New Delhi: The Centre has allocated ₹7.8 lakh crore to the Ministry of Defence for the financial year 2026–27, marking a 15% increase over the previous year’s total outlay. A major thrust has been given to military modernisation, with capital outlay rising sharply to ₹2.19 lakh crore—an increase of 21.84% compared with ₹1.80 lakh crore in the previous year.
The enhanced capital allocation is aimed at supporting big-ticket defence acquisition and modernisation programmes, including fighter aircraft such as Rafale jets, submarines and unmanned aerial vehicles (UAVs), which are currently in the pipeline.
Under the budget, ₹3,65,478.98 crore has been earmarked for defence services (revenue expenditure), while ₹1,71,338.22 crore has been allocated for defence pensions.
Presenting the budget, Finance Minister Nirmala Sitharaman proposed several measures to boost the defence manufacturing ecosystem. These include exemption from basic customs duty on imported raw materials used in the manufacture and maintenance of aircraft parts.
In response to US tariffs, the finance minister also announced a reduction in customs duty on certain items of personal use from 20% to 10%. To promote the seafood industry, the duty-free import limit has been increased from 1% to 3%.
In another push for advanced manufacturing and clean energy, Sitharaman proposed customs duty exemption on capital goods used in the production of lithium-ion cells, a key component for electric vehicles and energy storage systems.
