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Union Budget 2026: Why will the upcoming Budget be defence-centric?
Summary
Union Budget 2026: Finance Minister Nirmala Sitharaman is all set to present the Union Budget for the financial year 2026-27 on Sunday, February 1. Market experts believe that the upcoming budget will place a strong emphasis on emerging priority sectors that can drive long-term growth and strategic resilience.
The defence sector is likely to receive heightened focus, building on the Centre’s formation of a dedicated committee to nurture allied defence capabilities, according to experts.
“The defence sector’s growth can be accelerated through stronger Budget support for indigenisation and exports by expanding the Positive Indigenisation Lists, strengthening defence industrial corridors with better fiscal incentives and infrastructure, simplifying licensing and export procedures, and increasing allocations for R&D, innovation and technology transfer, while targeted export incentives and credit support can help scale defence exports towards long-term targets,” said Pranay Aggarwal, Director and CEO of Stoxkart.
The Union Budget for FY 2025-26 allocated ₹6,81,210.27 crore ($81 billion) to the Ministry of Defence (MoD), representing a 9.5% increase from the previous year.
Defence sector has become an important sector to focus on amid rising geopolitical tensions due to US-Venezuela tension, Middle East conflict and others.
Market experts are anticipating a 20% higher budget allocation in the defence sector in the upcoming budget. “ We are in a particularly tough neighbourhood; we will be asking closer to 20% higher allocation in the coming budget. Defence Secretary Rajesh Kumar Singh stated this in November last year, referring to the incremental approach of allocating only 10% higher defence funds every year,” said Mahesh M Ojha, AVP, Research at Kantilal Chaganlal Securities.
Ravi Singh, Chief Research Officer at Master Capital Services, believes that the defence sector is expected to benefit from continued government support focused on indigenisation.
“The Budget may reinforce this through higher capital allocation, stronger preference for domestic procurement, and policies that encourage exports. Measures that speed up procurement timelines or provide long-term visibility on orders would be particularly helpful,” Singh said.
He further explained that export-related support, such as easier financing, government-backed deals, or incentives for overseas sales, could also play an important role.
“These steps would help Indian defence companies scale up and compete globally. Overall, the focus is likely to remain on building domestic capability while gradually expanding India’s footprint in defence exports,” Singh said.
He further highlighted that Defence electronics and aerospace are expected to benefit the most, as modern defence systems rely heavily on electronics such as radars, communication systems, sensors and missiles, making this a high-priority area. Aerospace should also gain from ongoing aircraft, helicopter and engine programs.
According to Aggarwal of Stoxkart, companies with strong order visibility, execution capability and policy tailwinds appear best positioned for long-term growth, particularly leading players in aerospace, defence electronics and naval shipbuilding that benefit from indigenisation, exports and long-term strategic procurement.
Meanwhile, Singh believes that selected companies such as HAL, BEL and BDL could deliver higher growth as outsourcing increases and exports pick up.
“The key is to focus on companies with execution capability and alignment with the government’s indigenisation roadmap rather than chasing short-term Budget reactions,” he added.
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.
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The defence sector is likely to receive heightened focus, building on the Centre’s formation of a dedicated committee to nurture allied defence capabilities, according to experts.
“The defence sector’s growth can be accelerated through stronger Budget support for indigenisation and exports by expanding the Positive Indigenisation Lists, strengthening defence industrial corridors with better fiscal incentives and infrastructure, simplifying licensing and export procedures, and increasing allocations for R&D, innovation and technology transfer, while targeted export incentives and credit support can help scale defence exports towards long-term targets,” said Pranay Aggarwal, Director and CEO of Stoxkart.
The Union Budget for FY 2025-26 allocated ₹6,81,210.27 crore ($81 billion) to the Ministry of Defence (MoD), representing a 9.5% increase from the previous year.
Defence sector has become an important sector to focus on amid rising geopolitical tensions due to US-Venezuela tension, Middle East conflict and others.
Market experts are anticipating a 20% higher budget allocation in the defence sector in the upcoming budget. “ We are in a particularly tough neighbourhood; we will be asking closer to 20% higher allocation in the coming budget. Defence Secretary Rajesh Kumar Singh stated this in November last year, referring to the incremental approach of allocating only 10% higher defence funds every year,” said Mahesh M Ojha, AVP, Research at Kantilal Chaganlal Securities.
Ravi Singh, Chief Research Officer at Master Capital Services, believes that the defence sector is expected to benefit from continued government support focused on indigenisation.
“The Budget may reinforce this through higher capital allocation, stronger preference for domestic procurement, and policies that encourage exports. Measures that speed up procurement timelines or provide long-term visibility on orders would be particularly helpful,” Singh said.
He further explained that export-related support, such as easier financing, government-backed deals, or incentives for overseas sales, could also play an important role.
“These steps would help Indian defence companies scale up and compete globally. Overall, the focus is likely to remain on building domestic capability while gradually expanding India’s footprint in defence exports,” Singh said.
He further highlighted that Defence electronics and aerospace are expected to benefit the most, as modern defence systems rely heavily on electronics such as radars, communication systems, sensors and missiles, making this a high-priority area. Aerospace should also gain from ongoing aircraft, helicopter and engine programs.
According to Aggarwal of Stoxkart, companies with strong order visibility, execution capability and policy tailwinds appear best positioned for long-term growth, particularly leading players in aerospace, defence electronics and naval shipbuilding that benefit from indigenisation, exports and long-term strategic procurement.
Meanwhile, Singh believes that selected companies such as HAL, BEL and BDL could deliver higher growth as outsourcing increases and exports pick up.
“The key is to focus on companies with execution capability and alignment with the government’s indigenisation roadmap rather than chasing short-term Budget reactions,” he added.
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Download the Mint app and read premium stories
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AI Description
The article discusses the anticipated focus on the defence sector in the Union Budget 2026-27, highlighting the strategic importance of nurturing allied defence capabilities.