Defence Budget 2025: Centre sets aside record over Rs 6.81 lakh crore; ₹1.80 lakh cr allocated under Capital Budget of Armed Forces

New Delhi: Union Budget of India has made a provision of Rs 6,81,210.27 crore for Financial Year (FY) 2025-26 for the Ministry of Defence (MoD). This allocation is 9.53% more than the Budgetary Estimate of FY 2024-25 and stands at 13.45% of Union Budget, which is highest among the Ministries.

Out of this, Rs 1,80,000 crore i.e. 26.43% of total allocation will be spent on Capital Outlay on Defence Services. On Revenue Head, allocation for the Armed Forces stands at Rs 3,11,732.30 crore which is 45.76% of total allocation. Defence Pension receives a share of Rs 1,60,795 crore i.e. 23.60% and balance Rs 28,682.97 crore i.e. 4.21% 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.

Addressing the media in New Delhi, Defence Minister Rajnath Singh congratulated Finance Minister Nirmala Sitharaman for presenting a budget towards fulfilling the Prime Minister’s resolve of Viksit Bharat.

“This budget will promote the development of youth, poor, farmers, women and all other sections of society. Recognising the contribution of the middle class, the budget has brought an unprecedented gift,” he said.

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

Out of this, Rs 1,48,722.80 crore is planned to be spent on Capital Acquisition, termed as modernisation budget of the Armed Forces and remaining Rs 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, Rs 1,11,544.83 crore i.e. 75% of modernisation budget has been earmarked for procurement through domestic sources and 25% of domestic share i.e. Rs 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 op

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