NEW DELHI, — India’s Ministry of Defence (MoD) will seek a 35 per cent increase in its capital acquisition budget for the 2027–28 financial year (FY28), Defence Secretary Rajesh Kumar Singh said on Friday. If approved, the allocation would rise from ₹1.85 lakh crore ($22 billion) in FY27 to approximately ₹2.5 lakh crore ($30 billion).
Speaking at the Society of Indian Defence Manufacturers’ annual session in New Delhi, Singh said a 25 per cent increase would also be a positive outcome if the full request is not approved. Under this alternative, the capital acquisition budget would reach approximately ₹2.31 lakh crore ($27.5 billion).
The proposed increase would fund the acquisition of aircraft, warships, tanks, missiles, weapons systems and other military equipment for the Indian Army, Navy and Air Force. It applies specifically to capital acquisition, not the overall defence budget, which also covers salaries, pensions and operating expenses.
Higher funding follows increased procurement
The ministry’s request follows two consecutive years of fully utilising its revised modernisation allocations. Defence capital acquisition contracts exceeded ₹2 trillion ($23.8 billion) in both FY25 and FY26, compared with an earlier annual range of ₹80,000 crore to ₹1 lakh crore ($9.5 billion to $11.9 billion).
Singh said the ministry had approached the Finance Ministry for additional funding after using its revised allocations. The increased pace of contract signing supports its case for a larger capital acquisition budget.
India’s defence budget trends
India’s total defence allocation has increased over the past three financial years, alongside higher capital spending.
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FY25 (2024–25): Total defence allocation of approximately ₹6.22 trillion ($74.1 billion), with capital outlay of around ₹1.72 trillion ($20.5 billion).
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FY26 (2025–2026): Total allocation of ₹6.81 trillion ($81.1 billion), with capital outlay of ₹1.80 trillion ($21.4 billion). Modernisation funding was approximately ₹1.49 trillion ($17.7 billion), while defence spending represented 1.91 per cent of GDP.
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FY27 (2026–27): Total allocation of approximately ₹7.85 trillion ($93.5 billion), equivalent to 1.99 per cent of GDP. Capital outlay rose to ₹2.19 trillion ($26.1 billion), while the capital acquisition allocation reached ₹1.85 lakh crore ($22 billion), up 24.39 per cent from ₹1,48,722.8 crore in FY26.
FY28 proposal could raise capital acquisition spending to $30 billion
If approved, the 35 per cent increase would take the capital acquisition budget to approximately ₹2.5 lakh crore ($30 billion). Even the alternative 25 per cent increase would raise it to around ₹2.31 lakh crore ($27.5 billion).
The proposed funding would support continued military procurement and modernisation across the three services. Domestic industry already accounts for 75 per cent of the capital acquisition budget, reflecting the emphasis on Indian defence manufacturing.
India’s total defence allocation reached approximately $93.5 billion in FY27. The proposed increase in capital acquisition funding could contribute to further growth in defence spending, although the final FY28 allocation will depend on the government’s decision.
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