What Happened
- The Ministry of Defence fully utilised its revised capital expenditure allocation of Rs 1.86 lakh crore for FY2025-26, marking the second consecutive year of complete capital budget absorption after a prolonged gap
- The original Budget Estimate (BE) for capital outlay was Rs 1.80 lakh crore; the Ministry of Finance augmented this to Rs 1.86 lakh crore at the Revised Estimates stage due to the pace of spending achieved in the first two quarters
- The largest share of capital expenditure went towards acquisition of aircraft and aero engines, followed by land systems, electronic warfare equipment, armaments, shipbuilding, aviation stores, and projectiles
- During FY2025-26, Acceptance of Necessity (AoN) was accorded for 109 proposals worth Rs 6.81 lakh crore — nearly double the 56 proposals worth Rs 1.76 lakh crore approved in FY2024-25
- Capital procurement contracts worth Rs 2.28 lakh crore were signed for 503 proposals during the year
- Three-fourths of the modernisation budget (approximately Rs 1.11 lakh crore) was earmarked for procurement through domestic sources, in line with the Atmanirbhar Bharat push
- Union Budget 2026-27 has subsequently allocated an all-time high of Rs 7.85 lakh crore to the Ministry of Defence — a 15.19% increase over the BE for FY2025-26
Static Topic Bridges
Defence Capital vs Revenue Expenditure — Significance of Capital Utilisation
India's defence budget is broadly divided into revenue expenditure (salaries, pensions, operational costs, maintenance) and capital expenditure (acquisition of weapons, platforms, infrastructure, R&D). Historically, India's armed forces struggled to spend their capital allocations fully within a financial year due to slow procurement processes, bureaucratic delays, and complex contract negotiations. Unspent capital allocations lapse at year end, slowing modernisation plans. Full capital utilisation therefore signals improved procurement efficiency, stronger pipeline management, and a faster-paced modernisation effort. The capital outlay for defence services in FY2025-26 at Rs 1.86 lakh crore represented about 26% of the total MoD allocation.
- Capital expenditure: acquisition of new platforms, weapons systems, construction of military infrastructure, R&D investment
- Revenue expenditure: salaries, pensions, maintenance, operational costs (typically ~55-60% of total defence budget)
- Lapsing of funds at year-end is a systemic problem across Indian ministries; defence capital under-utilisation was a recurring criticism
- Full utilisation for the second consecutive year marks a structural improvement in defence acquisition management
- Capital outlay split: Rs 1,48,722.80 crore for modernisation (acquisitions), Rs 31,277.20 crore for R&D and infrastructure
- Budget 2026-27 allocation: Rs 7.85 lakh crore total MoD outlay (15.19% higher than FY2025-26 BE)
Connection to this news: Fully absorbing the augmented Rs 1.86 lakh crore capital budget confirms that the defence ministry's procurement machinery processed contracts faster than in previous years — a prerequisite for accelerating India's military modernisation.
Atmanirbhar Bharat in Defence — Indigenous Procurement Policy
The Atmanirbhar Bharat (Self-Reliant India) initiative in defence mandates a progressive shift from import-heavy procurement towards domestically designed, developed, and manufactured (IDDM) platforms. The Defence Acquisition Procedure (DAP)-2020, now being updated with a draft DAP-2026, introduced a "negative import list" — categories of equipment that can only be procured from Indian sources. India's defence exports, which stood at a negligible level a decade ago, crossed Rs 23,622 crore in FY2024-25. The draft DAP-2026 proposes a shift from 'Made in India' to 'Owned by India', prioritising indigenous intellectual property over mere manufacturing location.
- Atmanirbhar Bharat defence target: 75% domestic procurement by 2030
- Defence production value target: Rs 3 lakh crore (US$35 billion) — to be achieved by 2025 and scaled further by 2040
- Defence exports FY2024-25: Rs 23,622 crore (12.04% growth YoY)
- Indigenous defence production value: expected to exceed Rs 1.60 lakh crore between 2025 and 2026
- Negative import list: Over 500 items of defence equipment notified across multiple lists since 2020
- DAP-2026: Draft released for stakeholder feedback, focuses on IP ownership, not just manufacturing location
- FY2025-26: Three-fourths of modernisation budget (~Rs 1.11 lakh crore) directed towards domestic procurement
Connection to this news: The full utilisation of the capital budget — with a bulk directed towards domestic procurement — directly demonstrates the operational traction of the Atmanirbhar Bharat policy, moving from a policy aspiration to measurable spending on indigenous platforms.
Electronic Warfare (EW) — A Emerging Defence Priority
Electronic Warfare involves the use of the electromagnetic spectrum — through jamming, deception, signals intelligence, and cyber-electronic operations — to deny adversaries the ability to use radar, communications, and precision-guided systems effectively while protecting one's own use of the spectrum. India's early experience in the 1999 Kargil conflict and assessments from recent conflicts including the Russia-Ukraine war and India's own Operation Sindoor have accelerated EW as a modernisation priority. Jamming enemy radars, suppressing air defence systems, and protecting own communication networks have become as critical as kinetic weapon procurement.
- EW spectrum: Electronic Attack (jamming, deception), Electronic Protection (hardening own systems), Electronic Support (signals intelligence, ISR)
- DRDO's key EW systems: SAMYUKTA (ground-based EW system), airborne EW suites on fighter jets (Tejas, upgraded Jaguars)
- Drone warfare lesson: Ukraine-Russia conflict demonstrated the critical role of EW in neutralising drone swarms
- Operation Sindoor context: Naval and air operations highlighted the importance of EW in suppressing Pakistan's air defence radar networks
- India's FY2025-26 capital spending: EW equipment listed as a distinct category alongside aircraft, land systems, and armaments
Connection to this news: The explicit identification of electronic warfare equipment as a significant spend category in FY2025-26's capital utilisation signals that India is moving beyond traditional platform acquisition to invest in the full-spectrum warfare capabilities that modern conflicts demand.
Key Facts & Data
- Defence capital budget (Revised Estimates) FY2025-26: Rs 1.86 lakh crore (original BE: Rs 1.80 lakh crore)
- Full utilisation: Second consecutive year of complete capital absorption after a prolonged gap
- Acquisitions this year: AoN for 109 proposals worth Rs 6.81 lakh crore (up from 56 proposals worth Rs 1.76 lakh crore in FY2024-25)
- Contracts signed FY2025-26: 503 proposals worth Rs 2.28 lakh crore
- Domestic procurement share: approximately three-fourths (~Rs 1.11 lakh crore) of modernisation budget
- Top expenditure categories: aircraft and aero engines, land systems, electronic warfare, armaments, shipbuilding, aviation stores, projectiles
- Union Budget 2026-27 defence allocation: Rs 7.85 lakh crore total (all-time high; +15.19% over FY2025-26 BE)
- Defence exports FY2024-25: Rs 23,622 crore (12.04% growth)
- Atmanirbhar Bharat target: 75% domestic procurement by 2030