₹31,277.20 crore is for capital expenditure on Research & Development and creation of infrastructural assets across the country.

During FY 2020-21, MoD took a decision to strengthen the domestic industries and to make the forces self-reliant. Since then, a substantial share of modernisation budget is being earmarked for the capital procurement from domestic industries. In order to encourage the private sector for manufacturing and technological development in the defence sector, a notable percentage of domestic share is further earmarked for acquisition from domestic private industries. Accordingly, for FY 2025-26, ₹1,11,544.83 crore i.e. 75 per cent of modernisation budget has been earmarked for procurement through domestic sources and 25 per cent of domestic share i.e. ₹27,886.21 crore has been provisioned for procurement through domestic private industries.

This allocation will take care of major acquisitions planned in the ensuing FY and bolster jointness & integration initiatives. This allocation of funds will further facilitate MoD's plan to venture in new domains such as Cyber & Space and emerging technologies such as Artificial Intelligence (AI), Machine Learning and Robotics etc. Some major acquisitions planned in the next year such as Long Endurance Remotely Piloted Aircraft of High and Medium altitude, stage payment of Deck-based Aircraft, next generation submarines/ships/platforms will be funded out of this allocation. The capital investment in defence manufacturing sector has a cascading and multiplier effect in the National Economy which will boost the GDP and provide greater job opportunities to the youth of this country.

OPERATIONAL AND SUSTENANCE BUDGET OF ARMED FORCES

Revenue expenditure is to take care of Pay & Allowances of the Armed Forces Personnel and for sustenance & operational preparedness. Accordingly, ₹3,11,732.30 crore has been allocated for this purpose which is 10.24 per cent higher than budgetary allocation of FY 2024-25. Out of this, ₹1,14,415.50 crore has been allocated on account of non-salary expenditure which will facilitate procurement of Ration, Fuel, Ordnance Stores and maintenance/repair of equipment etc.

Government has been continuously allocating higher amount for sustenance and operational preparedness of the Armed Forces since mid-year review during FY 2022-23 and accordingly has given significant jump of 24.25 per cent in the next FY in comparison to the budgetary estimate of current FY. This allocation will address the requirement due to additional deployment of the forces in the border areas, hiring of vessels, increase in expenditure on longer sea deployment of ships and increase in flying hours for the aircraft. Under the Salary Head of revenue expenditure, ₹1,97,317.30 crore has been allocated to take care of Pay & Allowances of the three services and any further requirement will be addressed during mid-year review.

ENHANCED ALLOCATION FOR DRDO

The budgetary allocation to Defence Research and Development Organisation (DRDO) has been increased to ₹26,816.82 crore in FY 2025-26 from ₹23,855.61 crore in FY 2024-25 which is 12.41 per cent higher than the BE of 2024-25. Out of this, a major share of ₹14,923.82 crore has been allocated for capital expenditure and to fund the R&D projects. This will financially strengthen the DRDO in developing new technologies with special focus on fundamental research and hand-holding of the private parties through Development- cum-Production Partner. The increased allocation under Capital Head of DRDO will further provide adequate financial resources in funding the projects to be taken up in collaboration with private parties through flagship scheme of DRDO i.e. Technology Development Fund and will assist the development of Deep Technology in the defence sector.

ENCOURAGING STARTUP ECOSYSTEM FOR INNOVATION IN DEFENCE

For making the Armed Forces self-reliant in defence technology and encouraging innovation, it is imperative to engage the private players and strengthen the startup ecosystem in the country for technological development and innovation in the defence sector. For this purpose, ₹449.62 crore has been allocated to iDEX scheme, including its sub scheme Acing Development of Innovative Technologies with iDEX (ADITI) to be utilised for funding the projects to be taken up under this scheme. Allocation in this head shows a jump of almost three times in two years.

CAPITAL BUDGET OF INDIAN COAST GUARD

Indian Coast Guard (ICG) has been allotted ₹9,676.70 crore under Capital and Revenue Head which is 26.50 per cent more than the allocation for FY 2024-25 at BE stage. This increase is primarily in line with the focus of the Government on capability development of ICG and equipping them with modern equipment. ICG not only strengthens coastal security, but also provides assistance to neighbouring countries and commercial ships during emergency through faster response.

A jump of 43 per cent in Capital Budget i.e. from ₹3,500 crore for FY 2024-25 to ₹5,000 crore for FY 2025-26 will provide adequate financial space for acquisition of Advanced Light Helicopters (ALH), Dornier Aircraft, Fast Patrol Vessels (FPVs), Training Ships, Interceptor Boats etc. On revenue head, the allocation has been increased from ₹4,151.8 crore for FY 2024-25 to ₹4,676.70 crore for FY 2025-26 which shows an increase of 12.64 per cent. The increase will be utilised to fund the expenditure to be incurred on additional deployments of manpower and resources in addition to addressing the inflation.

STRENGTHENING BORDER INFRASTRUCTURE

In order to further improve the border Infrastructure and facilitate the movement of Armed Forces personnel through tough terrains, ₹7,146.50 crore has been allocated to Border Roads Organisation (BRO) under capital head which is 9.74 per cent higher than the BE of 2024-25. The financial provision made for the FY 2025-26 for BRO will not only promote the strategic interest of the nation in border areas by constructing tunnels, bridges and roads such as LGG-Damteng-Yangtse in Arunachal Pradesh, Asha-Cheema-Anita in J&K and Birdhwal-Puggal-Bajju in Rajasthan, but will also boost socio-economic development, provide employment opportunities and encourage tourism. BRO has created substantial employment opportunities by employing 70,000 local youths and has contributed to the local economies fostering long-term employability and skill development.