In her first Budget after Operation Sindoor, Union Finance Minister Nirmala Sitharaman has allocated ₹1.85 lakh crore for capital acquisition, approximately 24% higher than that of Budget FY25-26. Of this, ₹1.39 lakh crore, or 75% of the allocation, has been earmarked for procurement through domestic industries during FY27.

Leading Indian private sector defence suppliers like Bharat Forge, L&T, Tata Group, and Adani will benefit from the increased allocation.

For FY27, total budgetary allocation under the capital head to the defence forces stands at ₹2,19,306.47 lakh crore, which is 21.84% more than the Budget Estimates of FY2025-26.

During FY26, till December 2025, the Ministry of Defence (MoD) has concluded contracts worth ₹2.10 lakh crore and has given Acceptance of Necessity (AoN) approval for more than ₹3.50 lakh crore. The upcoming projects under capital acquisition will equip the armed forces with next-generation fighter aircraft, smart and lethal weapons, ships/submarines, unmanned aerial vehicles, drones, specialist vehicles, etc.

The budgetary allocation to Defence Research and Development Organisation (DRDO) has been increased to ₹29,100.25 crore in FY27 from ₹26,816.82 crore in FY26. Out of this allocation, a major share of ₹17,250.25 crore is allocated for capital expenditure.

The total defence budget is about ₹3,65,478.98 crore, 17.24% higher than the allocation for BE 2025-26. Out of this, ₹1,58,296.98 crore has been allocated for operation and sustenance related expenditure and the remaining for salary and allowances.  

Accordingly, budgetary allocation to the Border Roads Organisation (BRO) under capital for BE 2026-27 has been enhanced to ₹7,394 crore from ₹7,146.50 crore for FY2025-26, mainly for projects such as tunnels, bridges, airfields, etc. and to promote regional development and tourism, along with providing last mile connectivity in the border areas.

Ex-servicemen got a boost in the Budget as ₹12,100 crore has been allotted to Ex-Servicemen Contributory Health Scheme (ECHS),  which is 45.49% higher than the current year allocation at BE stage. This allocation will fund the Medical Treatment Related Expenditure (MTRE) of veterans. The allocation to ECHS has been increased by more than 300% in the last five years vis-a-vis the allocation made at BE stage for FY2021-22.