Defence Budget 2026: Double-Digit Growth Expected for Modernisation, Indigenous Manufacturing

• India's defence budget for FY27 is projected to see strong double-digit growth, driven by geopolitical uncertainties and a push for modernisation and indigenous manufacturing.
• Analysts anticipate the upcoming budget will mark an inflection point, particularly for capital expenditure, with a sharp focus on force modernisation and domestic procurement.
• Brokerages like Motilal Oswal, Nuvama, Morgan Stanley, and HDFC Securities forecast significant increases in defence spending, ranging from 8% to 15%, with a focus on capital outlay.
• Key areas for increased allocation include research and development, UAVs, drones, counter-drone systems, missiles, ammunition, electronic warfare, and air defence platforms.
• The government is expected to continue policy support through tax incentives and procurement reforms to strengthen India's defence manufacturing ecosystem, especially for private players.

Why It Matters: India's FY27 defence budget is set for significant growth, prioritizing modernisation, indigenous production, and capital expenditure.