New Delhi, April 2025 – In a landmark move that underscores its commitment to national security and self-reliance, the Narendra Modi-led government has significantly boosted India’s defence capital expenditure in the Union Budget 2025–26. This strategic push marks one of the highest-ever capital outlays for the Ministry of Defence, reflecting a long-term vision to modernize the armed forces, strengthen indigenous defence manufacturing, and enhance India’s preparedness amid rising geopolitical tensions.
The decision, taken during a series of high-level consultations and finalized in the Union Cabinet meeting chaired by Prime Minister Modi, comes against the backdrop of increasing security challenges along India’s borders and the Indo-Pacific region. The capital allocation—meant specifically for acquiring new weapons systems, platforms, and technology—has witnessed a sharp year-on-year rise, with a focus on equipping the Army, Navy, and Air Force with next-generation capabilities.
This budget marks a paradigm shift in India’s defence planning—moving beyond traditional allocations for salaries and pensions, and instead channeling resources into long-term force modernization, cyber warfare infrastructure, artificial intelligence (AI)-enabled systems, and space-based defence. The move also dovetails with the government’s flagship Atmanirbhar Bharat initiative, aiming to reduce reliance on foreign arms imports by empowering Indian defence manufacturers and startups.
Record Capital Outlay: A Shift in Focus
India’s defence budget for 2025–26 reflects a decisive pivot towards long-term capability development, with capital expenditure receiving a historic allocation of ₹1.85 lakh crore. This component of the defence budget is specifically earmarked for the acquisition of cutting-edge weaponry, modernization of military platforms, construction of strategic infrastructure, and induction of advanced defence technologies.
This figure marks a robust 14% increase from last year’s ₹1.62 lakh crore, signaling the government’s firm resolve to move beyond routine operational expenses and instead focus on building a future-ready force. Capital expenditure now constitutes over 29% of the total defence budget of ₹6.36 lakh crore, making it one of the most ambitious military modernization budgets in India’s history.
The increase is aligned with global military trends, where nations are rapidly upgrading defence capabilities to keep pace with emerging threats, such as hybrid warfare, drone incursions, cyber attacks, and space-based challenges. India’s capital outlay is aimed at bridging capability gaps and reducing over-dependence on foreign imports by supporting the domestic production of fighter jets, submarines, missile systems, and AI-powered surveillance systems.
Moreover, the budget prioritizes strategic autonomy by encouraging the use of indigenous platforms through Make in India and iDEX (Innovations for Defence Excellence) schemes. Nearly 75% of the capital procurement budget is earmarked for domestic industry, which includes both state-run defence PSUs and the rising private sector players, giving a significant boost to India’s defence manufacturing ecosystem.
This shift toward capital spending is not merely financial—it represents a deeper transformation in India’s military doctrine, preparing the armed forces for integrated theatre commands, network-centric warfare, and multi-domain operations that will define future conflicts.
Major Focus Areas
1. Modernization of the Armed Forces
A key pillar of the government’s capital spending strategy is the comprehensive modernization of the Indian Army, Navy, and Air Force—ensuring they are equipped to handle multi-domain warfare scenarios in the 21st century.
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Indian Air Force (IAF):
With an allocation exceeding ₹68,000 crore, the IAF is undergoing a major technological upgrade. Key procurement priorities include the induction of advanced 4.5-generation and 5th-generation fighter aircraft to replace aging MiG squadrons. Major acquisitions in the pipeline include the indigenous Tejas Mk-1A and the more advanced Tejas Mk-2, as well as the proposed AMCA (Advanced Medium Combat Aircraft).
The IAF is also strengthening its air mobility fleet with new transport aircraft such as the C-295, being manufactured jointly with Tata-Airbus in India. Investments in unmanned aerial vehicles (UAVs), both armed and reconnaissance variants, and enhanced surface-to-air missile systems (such as Akash-NG and MR-SAM) are also underway to bolster India’s aerial defence architecture. -
Indian Navy:
With around ₹53,000 crore earmarked, the Indian Navy’s capital allocation supports its long-term vision of becoming a blue-water navy capable of power projection across the Indian Ocean Region (IOR). Focus areas include the procurement of indigenous submarines under Project 75I, next-generation guided missile destroyers, and the possible commissioning of a third aircraft carrier to complement INS Vikramaditya and INS Vikrant.
Additionally, the Navy is investing in unmanned underwater vehicles (UUVs), maritime drones, and AI-enabled surveillance systems to enhance situational awareness in critical sea lanes. -
Indian Army:
The Indian Army, which receives the largest share at ₹63,000 crore, is prioritizing the acquisition of modern armored fighting vehicles, such as the Future Ready Combat Vehicle (FRCV), along with upgraded T-90 and Arjun Mk-1A tanks. Advanced howitzers (like the Dhanush and ATAGS), communication systems, night-vision-enabled infantry gear, and satellite-based surveillance tools are also being procured to enhance both firepower and real-time combat efficiency.
The modernization program is geared toward high-altitude and border warfare capabilities, especially in light of tensions with China and Pakistan.
2. Boost to Defence Manufacturing: Make in India in Defence
The government’s capital strategy aligns closely with its flagship Atmanirbhar Bharat Abhiyan by placing a strong emphasis on domestic defence production. Over 75% of the defence capital procurement budget is now allocated for indigenous sources, with a clear intent to reduce foreign dependence.
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Leading projects such as the Tejas fighter jet, Arjun Mk-1A main battle tank, and Pinaka rocket systems are seeing increased funding and fast-tracked procurement timelines.
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Defence Public Sector Undertakings (DPSUs) like HAL, BEL, and BEML are being pushed to collaborate with private sector innovators, startups, and MSMEs under schemes like iDEX (Innovations for Defence Excellence) and SP (Strategic Partnership) Model.
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The opening up of the Defence Testing Infrastructure Scheme (DTIS) and increased FDI limits are encouraging private players to invest in R&D, with a surge in Indian-made drones, sensors, and cyber defence tools now entering the procurement pipeline.
3. Strategic Infrastructure and Border Security
Recognizing the importance of logistics and mobility in modern warfare—particularly in mountainous and high-altitude regions—the government has accelerated funding for strategic infrastructure.
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The Border Roads Organisation (BRO) has been allotted an expanded capital budget to fast-track the construction of roads, bridges, and tunnels in forward areas of Ladakh, Arunachal Pradesh, Sikkim, and Uttarakhand.
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High-profile projects include the Zojila Tunnel, Sela Tunnel, and multiple all-weather access routes along the Line of Actual Control (LAC), enhancing troop deployment speed and supply chain resilience.
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Advanced Landing Grounds (ALGs) and forward airbases are being expanded and hardened to accommodate larger aircraft and facilitate quick airlift capabilities.
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This infrastructure development directly supports jointness and mobility under India’s theatre command concept, ensuring that Army, Navy, and Air Force assets can operate in a more integrated and agile manner.
This comprehensive focus on modernization, self-reliance, and strategic infrastructure reveals a long-term defence vision that goes far beyond procurement—it lays the foundation for India’s emergence as a technologically superior and strategically autonomous military power.
Technology-Driven Warfare and Cyber Capabilities
In keeping with the rapidly evolving landscape of global conflict, the Modi government has placed a sharp focus on building India’s technological edge in modern warfare, emphasizing cyber capabilities, artificial intelligence (AI), space-based assets, and electronic warfare. The 2025–26 defence budget reflects this strategic foresight by earmarking a substantial portion of capital outlay toward next-generation warfare systems.
AI-Powered Decision Support Systems
The Ministry of Defence is investing in Artificial Intelligence-enabled decision support platforms designed to aid military commanders in real-time battlefield analysis. These systems integrate data from satellites, UAVs, radar, and human intelligence sources to deliver predictive insights and automated threat assessments.
Initiatives led by the Defence Research and Development Organisation (DRDO) and collaborations with Indian tech startups under the iDEX programme are facilitating the development of these platforms, aiming to replicate the kind of command-and-control automation used by advanced militaries like the U.S. and Israel.
Quantum Computing and Secure Communication
To future-proof military communication against espionage and electronic eavesdropping, the government is prioritizing quantum key distribution (QKD) and quantum-resistant algorithms. DRDO and the Indian Army’s Signals Directorate are jointly pursuing quantum encryption protocols for high-security communication across command centres and satellite relays.
Pilot projects for secure, hack-proof quantum communication networks are already underway in critical sectors, including India’s nuclear command and control infrastructure.
Cybersecurity Command Centres
In response to increasing threats of state-sponsored cyberattacks, especially from hostile neighbours, the government has stepped up funding for dedicated Cyber Defence Command Centres. These centres, staffed by specialized cyber warfare officers and ethical hackers, will monitor, intercept, and neutralize threats in real time.
The Defence Cyber Agency (DCA), which reports directly to the Chief of Defence Staff (CDS), has received enhanced operational autonomy and funding to expand its footprint across tri-services, enabling coordinated cyber offence and defence strategies.
Satellite-Based Surveillance and Strategic Communication
The Defence Space Agency (DSA) is at the heart of India’s push toward space-based ISR (Intelligence, Surveillance, and Reconnaissance). Budgetary enhancements are enabling the acquisition of military-grade satellites, such as RISATs (Radar Imaging Satellites), for 24/7 border monitoring, maritime domain awareness, and support for high-altitude troops.
In collaboration with ISRO and private aerospace firms, the DSA is also developing dedicated military communication satellites to enable seamless, encrypted communication for armed forces during operations in remote and hostile terrains.
Electronic and Unmanned Warfare Systems
There is a growing push toward fielding unmanned ground vehicles (UGVs), autonomous drones, and robotic sentry systems—especially for patrolling high-risk zones like the Siachen Glacier or insurgency-prone border belts. DRDO’s tactical UAVs and loitering munitions have already entered limited service, and capital funds are being directed toward scaling up these deployments.
Additionally, the armed forces are strengthening electronic warfare (EW) capabilities to jam enemy radars, disrupt drone swarms, and protect communication grids from interference, especially in border areas with high signal conflict zones like the LAC and LoC.
Strategic Significance
The record capital outlay for defence in the 2025–26 budget is not merely a fiscal measure—it is a strategic declaration of India’s evolving defence posture in a rapidly changing geopolitical landscape. It underscores the government’s commitment to achieving Atmanirbharta (self-reliance) in defence production, while also enhancing India’s strategic deterrence capabilities amid heightened tensions across the Indo-Pacific region.
India, which has historically relied heavily on foreign suppliers for critical defence systems, is now transitioning toward becoming a net exporter of defence technologies. The massive capital investments into indigenous projects signal confidence in India’s R&D ecosystem, with flagship initiatives like the Tejas fighter jet, Pinaka rocket systems, and Arjun tanks taking centre stage. This shift supports the dual objective of reducing dependency on imports and building a resilient defence industrial base—capable of innovation, rapid production, and global competitiveness.
Regional and Global Posture
From an international perspective, the budget reflects India’s intent to take a proactive leadership role in regional security frameworks, especially in the Indo-Pacific, which continues to face evolving challenges such as maritime aggression, cyber intrusions, and grey-zone warfare tactics. By investing in naval expansion, satellite surveillance, and joint command capabilities, India is positioning itself as a credible maritime power and a key player in maintaining the strategic balance in this high-stakes region.
The enhanced budget also strengthens India’s hand in multilateral security partnerships, including the Quad (Quadrilateral Security Dialogue), where interoperability and strategic alignment with the United States, Japan, and Australia are of paramount importance. Enhanced military readiness and technological advancement will facilitate deeper engagement in joint exercises, intelligence sharing, and coordinated maritime patrols.
Political and Strategic Messaging
Defence Minister Rajnath Singh, while commenting on the budget, aptly captured its intent:
“This budget reinforces India’s goal of becoming a leading global power with a modern, agile, and technology-intensive military. It reflects our unwavering focus on strengthening national security while empowering domestic industry.”
His statement reflects the broader vision of the Modi government—to build an India that is self-reliant in defence, strong on the frontiers, and respected on the global stage. The capital outlay, therefore, is not just about procurement but about projection—of power, confidence, and sovereignty.
Challenges and Road Ahead
While the record capital allocation signals an assertive and visionary defence strategy, the road to full implementation is not without its hurdles. Systemic inefficiencies, procedural bottlenecks, and operational delays have long plagued India’s defence acquisition ecosystem, and overcoming these remains essential to realizing the full potential of this fiscal push.
Persistent Challenges
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Execution Delays in Procurement Projects
Many high-value acquisition programs—such as advanced submarines, combat drones, and long-range missile systems—continue to face delays in clearance, testing, and delivery timelines. These delays not only inflate costs but also affect combat preparedness. -
Bureaucratic Red Tape and Private Sector Hurdles
Despite reforms, private Indian defence manufacturers, including startups and MSMEs, often face procedural and regulatory challenges when competing for contracts. Licensing complexities, overlapping compliance mandates, and lack of institutional handholding restrict their integration into the mainstream procurement framework. -
Slow Induction of Indigenous Platforms
While Make in India initiatives have gained momentum, many indigenous systems—such as the Tejas Mk2, future infantry combat vehicles (FICVs), and unmanned ground systems—are still under development or awaiting field deployment. Timely trials, certifications, and frontline integration are essential for these platforms to transition from blueprints to battle-ready assets.
Corrective Measures and Strategic Reforms
In response to these issues, the government has begun introducing structural reforms aimed at enhancing procurement efficiency and transparency:
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The Defence Acquisition Procedure (DAP) 2020 is undergoing refinements to reduce layers of approval, streamline vendor selection, and improve lifecycle cost evaluation mechanisms.
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The establishment of Defence Testing Infrastructure Schemes (DTIS) and innovation accelerators under iDEX is expected to shorten field testing cycles and support tech-driven prototyping.
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Emphasis on project management units (PMUs) within the Ministry of Defence for big-ticket projects is another step toward ensuring accountability and timely delivery.
Moreover, the Chief of Defence Staff (CDS) framework is being strengthened to facilitate tri-service synergy and integrated capability planning—a key enabler for a cohesive national security architecture.
Conclusion
With the 2025–26 Union Budget laying out a bold vision for India’s defence landscape, the Modi government has signaled its clear intent: to transform the Indian armed forces into a technologically advanced, self-reliant, and combat-ready military power. By significantly increasing capital spending, the government is not only addressing immediate operational gaps but also future-proofing national security against emerging challenges—ranging from cyber threats and border tensions to maritime dominance in the Indo-Pacific.
While execution hurdles such as procurement delays and manufacturing bottlenecks remain, the government’s strategic roadmap and fiscal commitment indicate a serious effort to overhaul India’s defence architecture. If effectively implemented, this capital infusion could place India among the top military powers with indigenous capabilities and strategic autonomy.
In a volatile global environment where security dynamics are rapidly evolving, this bold fiscal push affirms that India is no longer content with being a regional power—it is preparing to lead on the global stage.
While challenges remain, the trajectory is optimistic. The Modi government’s commitment to systemic overhaul, supported by robust capital investment, sets the stage for a more agile, self-reliant, and technologically superior Indian military in the coming decade.
For official details, refer to the Ministry of Defence Budget Highlights.
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