Union Budget 2026–27: Defence Ambitions, Strategic Constraints, And The Question Of Execution

Press Release
Avni Singhai
Pallavi Lad

The IMPRI Centre for International Relations and Strategic Studies (CIRSS), IMPRI Impact and Policy Research Institute, New Delhi, hosted a panel discussion on ‘Defence, Foreign Policy, and the Union Budget 2026–27’ under its 7th Annual Series of Thematic Deliberations and Analysis of the Union Budget 2026–27.

The Ministry of Defence (MoD) has been allocated ₹7.85 lakh crore, marking a 15.9% increase over FY 2025–26, and accounting for 14.67% of total central government expenditure. Capital allocation has seen a significant rise, with the capital outlay increasing by 21.84%, pushing the capital share to a record 28% of the defence budget. This capital push supports advanced aircraft procurement, naval fleet modernisation, and strategic infrastructure. Seventy-five per cent of capital acquisition, ₹1.39 lakh crore, has been earmarked for domestic industries, supported by customs duty exemptions. On technology, DRDO funding has increased to ₹29,100 crore for research and development.

The Ministry of External Affairs (MEA) was allocated ₹22,118 crore, reflecting a 12% rise from the previous year. Under neighbourhood aid, the allocation stands at ₹4,548 crore, with a significant concentration across countries such as Bhutan, Nepal, the Maldives, and Mauritius, among others.

Dr Simi Mehta, CEO and Editor-in-Chief, IMPRI, served as Chair and Moderator of the discussion. She noted that the budget has been presented at a time when India’s strategic environment is marked by growing global uncertainties. Against this backdrop, she emphasised that the budget should be viewed not merely as an economic document, but as a strategic document reflecting how India positions itself in a changing global order.

She observed that capital expenditure, particularly in defence, has grown faster than revenue expenditure. Beyond defence, she highlighted the budget’s emphasis on infrastructure development, logistics, technology, innovation, manufacturing, and exports. Overall, she noted that the budget reflects a strategic vision of positioning India as a credible security provider, a trusted economic partner, and a rule-shaper rather than a rule-taker.

Economic–Foreign Policy Linkages and Global Uncertainty:

Prof Prabir De, Professor, Research and Information System for Developing Countries (RIS), New Delhi, linked the budget to the vision of Viksit Bharat by 2047, noting that contemporary budgets are increasingly shaped by global developments and a fragmented world order. He highlighted that global growth is expected to slow amid rising protectionism, geopolitical tensions, and supply chain disruptions, which pose risks for India despite its position as one of the fastest-growing economies. While the overall sentiment of the budget remains positive, he pointed out that several global challenges, such as energy insecurity and climate concerns, remain inadequately addressed.

He noted that despite expanding international engagements, allocations for foreign policy remain limited, with the MEA receiving less than 0.5% of the total budget. He also underlined the growing integration of economic and foreign policy through sectors such as clean energy, semiconductors, artificial intelligence, healthcare, and critical minerals, supported by duty exemptions and strategic infrastructure investments.

Security Priorities, Budgetary Trade-offs, and National Vision:

Prof Swaran Singh, Professor and Chairperson, Centre for International Politics, Organisation and Disarmament (CIPOD), Jawaharlal Nehru University (JNU), New Delhi, observed that the budget outlines India’s strategic priorities and future readiness, while stressing the importance of distinguishing between budget allocations, revised estimates, and year-on-year comparisons. He noted that defence continues to receive strong priority, reflecting its growing strategic importance.

The discussion also highlighted a heightened focus on internal security, with increased allocations aimed at modernising internal security infrastructure and technology. At the same time, concerns were raised over the Ministry of External Affairs continuing to receive a relatively modest share of the budget, which does not fully reflect India’s expanding global role. He emphasised that while the budget strongly prioritises physical infrastructure such as roads, railways, and logistics, equal attention must be given to social infrastructure, including skill development and environmental priorities, to support sustainable long-term growth.

Skills, Education, and Human Capital for Long-Term Preparedness:

Prof Annapurna Nautiyal, Former Vice Chancellor, Hemvati Nandan Bahuguna Garhwal University, Uttarakhand, highlighted that the budget approaches education in a broad and integrated manner, extending beyond classrooms and physical infrastructure. She noted that allocations for tourism, archaeology, thematic tourism trails, and the training of skilled guides represent important steps in linking education with employment generation. Investments in archaeological sites, Himalayan and thematic tourism circuits, Buddhist circuits, and hospitality institutions were seen as efforts to build skilled manpower while promoting India’s cultural and historical heritage.

She also pointed to initiatives such as the establishment of regional medical hubs, support for medical tourism, strengthening of AYUSH, and investment in the pharmaceutical sector as contributors to education and human resource development. In the broader strategic context, she noted that the increased defence allocation, support for indigenisation, and India’s expanding diplomatic and security challenges underscore the budget’s focus on self-reliance and long-term national preparedness towards 2047.

Defence Preparedness, Dynamic Response, and Capability Gaps:

Opening the substantive discussion, Major General (Dr) P. K. Chakravorty, VSM (Retd), Strategic Thinker on Security Issues and Visiting Senior Fellow, IMPRI, offered an operational and comparative assessment of the defence budget. While acknowledging the significance of the approximately ₹7.8 lakh crore allocation and defence spending at around 2% of GDP, he cautioned against reading headline figures as indicators of strategic sufficiency.

Drawing comparisons with global defence expenditures, he noted that India’s budget remains modest relative to major powers and must therefore be evaluated in terms of capability outcomes rather than numerical scale. He highlighted India’s recent shift towards a “dynamic response strategy”, citing Balakot and Operation Sindoor as examples of rapid-response operations that do not rely on prolonged mobilisation.

Major General Chakravorty stressed that future conflict will increasingly be shaped by non-contact warfare, including cyber operations, information warfare, drones, artificial intelligence, and space-based capabilities. In this context, he drew attention to persistent gaps in intelligence, surveillance, and reconnaissance (ISR), particularly India’s limited access to dedicated military satellites and reliance on shared or civilian platforms. He also underscored the growing importance of counter-drone capabilities, arguing that while India has begun manufacturing drones domestically, its ability to counter rapidly evolving adversarial technologies remains limited.

He further raised concerns regarding manpower and force structure, particularly uncertainties around long-term retention, counter-insurgency effectiveness, and force continuity, especially in sensitive theatres such as the Line of Control (LoC) and the Line of Actual Control (LAC). He also highlighted the implications of declining recruitment from Nepal’s Gorkha regiments for operational composition and long-term personnel planning.

On indigenisation, while welcoming initiatives such as the Advanced Medium Combat Aircraft (AMCA) programme, he underscored that India does not currently manufacture a single indigenous aircraft engine, a capability possessed by only a handful of countries globally. He also cited the BrahMos missile programme as an example of selective success in indigenisation, while cautioning that such outcomes remain exceptions rather than the norm. He emphasised that procurement delays, audit processes, and multi-layered approvals continue to slow the effective utilisation of allocated capital expenditure.

Defence Budget Trajectory and Foreign Policy Signalling:

Professor Sanjukta Bhattacharya, Retired Professor of International Relations, Jadavpur University, Kolkata, and Visiting Professor, IMPRI, situated the defence budget within a broader foreign policy and strategic framework. She argued that the Union Budget should be read not merely as an annual financial statement, but as a political and strategic text that signals national intent, priorities, and threat perceptions. She noted that defence spending has risen steadily from ₹2.95 lakh crore in 2015–16 to ₹7.85 lakh crore in 2026–27, while drawing attention to the comparatively modest scale of MEA allocations despite expanding diplomatic commitments.

She cautioned that a defence-heavy budget, dominated by revenue expenditure driven by manpower and pensions, constrains fiscal space for future-oriented capability development. Emphasising that contemporary warfare is increasingly system-centric rather than platform-centric, she called for sustained investments in cyber resilience, secure communications, space situational awareness, and autonomous decision-support systems. She further argued for a formally articulated and publicly available national security strategy to guide procurement priorities, inter-ministerial coordination, and civil–military alignment.

In her concluding intervention, Professor Bhattacharya examined foreign policy signals embedded in MEA allocations, particularly towards India’s neighbourhood. She noted that variations in development assistance, such as increased allocations to Bhutan and Sri Lanka alongside reductions to Bangladesh, Nepal, and the Maldives, as well as the absence of funding for Chabahar Port, reflect a more conditional and realist approach to regional engagement. She cautioned that while such recalibration may be shaped by absorptive capacity, political trust, and geopolitical constraints, abrupt reductions risk creating strategic vacuums that external actors could exploit.

Conclusion:

The panel collectively highlighted that the Union Budget 2026–27 must be read as a strategic document rather than a purely fiscal exercise, where defence allocations intersect with foreign policy priorities, institutional capacity, technological readiness, and human capital formation. While the budget reflects continuity in India’s security orientation, panellists emphasised that strategic outcomes will hinge less on headline allocations and more on the quality of execution—including institutional coordination, procurement efficiency, and the country’s ability to absorb and deploy emerging technologies. The discussion underscored that India’s long-term deterrence and global credibility will ultimately depend on how effectively military, economic, diplomatic, and knowledge systems are aligned and operationalised.

IMPRI’s 7th Annual Series of Thematic Deliberations and Analysis of Union Budget 2026-27

IMPRI 7th Annual Series of Thematic Deliberations and Analysis of Union Budget 2026-27

Defence, Foreign Policy and Union Budget 2026-27