Update: India announces USD85.5 billion defence budget for FY 2026–27

Janes Defence Budgets forecasts that India's defence budget will reach the equivalent of more than USD100 billion by 2030. (Janes Defence Budgets)

India's Ministry of Defence (MoD) has announced a defence budget of INR7.85 trillion (USD85.5 billion) for fiscal year (FY) 2026–27. The MoD said on 1 February that the new budget represents about 15% of total annual government expenditure and a nominal increase (before inflation) of about 15% over the estimated FY 2025–26 defence budget.

The budget allocation is intended to meet the modernisation and financial requirements of the Indian military following “emergency procurement of arms and ammunition made subsequent to Operation ‘Sindoor'”, the MoD said in reference to the Indian military operation conducted during its May 2025 conflict with Pakistan.

A substantial proportion of the new defence budget – 28%, valued at about INR2.19 trillion – has been allocated for capital expenditure, up from INR1.8 trillion in FY 2025–26. According to the MoD, revenue expenditure on pay and allowances receives around INR2 trillion (26%), and revenue expenditure on sustenance and operational preparedness receives about INR1.57 trillion (20%).

About 22% of the FY 2026–27 funding, valued at around INR1.71 trillion, is allocated for military pensions, up 6.5% from the previous fiscal year. The remaining 4% is earmarked for civil organisations under the MoD.

Under the FY 2026–27 defence budget, funding for the Defence Research & Development Organisation (DRDO) has been raised to about INR291 billion, up from INR268 billion in FY 2025–26. Out of this new DRDO funding, about INR172 billion is allocated for capital expenditure.

Modernisation