Key points
- India plans a sharp rise in defence spending in the first budget after its May conflict defeat against Pakistan
• Capital outlay is set to rise from 26% to about 31%, prioritising new weapons and platforms
• The FY 2026/27 defence budget is projected to jump nearly 25% to about USD 109 billion
• India’s defence spending is now almost ten times that of Pakistan, deepening the strategic imbalance
ISLAMABAD: India’s defence budget for FY 2026/27, the first since its military setback against Pakistan in the May conflict, reflects a decisive shift toward accelerated rearmament and long-term force modernisation.
New Delhi’s fiscal posture underscores an attempt to recover strategic confidence, close capability gaps exposed during the fighting, and reinforce deterrence across air, land, maritime, space and cyber domains.
Over the past five years, India’s defence spending has followed a steady upward trajectory. The budget expanded from USD 65.6 billion in FY 2021/22 to USD 87.4 billion in FY 2025/26, marking a substantial increase of 33.2% and an average annual growth rate of roughly 7.5%. This growth trend predates the May conflict. Yet the post-conflict budget marks a clear inflexion point in both scale and intent.
In FY 2025/26, India’s defence allocation remained heavily weighted toward recurring costs. About 46% was consumed by pay, allowances and operational preparedness, another 24% went to pensions, and only 26% was reserved for capital outlay dedicated to new acquisitions. Defence analysts in South Asia widely assessed this structure as a constraint on modernisation, especially after operational shortcomings became evident during the May fighting with Pakistan.
The upcoming FY 2026/27 budget is expected to address this imbalance. Indian authorities plan to raise the share of capital expenditure to approximately 31%, signalling a stronger emphasis on acquiring new platforms, weapons and enabling technologies. Overall defence spending is projected to increase by nearly 25%, rising from USD 87.4 billion to around USD 109 billion. This would provide an estimated USD 30–35 billion for force modernisation in a single fiscal year, the largest such allocation in India’s history.
For an international audience, the scale of India’s military expenditure stands out in sharp contrast to Pakistan’s fiscal capacity. India’s GDP, estimated at USD 4.187 trillion, is more than ten times larger than Pakistan’s USD 411 billion economy. Over the same five-year period, Pakistan’s defence spending rose only modestly, from USD 7.7 billion to about USD 9 billion, reflecting a nominal growth of 17% and an average annual increase of 3.9%. India’s defence budget is now nearly ten times larger than Pakistan’s, reinforcing an already pronounced asymmetry.
Looking ahead, cumulative Indian defence spending between 2026 and 2030 is projected to exceed USD 543.1 billion, according to GlobalData forecasts. This financial depth enables sustained, multi-service modernisation rather than episodic procurement cycles.
In the air domain, the Indian Air Force is set to induct 97 additional Tejas Mk-1A multirole fighters, supplementing 83 already on order, with integration of Astra air-to-air missiles. Rafale fleets are expected to receive further upgrades, Su-30MKI fighters will undergo life-extension programmes with BrahMos-A integration, and six Netra Mk-1A airborne early warning aircraft are planned. Development of the Advanced Medium Combat Aircraft is progressing, with prototypes anticipated in the latter half of the decade. Parallel investments are planned in layered air-defence systems, including Akash-NG, QRSAM and VL-SRSAM, alongside an expanded inventory of drones, loitering munitions and swarming systems.
Naval modernisation remains central to India’s blue-water ambitions. The navy is moving toward completion of Scorpene-class submarines equipped with air-independent propulsion, induction of indigenously built P-17A frigates and P-15B destroyers, and further acquisition of P-8I Poseidon maritime patrol aircraft. Additional C-295-based patrol platforms, maritime UAVs, advanced sonar systems and anti-submarine warfare helicopters are intended to strengthen both littoral defence and extended-range operations.
On land, the army’s plans include induction of truck-mounted K9 Vajra artillery, expansion of long-range rocket and missile regiments, upgrades to Arjun tanks, and continued procurement of armoured personnel carriers and infantry fighting vehicles. Emphasis is also placed on digital battle management systems, electronic warfare suites and secure communications to enhance joint operations.
Missile forces are expected to see new orders for BrahMos and BrahMos-NG variants, alongside wider deployment of modern surface-to-air missile families to replace ageing systems. In emerging domains, India is investing in expanded satellite constellations for intelligence, surveillance, and reconnaissance, as well as strengthened cyber capabilities and artificial intelligence-enabled systems, ranging from autonomous logistics to unmanned maritime and aerial platforms.
Strategically, India’s post-May budget signals a deliberate shift toward multi-domain readiness and long-term conventional deterrence. The emphasis on capital outlay, indigenous production and advanced technologies suggests lessons drawn from recent combat experience. For Pakistan, the widening resource and capability gap poses a significant challenge. Limited fiscal space is likely to push Islamabad toward greater reliance on strategic deterrence, asymmetric responses and selective niche capabilities. Sustaining readiness under economic constraints will remain a defining test for Pakistan’s defence planners.
