The Union Budget 2026-27, scheduled for presentation in Parliament on February 1, is expected to be a landmark for India’s defence sector, analysts say. With the military shifting from conventional warfare to Artificial Intelligence (AI)-driven technologies, the budget is likely to prioritise modernisation, advanced weapon systems, and AI-enabled combat solutions. Rising geopolitical tensions and emerging threats from neighbouring countries have prompted projections of significant defence allocations. The government is expected to invest in AI software for rapid decision-making, precision targeting, and coordinated drone operations, reflecting India’s focus on future warfare across land, cyber, space, and AI domains.
Last year, defence spending stood at approximately ₹6.81 lakh crore, and industry bodies like FICCI have recommended increasing capital expenditure from 26% to 30% to fund modernisation and new weapons acquisitions. The budget is also expected to advance the “Make in India” initiative by reducing imports, boosting domestic defence production, and providing substantial funding to startups under the iDEX scheme.
Expansion of defence corridors in Uttar Pradesh, Tamil Nadu, and East India is under discussion. India aims to raise defence exports to ₹50,000 crore by 2028-29, with incentives likely to be announced in the budget. Analysts describe Budget 2026 as more than a fiscal allocation—it is a strategic roadmap to transform India into a global defence powerhouse, leveraging technology, self-reliance, and export potential.