India Eyes Rs 2 Lakh Crore in Defence Contracts for FY26

New Delhi, Jul 7 (KNN) India is set to ramp up its defence expenditure significantly, with plans to sign contracts worth Rs 2 lakh crore in the financial year 2025-26. 

Defence Secretary Giridhar Aramane confirmed that the government is aiming to gradually raise the defence budget to around 2.5% of GDP over the next five years, from the current level of approximately 1.9%.

The Ministry of Defence is working closely with the Finance Ministry and the 16th Finance Commission to secure additional funding. 

Aramane stated that depending on project execution speeds and industry readiness, the ministry may seek extra allocations during the revised budget stage of FY26.

One of the key focus areas in FY26 will be the Advanced Medium Combat Aircraft (AMCA) programme, India’s 5th-generation fighter jet project. 

A contract for the indigenous aircraft is expected to be signed within the next three to six months. 

While flight testing of the AMCA is expected to take nearly a decade, the government is also exploring foreign options to temporarily fill the capability gap.

The government has already approved the procurement of three Apache helicopters from the US and several Make-in-India defence projects are in the pipeline. 

A recent Jefferies report highlighted a 328% year-on-year increase in India’s defence capital expenditure in May 2025, following the successful “Operation Sindoor.” The report also estimates a robust 14% CAGR in India’s defence spending till FY2030.

This push for higher spending comes alongside India’s growing focus on indigenous manufacturing and export of defence equipment. 

The country currently exports to over 90 nations and aims to boost annual defence exports to Rs 50,000 crore by FY26 and Rs 3 lakh crore by FY29, reflecting its ambition to become a major global defence supplier.

(KNN Bureau)