Overview: Defence budget rises to a new high
India’s defence budget for FY27 has surged by 15.3% to ₹7.84 lakh crore, reflecting a sustained push toward self-reliance and domestic production. The substantial increase comes after a year marked by heightened regional tensions and military engagements, including Operation Sindoor, which underscored the need for modernisation and readiness across the armed forces. The budget reinforces the government’s commitment to “Make in India” in defence and aims to broaden the domestic industrial base while maintaining strategic deterrence.
Key drivers: Make in India, self-reliance, and strategic aims
The larger allocation is driven by multiple priorities: modernisation of equipment, upgrading loudspeakers of air, land, and maritime forces, and expanding the domestic supply chain. A core objective is to reduce import dependence by encouraging indigenous design, development, and production. In the wake of security challenges, the government has prioritized capability-enhancement, ensuring India can meet rising regional demands without external vulnerabilities.
Make in India and domestic production
The budget emphasises indigenisation of defence equipment. Investments are steered toward domestic research, development, and manufacturing ecosystems. By accelerating public-private partnerships, procurement through domestically produced platforms, and streamlining the procurement cycle, the government seeks to shorten the time from design to deployment while building a robust regional supply chain.
Exports and industry reforms: from imports to exports
Alongside expenditure, export-oriented policies are gaining momentum. The administration is intent on turning India into a premier defence exporter, expanding market access for domestically manufactured systems, spares, and technologies. Reforms intended to ease licensing, compliance, and procurement processes are expected to lower barriers for Indian companies to participate in global contracts, boosting foreign exchange earnings and creating jobs at home.
Reforms and procurement: accelerating modernisation
The FY27 plan includes procedural reforms to speed up acquisitions, reduce red tape, and improve project governance. A transparent, rules-based framework aims to attract private sector investment while retaining strategic oversight. The emphasis on lifecycle support—spares, maintenance, and upgrades—ensures that capital outlays translate into sustained readiness and lower long-run costs.
Implications for the economy and security
The defence budget’s expansion carries broad macroeconomic implications. In the near term, it can bolster industrial activity, create high-skilled employment, and strengthen the high-technology manufacturing sector. For security, the increased funding supports more capable forces, enhanced deterrence, and improved interoperability with allied militaries through shared standards and procurement practices. Critics may watch for fiscal discipline and the balance between defence outlays and other social priorities, but proponents argue that strategic investments today reduce geopolitical risks and potential future costs.
Outlook: sustaining momentum into the next decade
As India positions itself as a major player in the global defence market, the 2026 budget sets the pace for ongoing reforms and capability build-up. The convergence of robust public investment, private sector participation, and export-led growth suggests a future where domestic production is central to national security and economic resilience. Continued emphasis on innovation, supply chain localisation, and smart procurement will be critical to translating the FY27 allocation into tangible, field-ready capabilities.
