**Executive Summary**
The Ministry of Defence (MoD) achieved 100% utilization of its Rs 1.86 Lakh crore capital budget for FY 2025-26, marking the second consecutive year of full utilization. Driven by modernization requirements post-Operation Sindoor, the expenditure focused on aircraft, land systems, and border infrastructure. To sustain this momentum, the MoD has been allocated an increased capital budget of Rs 2.19 Lakh crore for FY 2026-27.
**Key Points / Main Content**
* **Budgetary Performance**
* Achieved 100% utilization of the Rs 1.86 Lakh crore capital outlay for Defence Services at the Revised Estimates stage.
* Overall utilization of the total Defence Budget (including pensions and civil costs) reached 99.62%.
* The Ministry of Finance augmented the initial Rs 1.80 Lakh crore appropriation due to the rapid pace of expenditure in the first two quarters.
* **Expenditure Priorities**
* Primary spending was directed toward the acquisition of aircraft and aero engines.
* Other significant allocations included land systems, electronic warfare equipment, armaments, ship building, and projectiles.
* Funds were also utilized for infrastructure development in border areas.
* **Procurement and Approvals**
* Acceptance of Necessity (AoN) was accorded for 109 proposals valued at Rs 6.81 Lakh crore, a significant increase from 56 proposals worth Rs 1.76 Lakh crore in FY 2024-25.
* A total of 503 capital procurement contracts were signed, amounting to Rs 2.28 Lakh crore.
* **Future Outlook**
* The capital budget for FY 2026-27 has been set at Rs 2.19 Lakh crore at the BE stage.
* This represents a 22% hike intended to further strengthen and modernize the Armed Forces.
**Impact Analysis**
**Ministry of Defence (MoD Finance, Acquisition Wing, and Defence Services)**
**Impact**
These departments successfully facilitated a massive scaling of procurement activities, managing nearly four times the value of proposal approvals (AoNs) compared to the previous financial year.
**Action Required**
Maintain the joint effort and administrative pace required to manage the 503 newly signed contracts and effectively utilize the 22% increase in capital allocation for the upcoming fiscal year.
**Armed Forces**
**Impact**
The forces benefit from accelerated modernization of hardware (aircraft, ships, and electronic warfare) and improved strategic infrastructure in border regions.
**Action Required**
Utilize the newly acquired systems and infrastructure to address increased requirements post-Operation Sindoor and enhance operational readiness.
**National Economy**
**Impact**
The effective utilization of the defence budget acts as an economic driver through capital formation and the generation of employment opportunities.
**Action Required**
The document suggests no direct action for the economy, but implies that the industrial base must support the fulfillment of the Rs 2.28 Lakh crore in signed procurement contracts.
Key Entities Referenced
Ministry of Defence: The primary government ministry responsible for the full utilization of the capital budget allocated for the modernization and strengthening of the Indian Armed Forces.
Operation Sindoor: A specific military operation or initiative cited as a key driver for increased budget requirements and the accelerated modernization of the forces.
Ministry of Finance: The regulatory department that augmented the initial capital expenditure appropriation based on the Ministry of Defence's expenditure performance and modernization needs.
Ministry of Defence
Ministry of Defence Achieves Full Utilization of
Capital Budget of Rs. 1.86 Lakh Crore for FY
2025-26
Posted On: 01 APR 2026 7:55PM by PIB Delhi
The Ministry of Defence, with the joint efforts of MoD(Finance), Acquisition Wing, Defence Services and
Defence Accounts Department, has fully utilized its capital outlay of Rs 1.86 Lakh crore for Defence
Services provided for the FY 2025-26 at Revised Estimates stage. This milestone achieved by MoD is in
continuation to the complete utilization of the capital budget achieved during FY 2024-25 after many
years. The overall utilization of Defence Budget including MoD(civil), Pension, etc. during the FY 2025-
26 stands at 99.62% against final allocation to MoD.
The original appropriation for capital expenditure was Rs 1.80 Lakh crore, which was further augmented
by the Ministry of Finance in view of the pace of expenditure achieved by MoD during the first two
quarters and considering the increased requirement of the Forces for Modernization and other purposes
post Operation Sindoor.
A significant portion of the expenditure is towards acquisition of aircraft and Aero engines followed by
Land Systems, electronic warfare equipment, armaments, ship building, aviation stores and projectiles.
In addition to modernizing Armed Forces, the effective utilisation of expenditure will also aid
infrastructural development in the border areas. This will also support the overall economic growth of the
country through its multiplier effect on capital formation and generation of employment opportunities.
In the Financial Year 2025-26, AoN for 109 proposals amounting Rs 6.81 Lakh crore has been accorded
by MoD, compared to 56 proposals worth Rs. 1.76 Lakh Crore approved in FY 2024-25. Also Capital
procurement contracts for a total 503 proposals amounting Rs. 2.28 Lakh Crore were signed by MoD in
FY 2025-26.
With a hike of 22%, the Ministry of Defence has been allocated Rs. 2.19 Lakh crore for the FY 2026-27
under capital head at BE stage, further augmenting the efforts in modernising and strengthening our
Armed Forces.
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