Finance Minister Nirmala Sitharaman, in the Union Budget 2025, allocated ₹6.81 lakh crore to the defence sector, marking a significant increase from the ₹6.2 lakh crore assigned in the current fiscal year. The budget includes ₹4.88 lakh crore earmarked for revenue expenditure—covering salaries, operational costs, and maintenance—and ₹1.80 lakh crore for capital expenditure, focused on procurement of new equipment, modernisation, and infrastructure development. It marks a 4.65% increase compared to the Budgetary Estimate (BE) of FY 2024-25.
Modernisation and Domestic Procurement
From the capital expenditure budget, ₹1.48 lakh crore has been allocated for capital acquisition, also known as the modernisation budget of the Armed Forces. In comparison, ₹31,277 crore is reserved for research and development (R&D) and infrastructure creation across the country. Key allocations under the capital expenditure include:
- ₹48,614 crore for aircraft and aero engines
- ₹24,390 crore for the naval fleet
- ₹63,099 crore for other equipment
The Ministry of Defence (MoD) continues its emphasis on self-reliance and strengthening domestic industries, a focus initiated in FY 2020-21. For FY 2025-26, ₹1,11,544.83 lakh crore—75% of the modernisation budget—is earmarked for procurement from domestic sources. Of this, ₹27,886 crore (25% of the domestic share) is allocated for private sector procurement, promoting manufacturing and technological advancements.
“This allocation will support major acquisitions planned for the fiscal year, bolstering jointness and integration initiatives,” the MoD stated. The funds will also enable the Ministry to explore new domains such as cyber and space and emerging technologies like artificial intelligence (AI), machine learning, and robotics. Upcoming acquisitions include Long Endurance Remotely Piloted Aircraft (RPAs), stage payments for deck-based aircraft, and next-generation submarines and ships.
Revenue Expenditure for Sustenance and Operations
The revenue budget, which covers pay and allowances for Armed Forces personnel, operational preparedness, and sustenance, has been allocated ₹3.11 lakh crore—a 10.24% increase compared to FY 2024-25. Out of this, ₹1.14 lakh crore is allocated for non-salary expenditure, funding critical operational needs such as ration, fuel, ordnance stores, and equipment maintenance.
The government has consistently increased funding for operational readiness since FY 2022-23. The current allocation represents a 24.25% jump compared to the previous fiscal’s BE, addressing requirements for enhanced border deployment, longer sea deployments, and increased flying hours for aircraft.
Enhanced Support for DRDO
The Defence Research and Development Organisation (DRDO) has received a 12.41% budget increase, with ₹26,816 crore allocated for FY 2025-26, compared to ₹23,855 crore in FY 2024-25. Of this, ₹14,924 crore is designated for capital expenditure to support R&D projects. This increase aims to advance fundamental research and foster collaboration with private partners through the Development-cum-Production Partner model.
Boosting Innovation and Start-ups
To promote self-reliance and innovation, ₹449.62 crore has been allocated to the Innovations for Defence Excellence (iDEX) initiative, including its sub-scheme ADITI (Acing Development of Innovative Technologies with iDEX). It represents a threefold increase in funding over two years, underscoring the government’s commitment to supporting start-ups and private players in the defence sector.
Increased Funding for Indian Coast Guard
The Indian Coast Guard (ICG) has been allocated ₹9,676 crore, reflecting a 26.5% increase over FY 2024-25. It includes:
- ₹5,000 crore for capital expenditure (a 43% jump), enabling acquisitions such as Advanced Light Helicopters (ALH), Dornier aircraft, Fast Patrol Vessels (FPVs), and Interceptor Boats.
- ₹4,676 crore for revenue expenditure, a 12.64% increase to fund additional manpower and operational deployments.
The enhanced allocation aligns with the government’s focus on strengthening coastal security and supporting ICG’s role in regional assistance and emergency response.
Defence budget (including pensions) pegged at Rs 680,209 crores. Up from Rs 621,940 last year. Capital budget for defence services raised to 1,80,000 crore from the previous year's figure of 1,72,000 crore but much higher than the actual capital spend of Rs 1,59,500 crores in… pic.twitter.com/EJKEIjBKPe
— Nitin A. Gokhale (@nitingokhale) February 1, 2025
The Defence Budget 2025 reflects the government’s commitment to modernising the Armed Forces, promoting domestic industries, and exploring emerging technologies. The MoD stressed that increased capital acquisition, R&D, and operational readiness allocations aim to bolster national security while driving economic growth and job creation.
Team BharatShakti
