India’s Defence Budget for FY 2026-27, set for presentation on February 1, 2026, is anticipated to rise significantly amid geopolitical tensions and modernisation needs. Projections indicate an allocation of ₹7.12-8 lakh crore ($92.9 billion), marking a 10-20% increase from ₹6.81 lakh crore in FY 2025-26, potentially pushing defence spending to 2.5% of GDP from 1.9%. Experts like EY advocate for 3% of GDP to sustain growth. 

Capital expenditure (capex) is expected to surge 10-25%, possibly exceeding ₹2 lakh crore, focusing on acquisitions like jets, tanks, drones, hypersonic missiles, AI, and cyber capabilities. This aligns with Atmanirbhar Bharat, emphasising indigenisation, R&D via iDEX and ADITI, and export incentives to reach ₹50,000 crore in exports.

Key initiatives include ‘Drone Shakti’, clean energy integration, and border infrastructure enhancements. Challenges encompass weak exports, import reduction, and fiscal prudence amid 6.8-7.2% GDP growth. Industry seeks tax simplifications, PLI expansions for electronics, and PPPs to bolster self-reliance and global competitiveness. Overall, the budget aims to fortify national security while driving economic multipliers through defence investments.