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Decoding India’s defence budget & how various govts struggled to spend it—from UPA to NDA

February 24, 2026 5 min read Internal Security Economics Polity & Governance GS3 (Internal Security Defence Modernization Indian Economy)
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What Happened

  • An analysis of India's defence budget over multiple government tenures reveals a persistent gap between the funds allocated at the start of each financial year and the amounts actually spent — spanning both UPA and NDA governments
  • The Union Budget 2026-27 allocated a record ₹7.85 lakh crore to the Ministry of Defence — a 15.19% increase over FY 2025-26 Budget Estimates, and the highest ever defence budget
  • Capital expenditure allocation for 2026-27 stands at ₹2,19,306 crore — with capital acquisition accounting for ₹1.85 lakh crore (~24% higher than FY 2025-26)
  • Historical data shows that between FY 2022-23 and FY 2024-25, there was significant underspending on capital budgets — a trend of non-utilization of allocated funds that undermines modernization timelines
  • The analysis also highlights that the UPA governments (2004-2014) consistently allocated a higher share (~35%) of the defence budget to capital expenditure compared to subsequent years under NDA

Static Topic Bridges

India's Defence Budget Structure — Revenue vs Capital

India's defence budget is broadly divided into two major heads: Revenue Expenditure (operational and maintenance costs) and Capital Expenditure (procurement, modernization, and infrastructure). The balance between these two heads is a key indicator of whether a country is maintaining its existing forces or genuinely modernizing them.

  • Revenue Expenditure: Covers salaries, pensions, allowances, maintenance, stores, and day-to-day running costs. In FY 2026-27: ₹3,65,479 crore
  • Capital Expenditure: Covers procurement of new weapons, platforms, aircraft, warships, infrastructure, and R&D. In FY 2026-27: ₹2,19,306 crore (27.95% of total defence budget)
  • Capital acquisition sub-head (FY 2026-27): ₹1.85 lakh crore — of which 75% is earmarked for domestic procurement (Aatmanirbhar Bharat in defence)
  • DRDO allocation FY 2026-27: ₹29,100 crore
  • Pension burden: India's defence pension expenditure has grown significantly and is counted separately under the Ministry of Defence; in FY 2025-26 it was ~₹1.41 lakh crore
  • Target by 2030: Multiple strategic plans aim to double defence spending (to ~$130-150 billion) by 2030

Connection to this news: A high capital allocation headline is meaningful only if the money is actually spent. The historical data shows that even generous capital allocations often go unspent due to procurement delays, gestation times for complex platforms, and bureaucratic bottlenecks — pointing to a systemic procurement challenge.

Defence Procurement Framework — DPP/DAP and Domestic Preference

India's defence procurement is governed by the Defence Acquisition Procedure (DAP) — the current version is DAP 2020, which replaced the Defence Procurement Procedure (DPP) 2016. DAP 2020 created a category hierarchy prioritizing indigenous sources.

  • DAP 2020 category hierarchy (in order of preference, from most to least indigenous):
  • Buy (Indian — Indigenously Designed, Developed and Manufactured — IDDM)
  • Buy (Indian)
  • Buy & Make (Indian)
  • Buy & Make (with technology transfer)
  • Buy (Global — Manufacture in India)
  • Buy (Global)
  • Defence Acquisition Council (DAC): Chaired by the Defence Minister; grants Acceptance of Necessity (AoN) — the first formal approval for a procurement proposal
  • CCS (Cabinet Committee on Security): Chaired by the PM; approves major defense acquisitions above a certain financial threshold
  • Domestic procurement target FY 2026-27: 75% of capital acquisition budget (₹1.39 lakh crore) for domestic industry
  • Defence industrial corridors: Uttar Pradesh (UP) and Tamil Nadu (TN) — both operational since 2020
  • iDEX (Innovations for Defence Excellence): Launched 2018; funds startups for defence innovation

Connection to this news: The gap between allocation and actual spending often occurs in the capital head — specifically in complex procurement cases involving foreign OEMs (Original Equipment Manufacturers). India's shift toward DAP 2020's indigenous priority categories is meant to address this by reducing dependence on slow-moving international procurement negotiations.

A comparative analysis of defence budgets across governments reveals structural patterns that persist regardless of political orientation. India has historically spent around 1.8-2.5% of GDP on defence — well below China's ~2.2% (nominal, but much higher in absolute terms) and NATO's 2% benchmark.

  • UPA I and II (2004-2014): Capital expenditure as a share of total defence budget consistently around 35%; absolute spending grew 213% from ₹89,136 crore (2004-05) to ₹2,79,202 crore (2014-15)
  • NDA (2014 onward): Capital share has fluctuated; as a percentage of defence budget, capital outlay under NDA tenure has been generally lower than UPA in proportional terms, though absolute amounts are higher due to overall budget growth
  • Emergency capital spending: FY 2020-21 saw overspending on capital due to emergency procurement post the Galwan Valley clash with China (June 2020)
  • Underspending: Significant underutilization of capital budgets in FY 2022-23, 2023-24, and 2024-25 — contracts signed but payments delayed due to procurement gestation
  • Defence as % of GDP: ~2% in 2026-27 (₹7.85 lakh crore against ~₹390 lakh crore nominal GDP estimate)
  • Post-Operation Sindoor context: The 2026-27 budget's 15% jump (from ₹6.81 lakh crore in 2025-26) reflects urgency in modernization after recent strategic events

Connection to this news: The spend-vs-allocation gap is not a UPA or NDA specific problem — it is a structural issue of India's defence procurement bureaucracy, where procurement cycles (from Acceptance of Necessity to delivery) often run 5-15 years for major platforms. UPSC Mains essays and GS3 answers frequently require this nuanced understanding.

Key Facts & Data

  • Defence budget FY 2026-27: ₹7.85 lakh crore (all-time high; 15.19% over FY 2025-26 BE)
  • Capital outlay FY 2026-27: ₹2,19,306 crore (27.95% of total defence budget)
  • Capital acquisition FY 2026-27: ₹1.85 lakh crore (~24% higher than FY 2025-26)
  • Domestic procurement share: 75% of capital acquisition (₹1.39 lakh crore) for Indian industry
  • DRDO allocation FY 2026-27: ₹29,100 crore
  • Defence as % of GDP (2026-27): ~2%
  • UPA capital expenditure share: consistently ~35% of total defence budget (2004-2014)
  • Emergency overspending year: FY 2020-21 (post-Galwan clash, June 2020)
  • Underspending years: FY 2022-23, 2023-24, 2024-25 (capital budget underutilized)
  • Governing procurement framework: Defence Acquisition Procedure (DAP) 2020
  • Key approving bodies: DAC (Defence Acquisition Council, chaired by Defence Minister) and CCS (Cabinet Committee on Security, chaired by PM)