Will seek 2x normal growth in FY27 military modernisation budget: Def Secy

India may seek a 20% rise in defence modernisation spending next year as the MoD pushes for faster upgrades, stronger exports, and stricter accountability across domestic and foreign defence suppliers

India’s outlay for procuring new equipment and weapon platforms for the armed forces in next year’s Budget is likely to increase, with Defence Secretary Rajesh Kumar Singh saying on Friday that the Ministry of Defence (MoD) will seek a 20 per cent rise in the defence modernisation component for the coming financial year—double the usual 10 per cent increase seen in previous years.

 

Speaking at FICCI’s 98th Annual General Meeting and Annual Convention in the capital, Singh said, “We have been comfortably getting a 10 per cent increase in our modernisation or capex Budget every year. Next year, we will be probably asking for something closer to the 20 per cent mark.” Citing the ongoing geopolitical turmoil across the world, the rearmament underway in European and ASEAN countries, and the situation in India’s immediate neighbourhood as reasons for seeking such an increase, Singh added, “I don’t see any difficulties in getting that kind of an allocation from the Ministry of Finance.”

 

Underscoring that defence expenditure has been shrinking as a share of the gross domestic product (GDP)—and now stands below two per cent—the secretary said that, in his view, a 20 per cent year-on-year increase in the modernisation component of the defence Budget is required for the next few years. “That will be sufficient to meet all of our ongoing capability plans,” he added, assuring that, given the country’s growing and diversified defence industrial base, the absorptive capacity to utilise these additional resources already exists.

 

The MoD will be seeking the enhanced allocation after having exhausted the military modernisation budget in FY25 for the first time in five years. For FY26, around ₹1.49 trillion has been allocated under this head. The overall FY26 defence budget allocation is ₹6.81 trillion .

 

Defence exports to double ahead of FY30 deadline

 

Responding to a question during a panel discussion, the secretary said he was confident that defence exports would double to around Rs 50,000 crore within the next two to three years—well before the FY30 deadline—up from about Rs 23,000 crore in FY25. “We will exceed that target quite easily,” he added.

 

He also revealed that, following its employment during Operation Sindoor in May, numerous enquiries had been received from other countries for the Indo-Russian BrahMos supersonic cruise missile, with orders from Vietnam and Indonesia expected fairly soon. “We expect similar momentum with many other platforms as well,” he added.

 

Indo-Russian defence cooperation to continue

 

Describing India’s defence cooperation with Russia as long-standing, the secretary said, “We are not going to stop our defence cooperation with them anytime soon.” However, he stressed that India follows a policy of strategic autonomy, under which it will procure equipment according to its needs from both Russia and the United States, with the aim of diversifying its sources of supply.

 

Against the backdrop of Russian President Vladimir Putin’s state visit to India next week, the secretary said that maintenance and support for the substantial quantity of Russian legacy equipment operated by the Indian armed forces, along with the remaining S-400 Triumf air defence systems yet to be delivered, would be on the agenda. India procured the S-400 in a 2018 deal worth about Rs 40,300 crore. Although all five squadrons were originally scheduled for delivery by end-2023, the remaining two are reportedly expected in 2026 and 2027.

 

Joint manufacturing is the future

 

In line with the government’s self-reliance in defence initiative, the secretary said that foreign defence original equipment manufacturers would have to get used to the fact that most of the country’s defence expenditure will be spent within India. “If they want to get a share of the pie, they will have to form joint ventures and co-produce here,” he stressed.

 

While noting that, in his view, co-production with the United States was still some time away, the secretary said he saw greater prospects for co-production and joint ventures with French and Russian firms.

 

The secretary also underscored that, of the Rs 2 trillion worth of contracts signed by the MoD in FY25, Rs 1.33 trillion—almost 88 per cent—was with domestic suppliers. “This trend will continue, and this proportion will never go below 75 per cent. Big global buys will be exceptions rather than the norm,” he added. The secretary also revealed that the MoD had signed contracts worth about Rs 1.5 trillion so far in FY26.

 

Greater accountability needed

 

The secretary also called for greater accountability to go hand in hand with the increase in contract signings, stressing that while the MoD was responsible for speedier procurement, suppliers—domestic or foreign, public or private—were responsible for meeting the promised milestones.

 

Taking a tough line at another defence conclave earlier in the day, the secretary said that more stringent action would be needed against delays in the delivery of defence equipment and services, with a greater likelihood of damages being levied on suppliers.

 

He underscored that, under the ongoing Rs 40,000-crore sixth tranche of emergency procurement (EP) for the armed forces, the MoD has already decided that any contract not executed on time will be foreclosed.

 

Responding to questions about delays in procuring contracted equipment, Singh said, “We will need to start cracking down much more, apply liquidated damages clauses much more.”

 

Highlighting that action was already underway, he added, “In the current round of emergency purchases, we have taken a very tough stand: any case where delivery is not completed within one year will be foreclosed. I intend to ensure that is done. Irrespective of who it is, which company, or which country, we will foreclose every contract within one year.”

 

The secretary stressed that it is hoped such decisions will begin to bring in a greater degree of accountability with respect to delivery milestones.

 

Under EP provisions, the three services can procure defence equipment worth up to Rs 300 crore on an urgent basis without any further clearances. Deliveries should begin within six months and end within a year of the contract date. The EP route has been used five times since 2016, with the sixth tranche underway.

 

The secretary, however, underscored that delays in the armed forces receiving the equipment they need were not caused by domestic manufacturers alone, noting that delays had also occurred in contracts with Russian and Israeli firms due to the conflicts their respective countries were engaged in. “All of it is not solely attributable to indigenous manufacturers, but yes, there is a tendency to over-promise and under-deliver,” he added.