Union Budget 2025: MoD Received Highest Budget Allocation Among All Ministries

Finance Minister Nirmala Sitharaman has allocated ₹6,81,210.27 crore for the Ministry of Defence (MoD) in Union Budget 2025 for FY 2025-26. This is a 9.53% increase compared to the Budgetary Estimate for FY 2024-25 and represents 13.45% of the total Union Budget, the highest share among all ministries.

Of this allocation, ₹1,80,000 crore (26.43%) is dedicated to Capital Outlay for Defence Services, while ₹3,11,732.30 crore (45.76%) is allocated for the Armed Forces’ Revenue expenditures. Defence Pension receives ₹1,60,795 crore (23.60%), and the remaining ₹28,682.97 crore (4.21%) is designated for civilian organizations under MoD.

The Ministry has declared FY 2025-26 as the ‘Year of Reforms’ to enhance the modernisation of the Armed Forces and streamline the Defence Procurement Procedure to ensure efficient use of funds.

Capital Outlay Plan by MoD

In light of evolving global security dynamics, the Indian Armed Forces require cutting-edge technology to stay combat-ready. To address this, ₹1,80,000 crore has been earmarked for Capital Outlay, a 4.65% increase from FY 2024-25’s Budgetary Estimate. Of this, ₹1,48,722.80 crore will be spent on Capital Acquisition for modernizing the Armed Forces, while ₹31,277.20 crore will go towards Research & Development and infrastructure development.

Since FY 2020-21, the MoD has focused on bolstering domestic industries and self-reliance. As part of this, 75% of the modernisation budget—₹1,11,544.83 crore—will be used to procure goods from domestic sources, with 25% (₹27,886.21 crore) allocated for procurement from domestic private industries.

Operational and Sustenance Budget

Revenue expenditure will cover pay, allowances, and the operational readiness of the Armed Forces, with ₹3,11,732.30 crore allocated for this purpose—a 10.24% increase over FY 2024-25. Of this, ₹1,14,415.50 crore is allocated for non-salary expenses, including the procurement of ration, fuel, and maintenance of equipment. This increase accounts for additional deployments and extended operational requirements, including those at border areas, and the hiring of vessels and aircraft.

A significant portion of the revenue budget, ₹1,97,317.30 crore, will be allocated for pay and allowances for personnel, with any additional needs to be addressed during the mid-year review.

Enhanced DRDO Allocation

The Defence Research and Development Organisation (DRDO) sees an increase in its budget to ₹26,816.82 crore for FY 2025-26, a 12.41% increase over the previous year. A major portion, ₹14,923.82 crore, will fund capital expenditures and R&D projects, reinforcing DRDO’s capacity to develop new technologies and collaborate with private industry partners. This will also support the development of deep technology in the defence sector.

Promoting Start-up Ecosystem for Defence Innovation

To foster self-reliance in defence technology and promote innovation, ₹449.62 crore has been allocated to the iDEX scheme, which includes the Acing Development of Innovative Technologies with iDEX (ADITI) sub-scheme. This marks a nearly threefold increase in two years, highlighting the government’s commitment to enhancing the start-up ecosystem in the defence sector.

Support for Ex-Servicemen Welfare

The government has allocated ₹8,317 crore for the Ex-Servicemen Contributory Health Scheme (ECHS), a 19.38% increase over the previous year. This funding ensures high-quality healthcare for veterans and their families. Additionally, ₹1.61 lakh crore has been allocated for Defence Pension, a 13.87% increase, reflecting the government’s commitment to supporting ex-servicemen and their dependents.

Capital Budget for the Indian Coast Guard

The Indian Coast Guard (ICG) receives a 26.50% increase in its budget, with ₹9,676.70 crore allocated across Capital and Revenue heads. The capital budget increases by 43%, from ₹3,500 crore in FY 2024-25 to ₹5,000 crore in FY 2025-26, enabling the acquisition of advanced equipment like helicopters, aircraft, and patrol vessels. The revenue budget has been increased to ₹4,676.70 crore to cover additional operational costs.

Strengthening Border Infrastructure

To improve border infrastructure, the Border Roads Organisation (BRO) has been allocated ₹7,146.50 crore—9.74% more than the previous year’s allocation. This funding will support the construction of tunnels, bridges, and roads in strategically important areas. It will also contribute to local economies by creating jobs and promoting skill development through the employment of local youth.

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