Defence Budget 2026: Will Government Announce a Massive 20 Percent Hike?

As Finance Minister Nirmala Sitharaman prepares to present the Union Budget on February 1, the defense sector is buzzing with high expectations. Given the current global geopolitical climate and the persistent challenges along India's borders, experts suggest that a significant boost in defense spending isn't just likely but necessary. There is a strong consensus that the government might announce a. 20% hike in the defense budget for the fiscal year 2026.

Analyzing the Previous Allocations

In the previous fiscal year 2025-26, the government allocated approximately 6,81,210. 27 crore to the Ministry of Defence. This was a 9. 5% increase over the previous year. While substantial, analysts argue that to keep pace with rapid modernization and the integration of high-end technology, a double-digit growth in the budget is essential. A 20% increase would provide the necessary fiscal space for major capital acquisitions and long-term strategic projects.

Strategic Focus on Indigenization

The 2026 budget is expected to place defense at the strategic core of India's economic planning. The primary focus will likely be on increasing capital expenditure and accelerating the indigenization of military hardware. Under the 'Defence Vision 2047' framework, there is a push for greater participation of startups and private players in the defense ecosystem. This move aims to reduce reliance on imports and strengthen the domestic manufacturing base, aligning with the 'Atmanirbhar Bharat' initiative.

Embracing Modern Warfare Technologies

Experts emphasize that the 2026 budget must reflect the changing nature of modern warfare. The focus is shifting from traditional platforms to AI-enabled systems, autonomous drones, and cyber resilience. These technologies are no longer secondary; they must be integrated into the core procurement and contracting models. The budget is expected to allocate specific funds for R&D in emerging technologies to ensure that the Indian Armed Forces remain future-ready and technologically superior.

Industry Expectations and Policy Reforms

Beyond just financial numbers, the defense industry is looking for structural reforms. Companies are seeking faster contracting processes, legal clarity on Intellectual Property (IP) rights, and streamlined export approvals. There is also a demand for a more pragmatic approach to indigenous content requirements, especially in sectors where India still relies on imported subsystems. Addressing these policy bottlenecks will be crucial for the success of the increased budgetary allocation and the overall growth of the defense sector.