Defence Industry Set for Double-Digit Growth on Higher Budget, Domestic Push

The report highlighted that the defence budget for FY26-27 has been pegged at Rs 7.84 trillion, accounting for nearly 15 per cent of the total Union Budget. This marks a 15 per cent year-on-year increase over FY26 Budget Estimates. Within this, capital spending has seen a sharp rise, with the allocation increased by 21.8 per cent over FY26BE to Rs 2.19 trillion.

According to the report, given the current geopolitical scenario, a significant jump in the modernisation budget is essential. In line with this, the Ministry of Defence (MoD) has earmarked 75 per cent of the capital acquisition budget for procurement through domestic industries during FY26-27, reinforcing the government's focus on indigenisation and self-reliance in defence manufacturing.

"Our interactions with industry indicate that the budget will not be a constraint for acquisition of weapon systems, and double-digit growth in defence capex can be expected in the coming years," the report stated.

The report further noted that the share of capital spending in overall defence expenditure has increased to 28 per cent, signalling an improvement in the quality of expenditure. Higher capital allocation reflects a greater emphasis on long-term capability building, modernisation of equipment, and strengthening of defence infrastructure.

With rising geopolitical tensions globally, countries, including India, are increasingly focusing on strengthening their defence preparedness.

This trend provides a significant opportunity for domestic Indian defence manufacturers, particularly as the government continues to prioritise procurement from local players.

The Union Budget 2026-27, the report said, has reaffirmed the government's resolve towards defence preparedness. At the same time, the Ministry of Defence is working on reducing procedural timelines for awarding orders, which is expected to improve execution and speed up procurement.

As a result of higher allocations and faster decision-making, the report expects major defence orders to be placed during FY27-28. This is likely to provide sustained revenue visibility for defence companies and support long-term growth of the sector.

So the report outlined that higher capital expenditure, a strong push for domestic procurement, and improving execution environment together set the stage for robust growth in India's defence industry in the coming years.

- ANI