All About Indian Defence Budget 2025- Defence Guru

Here is a short summary of the defence budget presented on the 01st February 2025.

1. A record over Rs 6.81 lakh crore was allocated in Union Budget 2025-26 for MoD, an increase of 9.53% from the current Financial Year.
2. Rs 1.80 lakh crore allocated under the Capital Budget of Armed Forces; Modernisation a key focus area; Rs 1.12 lakh crore earmarked for procurement from domestic industries.
3. 14% increase in allocation for Defence Pension; Rs 8,317 crore allocated for ECHS.
4. 12% hike for Defence R&D Budget.
5. Significant jump of 43% in the Capital Budget of ICG; Rs 7,146 crore allocated to BRO under Capital Head.

UNION BUDGET is a step towards fulfilling the Prime Minister’s resolve of Viksit Bharat by 2047: Raksha Mantri Shri Rajnath Singh

• Aligning with Prime Minister Shri Narendra Modi’s vision of ‘Viksit Bharat @ 2047’ and the goal of creating technologically advanced and ‘Aatmanirbhar’ Armed Forces, the Union Budget for FY 2025-26 has allocated ₹6,81,210.27 crore to the Ministry of Defence (MoD). This represents a 9.53% increase over the Budget Estimate for FY 2024-25 and accounts for 13.45% of the total Union Budget, the highest share among all ministries.

 

• Of the total allocation, ₹1, 80,000 crore (26.43%) is earmarked for Capital Outlay on Defence Services, while ₹3, 11,732.30 crore (45.76%) is allocated under the Revenue Head for the Armed Forces. Defence Pensions will receive ₹1, 60,795 crore (23.60%), and the remaining ₹28,682.97 crore (4.21%) is designated for civil organisations under the Ministry of Defence (MoD).

 

• Additionally, the MoD has declared FY 2025-26 as the ‘Year of Reforms’, reinforcing the Government’s commitment to modernising the Armed Forces. This initiative aims to simplify the Defence Procurement Procedure and ensure the optimal utilisation of resources.

 

• Addressing the media in New Delhi, Raksha Mantri Shri Rajnath Singh extended his congratulations to Finance Minister Smt Nirmala Sitharaman for presenting a budget aligned with the Prime Minister’s vision of Viksit Bharat. He stated, “This budget will drive the development of youth, the poor, farmers, women, and all sections of society. Recognizing the contributions of the middle class, it brings an unprecedented gift.”

 

Capital Outlay

• In light of evolving global geopolitical dynamics and the shifting nature of modern warfare, it is crucial for the Indian Armed Forces to be equipped with cutting-edge weaponry and transformed into a technologically advanced, combat-ready force. To support this objective, ₹1, 80,000 crore has been allocated for Capital Outlay on Defence Forces, marking a 4.65% increase over the Budget Estimate (BE) of FY 2024-25.

 

• Of the total allocation, ₹1,48,722.80 crore is designated for Capital Acquisition, commonly referred to as the modernisation budget of the Armed Forces, while the remaining ₹31,277.20 crore will be utilised for capital expenditure on Research & Development and the creation of infrastructural assets across the country.

 

• In FY 2020-21, the Ministry of Defence (MoD) initiated efforts to strengthen domestic industries and enhance self-reliance in defence manufacturing. Since then, a significant portion of the modernisation budget has been dedicated to capital procurement from domestic industries. To further encourage private sector participation in defence manufacturing and technological advancements, a substantial share of the domestic procurement budget has been allocated to private industry.

 

• For FY 2025-26, ₹1, 11,544.83 crore—75% of the modernisation budget—has been earmarked for procurement through domestic sources, with ₹27,886.21 crore (25% of the domestic share) specifically allocated for procurement from domestic private industries.

 

Strengthening Defence Capabilities & Future-Ready Technologies

• The allocated funds will support major defence acquisitions planned for the upcoming fiscal year, reinforcing jointness and integration initiatives within the Armed Forces. Additionally, this budget will enable the Ministry of Defence (MoD) to explore emerging domains such as Cyber & Space and cutting-edge technologies like Artificial Intelligence (AI), Machine Learning, and Robotics. 
• Key acquisitions set to be funded include: 

1. Long Endurance Remotely Piloted Aircraft (High & Medium Altitude) 
2. Stage payment for Deck-Based Aircraft 
3. Next-generation submarines, ships, and platforms                               

• Beyond defence readiness, capital investment in the defence manufacturing sector will have a cascading and multiplier effect on the national economy, boosting GDP growth and creating new job opportunities for the youth. 

 

Operational & Sustenance Budget for the Armed Forces

• To ensure operational preparedness and personnel welfare, ₹3, 11,732.30 crore has been allocated under Revenue Expenditure, marking a 10.24% increase over FY 2024-25. This allocation includes: 
• ₹1, 97,317.30 crore for Pay & Allowances of the three services 
• ₹1, 14,415.50 crore for non-salary expenditure, covering essentials like ration, fuel, ordnance stores, and equipment maintenance.
• Since the mid-year review of FY 2022-23, the Government has consistently increased funding for the sustenance and operational preparedness of the Armed Forces. For FY 2025-26, this commitment continues with a significant 24.25% jump over the current fiscal year's budget estimate. The increased allocation will cover: 
• Additional troop deployments in border areas.
• Hiring of vessels & longer sea deployments of naval ships.
• Increased flying hours for aircraft operations.
• Any additional requirements under Pay & Allowances will be addressed in the mid-year review.

 

Enhanced Budget for DRDO

• The Defence Research and Development Organisation (DRDO) has received a boost in its budget, with an allocation of ₹26,816.82 crore for FY 2025-26, reflecting a 12.41% increase over the previous year (₹23,855.61 crore in FY 2024-25). 
• ₹14,923.82 crore is dedicated to capital expenditure and R&D projects, empowering DRDO to: 

• Drive breakthrough innovations in defence technology 
• Strengthen fundamental research 
• Support private-sector participation through the Development-cum-Production Partner model.

The increased Capital Head allocation will further fund collaborative projects under DRDO’s Technology Development Fund (TDF), accelerating deep-tech advancements in the defence sector.

 

Boosting Innovation & Self-Reliance in Defence

• To achieve self-reliance in defence technology and foster innovation, the Government is actively engaging private players and start-ups to drive technological advancements in the defence sector. A sum of ₹449.62 crore has been allocated to the iDEX (Innovations for Defence Excellence) scheme, including its sub-scheme ADITI (Acing Development of Innovative Technologies with iDEX), to fund innovative defence projects. This allocation reflects a threefold increase in just two years, highlighting the Government’s strong commitment to nurturing a robust start-up ecosystem in defence. 

Commitment to Ex-Servicemen Welfare

• The Government remains steadfast in its commitment to veterans and their families, ensuring continued enhancement of healthcare and pension benefits. 
• ₹8,317 crore has been allocated to the Ex-Servicemen Contributory Health Scheme (ECHS), marking a 19.38% increase over the previous year’s allocation. This will provide comprehensive healthcare services to veterans and their dependents, meeting the growing medical needs. 
• Defence Pension Budget continues to support around 34 lakh pensioners, with a ₹1.61 lakh crore allocation for FY 2025-26, reflecting a 13.87% increase over FY 2024-25. This increase accounts for inflation adjustments and aims to improve the standard of living for ex-servicemen and their families. 
• The One Rank One Pension (OROP) scheme, first implemented in July 2014, undergoes revision every five years. The third revision, effective July 2024, has been successfully implemented, further ensuring pension parity among retired personnel. 

Enhanced Capital Budget for the Indian Coast Guard (ICG)

• Recognizing the Indian Coast Guard's critical role in coastal security, emergency response, and regional assistance the Government has significantly increased its funding. 
• ₹9,676.70 crore has been allocated for Capital and Revenue Expenditure, marking a 26.50% increase over FY 2024-25. 
• The Capital Budget has surged by 43%, from ₹3,500 crore in FY 2024-25 to ₹5,000 crore in FY 2025-26, ensuring the acquisition of: 

   -Advanced Light Helicopters (ALH) 

   - Dornier Aircraft 

   - Fast Patrol Vessels (FPVs) 

   - Training Ships & Interceptor Boats 

• Revenue allocation has increased from ₹4,151.8 crore to 4,676.70 crore, a 12.64% rise, catering to additional manpower, operational deployments, and inflationary costs. 

Strengthening Border Infrastructure 

• The Government continues to invest in critical border infrastructure to enhance troop mobility and strategic capabilities in tough terrains. 
• ₹7,146.50 crore has been earmarked for the Border Roads Organisation (BRO) under the Capital Head, reflecting a 9.74% increase over the previous year. 
• This funding will facilitate the construction of tunnels, bridges, and roads in strategically important locations, including: 

   - LGG-Damteng-Yangtse (Arunachal Pradesh) 

   - Asha-Cheema-Anita (Jammu & Kashmir) 

   - Birdhwal-Puggal-Bajju (Rajasthan)

  -Beyond strategic advantages, these projects will: 

   -Boost socio-economic development in border regions 

   -Create employment opportunities—BRO has already provided jobs to 70,000 local youths. 

   -Encourage tourism and local economic growth 

• This increased allocation reaffirms the Government’s unwavering commitment to national security, infrastructure development, and inclusive growth in border regions.

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