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The defence budget for next financial year has been increased by 9.52%.

While presenting the annual budget the Financial Year 2025-2026, Rs 1.80 lakh crore has been allocated under Capital Budget of Armed Forces.

There has been an increase of about 14% increase in allocation for Defence Pension along with a 12% hike for Defence R&D Budget.

The budget papers mentions a significant jump of 43% in Capital Budget of ICG whereas Rs 7,146 crore are allocated to BRO under Capital Head account.

Total allocation of funds for Armed Forces is to the tune of Rs 6,81,210.27 crore for next financial year.

Out of this, Rs 1,80,000 crore i.e. 26.43% of total allocation will be spent on Capital Outlay on Defence Services.

On Revenue Head, allocation for the Armed Forces stands at Rs 3,11,732.30 crore which is 45.76% of total allocation.

There is no mention of a separate budget for the three wings of the defence namely the army, navy and the air force.

Thus time the Defence Pension receives a share of Rs 1,60,795 crore i.e. 23.60% and balance Rs 28,682.97 crore i.e. 4.21% is for civil organisations under MoD.

Capital Outlay

In the current geopolitical scenario where the world is witnessing a changing paradigm of modern warfare, Indian Armed Forces need to be equipped with state-of-the-art weapons and have to be transformed into 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.

Out of this, Rs 1,48,722.80 crore is planned to be spent on Capital Acquisition, termed as modernisation budget of the Armed Forces and remaining Rs 31,277.20 crore is for capital expenditure on Research & Development and creation of infrastructural assets across the country.

During FY 2020-21, MoD took a decision to strengthen the domestic industries and to make the forces self-reliant.

Since then, a substantial share of modernisation budget is being earmarked for the capital procurement from domestic industries.

In order to encourage the private sector for manufacturing and technological development in the defence sector, a notable percentage of domestic share is further earmarked for acquisition from domestic private industries.

Accordingly, for FY 2025-26, Rs 1,11,544.83 crore i.e. 75% of modernisation budget has been earmarked for procurement through domestic sources and 25% of domestic share i.e. Rs 27,886.21 crore has been provisioned for procurement through domestic private industries.

The budgetary allocation to Defence Research and Development Organisation (DRDO) has been increased to Rs 26,816.82 crore in FY 2025-26 from Rs 23,855.61 crore in FY 2024-25 which is 12.41% higher than the BE of 2024-25.

Out of this, a major share of Rs 14,923.82 crore has been allocated for capital expenditure and to fund the R&D projects.

This will financially strengthen the DRDO in developing new technologies with special focus on fundamental research and hand-holding of the private parties through Development-cum-Production Partner.

The increased allocation under Capital Head of DRDO will further provide adequate financial resources in funding the projects to be taken up in collaboration with private parties through flagship scheme of DRDO i.e. Technology Development Fund and will assist the development of Deep Technology in the defence sector.

For making the Armed Forces self-reliant in defence technology and encouraging innovation, it is imperative to engage the private players and strengthen the start-up ecosystem in the country for technological development and innovation in the defence sector. For this purpose, Rs 449.62 crore has been allocated to iDEX scheme, including its sub scheme Acing Development of Innovative Technologies with iDEX (ADITI) to be utilised for funding the projects to be taken up under this scheme.

There are approximately 34 lakh defence pensioners whose monthly pension is met out of Defence Pension Budget. In order to further enhance the Defence Pension for the Armed Forces, One Rank One Pension (OROP) was implemented w.e.f. July 2014. Since then, it is revised after every five years. Third revision under OROP came into effect from July 2024 and it was timely implemented.

Considering elements of expenditure under Defence Pension, 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.

Indian Coast Guard (ICG) has been allotted Rs 9,676.70 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 neighboring countries and commercial ships during emergency through faster response.

A jump of 43% in Capital Budget i.e. from Rs 3,500 crore for FY 2024-25 to Rs 5,000 crore for FY 2025-26 will provide adequate financial space for acquisition of Advanced Light Helicopters (ALH), Dornier Aircraft, Fast Patrol Vessels (FPVs), Training Ships, Interceptor Boats etc.

In order to further improve the border Infrastructure and facilitate the movement of Armed Forces personnel through tough terrains, Rs 7,146.50 crore has been allocated to Border Roads Organisation (BRO) under capital head which is 9.74% higher than the BE of 2024-25.

The financial provision made for the FY 2025-26 for BRO will not only promote the strategic interest of the nation in border areas by constructing tunnels, bridges and roads such as LGG-Damteng-Yangtse in Arunachal Pradesh, Asha-Cheema-Anita in J&K and Birdhwal-Puggal-Bajju in Rajasthan, but will also boost socio-economic development, provide employment opportunities and encourage tourism.