HAL’s Tejas.
Explained: India’s defence budget and capital expenditure: India’s defence modernisation programme has gained impressive momentum in FY 2025–26, with the Ministry of Defence (MoD) utilising more than half of its capital expenditure budget within the first six months of the financial year. According to data released by the Press Information Bureau, the MoD has spent ₹92,211.44 crore—equivalent to approximately USD 11.1 billion—by September 30. This represents 51.23% of the total capital outlay of ₹1.8 lakh crore (USD 21.7 billion) allocated for the year.
Correction Note: An earlier version misstated this figure as USD 1.11 billion due to a misplaced decimal. The correct figure is USD 11.1 billion.
The early and aggressive pace of expenditure reflects the government’s intent to fast-track military capability upgrades and ensure timely delivery of critical assets. Last year, India achieved 100% capital expenditure utilisation with a total spend of ₹1,59,768.40 crore (USD 19.24 billion).
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What Is Capital Expenditure in Defence?
Capital expenditure (CapEx) in defence covers investments in long-term assets and capabilities—such as combat aircraft, ships, submarines, advanced weapon systems, and critical infrastructure, particularly along India’s strategic borders. It differs from revenue expenditure, which includes salaries, operations, and maintenance.
Capital investments are essential to ensure operational readiness and strategic deterrence, especially in a region marked by geopolitical volatility and rapid military build-up by China and other powers.
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Where Is the Money Going?
According to the MoD, the majority of the spending so far has been directed towards:
Aircraft and aero engines
Land systems (armoured vehicles, artillery)
Electronic warfare systems
Armaments and projectiles
Major ongoing and upcoming projects include:
Tejas Mk-1A and Mk-2 indigenous fighter jets
Advanced Medium Combat Aircraft (AMCA) development
C-295 transport aircraft production under Make in India
Frigates and submarines under Projects 17A and 75I
Modernisation of artillery and acquisition of next-gen missiles
These investments reflect India’s strategic priorities—air power, naval reach, and enhanced surveillance and strike capability across multiple domains.
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Indian Navy.
Aatmanirbhar Push: Domestic Procurement in the Spotlight
A major highlight of this year’s capital spending is the strong emphasis on domestic procurement. Of the total capital allocation, ₹1,11,544.83 crore (USD 13.43 billion) has been earmarked for purchasing defence equipment from Indian companies. As of September 2025, 45% of that allocation—₹50,195 crore (USD 6.04 billion)—has already been spent.
This commitment is aimed at strengthening India’s defence manufacturing base under the Aatmanirbhar Bharat (Self-Reliant India) vision. Key beneficiaries include:
Public sector giants like HAL, BEL, and DRDO labs
Private sector players involved in missiles, drones, and electronics
MSMEs and start-ups developing niche technologies and subsystems
Successful indigenous platforms such as the INS Vikrant, Pinaka rocket systems, Arjun Mk-1A tank, and BrahMos missile variants are results of this push.
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Budget Rising, But Challenges Persist
India’s defence capital budget has been on an upward trajectory. The current year’s outlay of ₹1.8 lakh crore (USD 21.7 billion) is 12.66% higher than last year’s actuals. Over five years, the capital budget has risen by nearly 60%, reflecting growing political and strategic prioritisation.
However, several challenges remain:
Project execution delays in indigenous development
Absorption capacity constraints among services and DPSUs
Revenue spending burden (pensions, salaries) consuming a large portion of the total defence budget (~₹6 lakh crore / USD 72.3 billion)
Strategic Imperatives Behind the Spending Surge
India’s capital spending is not occurring in a vacuum. Key drivers include:
Standoff with China along the LAC requiring forward deployments and infrastructure
Naval expansion by China in the Indian Ocean Region
Increased threats from UAVs and hybrid warfare across western borders
Commitments under Quad and Indo-Pacific partnerships, demanding interoperability and capability alignment
These realities underscore why front-loaded defence spending is seen as vital to national security and diplomatic credibility.
India’s rapid utilisation of over USD 11.1 billion in capital expenditure by mid-year is a reflection of a broader transformation in defence procurement—from reactive to proactive, from import-driven to self-reliant.
With several major deals approaching finalisation and domestic industry increasingly stepping up, India appears poised to not just meet, but fully utilise its capital allocation again this year—strengthening both its armed forces and its industrial ecosystem.
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INS Udaygiri.
Key Figures (INR to USD Conversion @ ₹83 = $1)
| INR | USD | Purpose |
|---|---|---|
| ₹92,211.44 crore | $11.1 billion | CapEx by Sept 2025 |
| ₹1,80,000 crore | $21.7 billion | FY 2025–26 Capital Budget |
| ₹1,59,768.40 crore | $19.24 billion | FY 2024–25 CapEx |
| ₹1,11,544.83 crore | $13.43 billion | Domestic Procurement Earmarked |
| ₹50,195 crore | $6.04 billion | Domestic Procurement Used (till Sept) |
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