Indian Defence Budget Overview
The Indian defence budget for FY2027 reflects a strategic shift in addressing the balance between human-resource costs and technological modernisation. The budget, close to ₹8 lakh crore, aims to support a modernising military and a growing domestic defence industry.
Key Budget Figures
- Total Ministry of Defence expenditure: ₹7,84,678 crore for FY27 (Budget Estimate).
- Accounts for 14.7% of Government’s total expenditure at the BE stage for FY27.
- Capital outlay share: 27.9% of the total defence budget, a significant increase from 24.9% in FY23.
- Capital outlay in absolute terms for FY27 BE: ₹2,19,306 crore.
Factors Influencing Defence Spending
Several factors drive the increased defence spending:
- The need for restocking armaments post-Operation Sindoor, highlighting a two-front challenge with China and Pakistan.
- Institutionalisation of Emergency Procurement post-Galwan incident, standardising fast-track processes for essential technologies.
- Commitment to past liabilities allowing for future procurements like Advanced Medium Light Aircraft and submarines.
Changes in Expenditure Composition
- Reduction in pension share: Down to 21.8% from 26% in FY20.
- Reduction in salary component: Down to 22.4% from 30% in FY20.
Domestic Industry and Self-Reliance
Approximately 75% of the capital acquisition budget is reserved for the domestic industry under the Aatmanirbhar Bharat initiative, testing the absorption capacity of local defence sectors.
- The “Buy Indian-IDDM” policy aims to expedite domestic procurement but requires stringent adherence to delivery timelines.
