As India approaches Budget 2026–27, the key story in defence spending lies not merely in absolute numbers but in percentages. In the current fiscal, defence allocation stands at around 1.9 per cent of GDP, unchanged from 2024–25 and noticeably lower than in previous years. India’s defence expenditure as a share of GDP has been on a steady decline, raising concerns about long-term military preparedness. The downward trend is evident since 2020–21, when defence spending peaked at 2.4 per cent of GDP. According to information shared by the Ministry of Defence in July, the government is seeking to push this figure up to 2.5 per cent in the upcoming budget — a demand that has only grown stronger following Operation Sindoor. While the GDP share has weakened, defence outlay in absolute terms continues to rise. In Budget 2025–26, the Ministry of Defence received ₹6.81 lakh crore, marking a 9.53 per cent increase, the highest allocation among all ministries. However, the capital expenditure component tells a different story. Of the total, ₹1.80 lakh crore (26.43 per cent) was earmarked for capital expenditure, lower than last year and below the 29 per cent allocation in 2023–24. Defence spending today faces a dual challenge: increasing its share of GDP and strengthening capital investment. At the same time, the sector is driving the ‘Make in India’ push through faster approvals, new technologies, and relaxed rules to boost domestic manufacturing and establish India as a global MRO hub. With the Defence Acquisition Council approving capital proposals worth nearly ₹79,000 crore in late 2025, expectations are high. The coming budget will determine whether India can reverse recent trends and place defence modernisation on a stronger footing.