As Finance Minister Nirmala Sitharaman prepares the Union Budget 2026, industry body FICCI has urged the government to prioritise growth-enhancing capital expenditure, with a sharper focus on the defence sector amid rising global uncertainty.
In its pre-Budget memorandum, FICCI said India must place greater emphasis on technology-led defence innovation. It noted that the external security environment is increasingly volatile, with adversaries investing heavily in advanced military technologies such as autonomous weapons, hypersonic systems, UAV swarms and AI-enabled warfare. In this context, a strong, modern and well-resourced defence architecture is essential to safeguard territorial integrity and preserve strategic autonomy.
Shift from platform-centric to technology-driven capability
FICCI argued that future warfare will be multi-domain and information-centric, spanning land, air, sea, cyber, space and the electromagnetic spectrum. India must therefore move away from platform-centric modernisation towards networked, integrated and AI-enabled capabilities, supported by a robust indigenous innovation ecosystem. According to the industry body, increasing the defence budget is no longer merely a fiscal decision but a strategic imperative.
Defence Budget 2026: A four-point agenda
FICCI has proposed a four-pronged approach for the upcoming defence budget:
- Increase capital outlay for modernisation
In Budget 2025, the Ministry of Defence was allocated ₹6,81,210.27 crore for FY 2025–26, marking a 9.53% increase over the previous year. FICCI has suggested that while the government should maintain around 10% overall growth in defence allocations, the share of capital outlay should be raised to 30% from about 26%. Higher capital spending would support modernisation of military infrastructure and procurement of frontline assets, including UAVs, counter-UAV systems, electronic warfare equipment and air defence systems, particularly in border areas. - Strengthen DRDO funding for deep-tech innovation
FICCI has called for a significant increase in allocations to the Defence Research and Development Organisation (DRDO). The organisation received ₹26,816.82 crore in FY 2025–26, reflecting a 12.4% hike. The industry body has recommended an additional ₹10,000 crore in Budget 2026 to strengthen DRDO’s ability to pursue frontier technologies and fundamental research, especially through collaboration with private players under schemes such as the Technology Development Fund. This, it said, would accelerate the development of deep technologies in defence. - Expand defence industrial corridors to Eastern India
While acknowledging progress under the Atmanirbhar Bharat initiative through the Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu, FICCI said the momentum should be extended by establishing an Eastern India Defence Industrial Corridor. Aligned with the government’s Purvodaya vision, such a corridor could revitalise industrial clusters in eastern states, generate employment, stimulate R&D, boost defence manufacturing and support India’s ambition to become a global defence export hub, while strengthening national security across all three borders. - Create a dedicated mechanism to boost defence exports
Defence exports have grown at a compound annual growth rate of 46% between 2016–17 and 2023–24, driven largely by private sector participation. With the government targeting defence exports worth ₹50,000 crore by 2028–29, FICCI has proposed the creation of a Defence Export Promotion Council (DEPC). The proposed body would coordinate with the armed forces, DPSUs, private manufacturers, the Ministry of External Affairs, Indian missions abroad and the Ministry of Defence to engage foreign governments and buyers and systematically promote Indian defence products.
FICCI’s recommendations underline a broader message: Budget 2026 must treat defence spending not merely as expenditure, but as an investment in national security, technological sovereignty and long-term economic growth.
