New Delhi: Indian Ministry of Defence is planning to seek a 35% increase in the defence modernisation budget for FY2027-28 to speed up military procurement and strengthen the country’s armed forces.
Defence Secretary Rajesh Kumar Singh reportedly outlined the proposal at the annual session of the Society of Indian Defence Manufacturers (SIDM) in New Delhi on October 9, 2026. If approved, the increase could raise funding for military equipment purchases to nearly $30 billion. However, the proposed increase has not yet received official budget approval.
India Plans A Major Increase In Defence Modernisation Spending
The Ministry of Defence wants to increase spending on military modernisation to help the Army, Navy and Indian Air Force acquire advanced equipment and replace older systems.
Read also: Defence Reforms 2026: India Plans These Major Defence Procurement Reforms
According to the report the ministry will seek an increase of up to 35% in the modernisation budget for FY2027-28. A 25% increase is considered a more realistic possibility at this stage.
The proposed increase comes after the ministry reportedly used its revised modernisation allocations in both FY2024-25 and FY2025-26. Additional funding could help maintain the pace of military upgrades and support new procurement programmes. It is important to note that the 35% increase is a proposal, not an approved budget allocation.
Why Does India Need A Higher Defence Modernisation Budget
India needs regular investment in modern military equipment to maintain operational readiness and respond to changing security challenges.
Modernisation spending supports the purchase of new aircraft, ships, submarines, missiles, armoured vehicles, drones and other advanced military systems.
A larger budget could also help the armed forces improve surveillance, air defence, battlefield communication and operational capabilities.
The government has also been working to strengthen domestic defence manufacturing and reduce dependence on imported military equipment.
According to the Ministry of Defence’s published FY2026-27 budget information, ₹1.85 lakh crore was earmarked for capital acquisition, approximately 24% higher than the FY2025-26 budget estimate for this purpose. This existing allocation provides important context for the proposed increase in FY2027-28.
Indian Defence Spending Has Continued To Grow
India’s defence spending has increased over recent years, with a growing focus on military modernisation and capital expenditure.
The Union Budget for FY2026-27 allocated approximately ₹7.85 lakh crore to the Ministry of Defence. This covers several areas, including military salaries, pensions, equipment procurement, maintenance and research and development.
The government allocated ₹2,19,306.47 crore under the capital head for the defence forces in FY2026-27. Of this amount, ₹1.85 lakh crore was earmarked for capital acquisition.
These figures show the importance of modernisation in India’s defence spending plans. However, the proposed FY2027-28 increase will depend on the government’s budget decisions.
What Could The Proposed 35% Increase Mean
If the government approves a substantial increase, India could have more money available to purchase advanced equipment for all three armed services. The additional funding could support the following areas:
1. Fighter Aircraft And Aviation Systems
The Indian Air Force needs modern aircraft, engines, sensors and other aviation equipment to maintain its operational capabilities.
Higher procurement spending could support ongoing aircraft acquisition programmes and related technologies. The exact projects receiving additional funding will depend on future government approvals and procurement decisions.
2. Warships And Submarines
The Indian Navy requires modern warships, submarines and maritime surveillance systems to protect India’s maritime interests.
Increased funding could help advance naval acquisition programmes, subject to approved requirements and contractual decisions.
3. Missiles And Air Defence Systems
Modern missile and air defence systems play an important role in protecting military installations and responding to aerial threats.
Additional funding could support the acquisition of advanced weapons and related systems for the armed forces.
4. Drones And Unmanned Systems
Drones and unmanned aerial systems have become increasingly important in surveillance, reconnaissance and military operations.
Higher modernisation spending could create more opportunities to acquire these systems and develop domestic alternatives.
5. Armoured Vehicles And Other Equipment
The Army also needs modern armoured vehicles, specialist equipment, communication systems and battlefield technologies.
A larger procurement budget could help address equipment requirements across different operational environments.
These are potential areas of investment, not a confirmed list of purchases under the proposed FY2027-28 budget.
Indian Defence Spending: Domestic Defence Companies Could Benefit
A higher defence modernisation budget could create additional opportunities for Indian defence manufacturers.
Companies involved in aircraft components, electronics, radar systems, missiles, naval equipment, drones and military vehicles could benefit if the government places new orders in these sectors. However, the actual impact on individual companies will depend on their eligibility for contracts, order wins, production capacity, execution timelines and competition.
The government has also highlighted the importance of private-sector participation, research and development, and domestic production.
At the SIDM Champion Awards 2026 event on October 9, 2026, Defence Minister Rajnath Singh called for greater private-sector participation, stronger research investment and increased defence production capacity. The Ministry of Defence also highlighted the importance of technological innovation and self-reliance. These priorities could support the broader development of India’s defence manufacturing industry.
FAQs
India earmarked ₹1.85 lakh crore for defence capital acquisition in FY2026-27. This was approximately 24% higher than the FY2025-26 budget estimate for capital acquisition.
India’s Ministry of Defence is reportedly seeking an increase of up to 35% in the defence modernisation budget for FY2027-28. A 25% increase has been described as a more realistic possibility, but neither figure has been officially approved.
Indian companies manufacturing aircraft components, missiles, radar systems, drones, naval equipment, electronics and armoured vehicles could benefit if they secure new defence contracts. The actual impact will depend on government orders, company capabilities and project execution.
