MoD Fully Utilises Rs 1.86 Lakh Crore Capital Budget in FY26, Signals Stronger Push for Military Modernisation

India’s Ministry of Defence has achieved full utilisation of its capital outlay of Rs 1.86 lakh crore for Defence Services in FY 2025–26, marking a second consecutive year of complete use of the capital budget after a long gap. The ministry also said overall defence budget utilisation, including civil and pension components, reached 99.62 percent of the final allocation for the year.

According to the Ministry of Defence, the original capital expenditure provision of Rs 1.80 lakh crore was later enhanced by the Ministry of Finance after the pace of spending in the first half of the year and the armed forces’ rising modernisation requirements, including needs emerging after Operation Sindoor.

A major share of this expenditure went towards the acquisition of aircraft and aero engines, followed by spending on land systems, electronic warfare equipment, armaments, shipbuilding, aviation stores and projectiles. The government said the outlay is intended not only to strengthen military capability but also to support border infrastructure, capital formation and employment generation through the broader economic multiplier effect of defence spending.

The scale of defence planning and procurement also expanded sharply during the year. The ministry said it accorded Acceptance of Necessity (AoN) to 109 proposals worth Rs 6.81 lakh crore in FY26, compared with 56 proposals worth Rs 1.76 lakh crore in FY25. In parallel, the MoD signed capital procurement contracts for 503 proposals worth Rs 2.28 lakh crore during FY26.

Looking ahead, the government has allocated Rs 2.19 lakh crore under the capital head for FY 2026–27 at the Budget Estimate stage, reflecting a 22 percent increase and indicating that the armed forces’ modernisation drive will remain a central priority in the coming year.

Reference:PIB