Relevance: GS III (Security & Government Budgeting) | Source: The Indian Express, Budget Documents 2026-27

1. The Context: Lessons from “Operation Sindoor”

The 2026-27 Defence Budget is not just about money; it is a strategic response to the realities of “Operation Sindoor” (May 2025). The military operation highlighted a critical lesson: in a crisis, India cannot rely on foreign supply chains.

  • The Pivot: Consequently, this budget shifts focus from “manpower-intensive” (more soldiers) to “tech-intensive” (more drones and smart weapons) warfare to ensure self-reliance.

2. The Big Numbers

  • Total Allocation: ₹7.85 Lakh Crore (The highest-ever allocation).
  • Share: It accounts for 14.67% of total Union Government spending and approximately 2% of India’s GDP.

3. Quality of Spending (Capital vs. Revenue)

Historically, India’s defence budget suffered from “Revenue Bias”—spending most money on salaries and pensions, leaving little for new weapons. This trend is reversing.

  • Capital Expenditure (Asset Creation): Allocation for buying new equipment (modernization) has jumped by 22% to ₹2.19 Lakh Crore.
  • The Ratio: The share of capital spending has risen to 29.44%, meaning nearly one-third of the budget is now creating long-term assets like submarines and fighter jets.

4. “Aatmanirbhar” in Defence

To stop reliance on foreign imports during wars, the government has set a strict domestic mandate.

  • The Rule: 75% of the Capital Acquisition Budget (roughly ₹1.39 Lakh Crore) is reserved exclusively for domestic industry.
  • Impact: This ensures that money spent on defence stays within the Indian economy, boosting local manufacturing and MSMEs.

5. Strategic Infrastructure

  • Border Roads Organisation (BRO): Funding has increased to ₹7,394 Crore. This is crucial for building strategic tunnels and airfields rapidly along the sensitive China and Pakistan borders.

UPSC Value Box

Concept / InstitutionRelevance for Prelims
Capital Expenditure (Capex)Money spent on acquiring permanent assets like machinery, weapons, equipment, or infrastructure (roads/airfields). It yields long-term benefits.
Revenue ExpenditureMoney spent on day-to-day running costs, such as Salaries, Pensions, and maintenance of existing equipment. It does not create new assets.
Border Roads Organisation (BRO)Functions under the Ministry of Defence. It develops and maintains road networks in India’s border areas and friendly neighboring countries.

Q. With reference to the Union Budget’s classification of Defence Expenditure, consider the following statements:

  1. Expenditure on the construction of strategic border roads by the Border Roads Organisation (BRO) is classified as Revenue Expenditure.
  2. Pensions paid to retired defence personnel are a part of Capital Expenditure.
  3. The “Capital Acquisition Budget” refers to the funds allocated for the procurement of new modernization equipment like aircraft and ships.

Which of the statements given above is/are correct?

(a) 1 only

(b) 3 only

(c) 2 and 3 only

(d) 1 and 2 only

Correct Answer: (b)

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