Defence Capex To Rise To 2.5% Of GDP In FY26: Secretary Rajesh Kumar Singh | Profit Exclusive

India is targeting capital expenditure on defence to reach 2.5% of GDP by fiscal 2026, as part of a broader push to strengthen military capabilities and accelerate procurement.

That is the assessment of Defence Secretary Rajesh Kumar Singh, who said the government was working to scale up defence capital spending in line with GDP growth and structural reforms in procurement.

“We are right now at 1.9% of the GDP when it comes to defence expenditure overall. The capex part is only about 0.5% of the GDP. My view is that it should go up by about at least 20% CAGR every year on the capex front, leading to a five-year target of achieving about 2.5% of the GDP by the end of the next financial year,” Singh said in an exclusive interview with NDTV Profit.

In the Union Budget for fiscal 2026, the Ministry of Defence received a total allocation of Rs 6.81 lakh crore, or 13.45% of the total budget. Of this, Rs 1.8 lakh crore—or 26.43% of the defence budget—was earmarked for capital outlay on defence services. This marks a 4.65% increase over the capital outlay in the previous year.

The defence ministry aims to issue equipment orders worth Rs 2 lakh crore during the ongoing fiscal, as part of the planned modernisation and domestic procurement strategy, Singh said.

Of the Rs 1.8 lakh crore capital outlay announced during the budget, Rs 1.48 lakh crore was allocated for capital acquisition.

“We will sustain this level of contract signings in terms of at least another Rs 2 lakh crore of contracts, as well as ensuring that the bulk of these goes to the domestic industry,” Singh said.

Beyond capital expenditure, the ministry allocated Rs 3.11 lakh crore for revenue expenditure, including salaries and sustenance costs. Defence pensions accounted for Rs 1.61 lakh crore, while the Defence Research and Development Organisation received Rs 26,816 crore—a 12.4% increase from the preceding fiscal.