Ajai Shukla 
The Union budget for financial year (FY) 2025-26 has allocated Rs 6,81,210 crore to the Ministry of Defence (MoD). This allocation, which amounts to an absolute rise of Rs 40,151 crore over the revised estimates of FY 2024-25, keeps defence spending below 2% of the country’s Gross Domestic Product (GDP) for the third straight year. Defence spending has remained between 13-14% of the Union government’s annual expenditure for six years running.
The MoD’s capital budget – which caters for equipment acquisition and modernisation – amounts to Rs 1,85,000 crore, or 27% of the defence allocation. Of this, Rs 1,48,722 crore is earmarked for equipment modernisation. The remaining Rs 31,277 crore is earmarked for research & development (R&D) and the creation of border infrastructural assets.
Revenue allocations for the military amount to Rs 3,11,732 crore, or 45% of the total defence allocation. Defence pensions add up to Rs 1,60,795 crore, or 23.60%.
The remaining Rs 28,682 crore, which consists of 4.21% of the budget, is for civil organisations under the MoD. These include organisations such as the Border Roads Organisation (BRO) and the Coast Guard.
Defence allocations as percentage of GDP. Source: Calculated from defence budget and NSO figures
In India’s geopolitical environment, the military need to be equipped with state-of-the-art weapons so that it is 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,” said an MoD statement on Saturday.
During FY 2020-21, the MoD took a decision to strengthen domestic industry and make the forces self-reliant. Towards that, an increasing share of the modernisation budget is being earmarked for capital procurement from domestic industries.
To encourage the private sector to play a larger role in defence manufacturing and technology development, a significant share of the modernisation budget is earmarked for acquisition from domestic private industries. Towards this end, Rs 1,11,544 crore, or 75% of the modernisation budget has been earmarked for procurement through domestic sources.
Further, Rs 3,11,732 crore has been allocated to cater for salaries and pensions. This is 10.24% higher than the revenue budget allocation of FY 2024-25.
The budgetary allocation to Defence Research and Development Organisation (DRDO) has been enhanced by 12.41% to Rs 26,816 crore. The MoD expects this will strengthen the DRDO in developing new technologies.
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Towards making the military establishment self-reliant in defence technology, the MoD has announced it is imperative to engage the private players and strengthen the start-up ecosystem in the country. For this purpose, Rs 450 crore has been allocated to the iDEX scheme.
The pension budget provides pensions to approximately 34 lakh defence pensioners. To enhance defence pensions for the military, One Rank One Pension (OROP) was implemented from July 2014. Pensions are revised every five years, and the third revision under OROP came into effect from July 2024.
Moreover, Rs. 1.61 lakh crore has been allocated for FY 2025-26, which is 13.87% higher than the allocation made during FY 2024-25. This will take care of inflationary trends and provide comfort to the ex-servicemen and their dependents for maintaining a better lifestyle.
Capital budget of Indian Coast Guard
Indian Coast Guard (ICG) has been allotted Rs 9,677 crore under capital and revenue head which is 26.50% 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% in the Coast Guard’s capital budget, from Rs 3,500 crore for FY 2024-25 to Rs 5,000 crore for FY 2025-26 is intended to provide the financial space for acquisition of Advanced Light Helicopters (ALH), Dornier-228 aircraft, Fast Patrol Vessels (FPVs), Training Ships, Interceptor Boats etc. Under the revenue head, the allocation has been increased from Rs 4,152 crore for FY 2024-25 to Rs 4,676 crore for FY 2025-26 – an increase of 12.64%.
Strengthening border infrastructure
To further improve the border infrastructure and facilitate military movement through tough terrain, Rs 7,147 crore has been allocated to Border Roads Organisation (BRO) under capital head, which is 9.74% higher than the previous year.
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The enhanced financial provision made for the BRO during FY 2025-26 will promote Indian interests in border areas, by constructing tunnels, bridges and roads. 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.
Key highlights
- Over Rs 6.81 lakh crore allocated in Union budget 2025-26 for MoD, an increase of 9.53% from current financial year.
- Rs 1.80 lakh crore allocated under capital budget; of this, Rs 1.12 lakh crore have been earmarked for procurement from domestic industries.
- 14% increase in allocation for defence pensions; Rs 8,317 crore allocated for ECHS.
- 12% hike for Defence R&D budget.
- Significant jump of 43% in the Coast Guard’s capital budget; Rs 7,146 crore have been allocated to BRO.
Colonel Ajai Shukla (Retired) is a columnist, commentator and journalist who covers regional security issues in South Asia and the Indo-Pacific, military technology and India’s defence economy.