Union Budget 2025-26: Defence sector sees major capex boost, no change in Railways and roads allocation

New Delhi, Feb 1: Finance Minister Nirmala Sitharaman has allocated Rs 11.21 lakh crore for capital expenditure in the Union Budget for 2025-26, marking a 0.9% increase over last year’s Budget Estimate of Rs 11.11 lakh crore. However, compared to the revised estimate of Rs 10.18 lakh crore for 2024-25, the 2025-26 budget is significantly higher.

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Capital expenditure (capex) refers to funds spent on long-term physical assets. Among the sectors, defence stands out with the largest hike in capex, receiving a 4.6% increase for 2025-26, totaling Rs 1.8 lakh crore. The 2024-25 Budget Estimate for defence was Rs 1.72 lakh crore, later revised downward to Rs 1.59 lakh crore. The new defence capex target for 2025-26 is 13.3% higher than the revised estimate for the current fiscal year.

India’s defence sector is seeing strong growth, driven by increased capital expenditure, rising defence exports, and a strong push towards domestic manufacturing. Over the past decade, the government has shifted policies and procedures to accelerate domestic defence production. It has introduced reforms to foster indigenous design, development, and production of defence equipment, promoting self-reliance. Additionally, significant investments are being made in defence and aerospace manufacturing, with several defence hubs being established across the country.

India’s defence exports reached a record Rs 21,083 crore (around USD 2.63 billion) in 2023-24, a 32.5% increase from the previous year. Defence exports have increased 31-fold since 2013-14, highlighting the sector’s impressive growth. Furthermore, defence production in India grew by 17% to Rs 1.27 lakh crore in the last fiscal year.

Turning to railways and roads, both essential sectors for India’s economic growth, the capital expenditure targets for 2025-26 have been kept the same as last year. The Railways capex is set at Rs 2.52 lakh crore, matching the 2024-25 estimate, while the Roads sector also sees no change, with a capital outlay of Rs 2.72 lakh crore, consistent with the Budget and Revised Estimate for the previous fiscal year.