Speaking after Finance Minister Nirmala Sitharaman announced a defence outlay of ₹7.85 lakh crore for FY27, Singh said the government’s intent is to steadily enhance India’s military capability while ensuring long-term fiscal sustainability. The Budget marks a 15.2% rise over the previous year’s allocation and includes a 20.1% increase in defence capital expenditure to ₹2.31 lakh crore, reflecting a renewed emphasis on capability building and self-reliance.
Singh said the aspiration presented before the Finance Commission was clear. “I asked for a CAGR of about 19%, so that over a five-year period, we end up close to 2.5% of GDP. That was my aspiration,” he said, adding that the final decision will rest with the government.
The Defence Secretary noted that the higher allocation was supported by improved spending efficiency and record procurement activity in recent years. “Because of the better utilisation that we were able to show over the last two years, and because we did a record number of contract signings… they have given us a 21% increase in our overall capex budget,” he said, pointing also to the “prevailing geopolitical flux” in the region.
A significant portion of the increased capital outlay will go towards committed liabilities from major contracts already signed, including Rafale Marine aircraft and Predator drones, with milestone payments due over the next two to three years. Singh said the government is also preparing for large big-ticket purchases in drones, counter-drone systems, and fighter aircraft to address gaps in India’s depleting fighter fleet strength.
The Budget has earmarked one of the largest allocations — around ₹64,000 crore — for defence aircraft and aero engines. Singh confirmed that India is moving ahead with plans to co-develop a jet engine with an international partner. “That process is on… I can’t give you a timeline… but it is going to happen,” he said.
He also indicated progress on strengthening the Navy’s submarine fleet and acquiring medium-role fighter aircraft for the Indian Air Force, while refraining from specifying timelines given that key decisions remain at higher levels of government.
On the indigenous Advanced Medium Combat Aircraft (AMCA) programme, Singh said the response from the private sector had been unexpectedly strong, with seven consortia bidding. He said the process has now narrowed to three contenders, and cost bids for producing five prototypes are expected soon. “We should get this finalised in about three months’ time,” he said, with prototypes likely in three to four years, while full production could take a decade.
Singh also highlighted how recent operational lessons have shaped India’s modernisation priorities. Referring to Operation Sindoor, he said it underscored the evolving nature of warfare, including the growing role of drones, counter-drone systems, air power and precision weapons. This has led to emergency procurements and fast-track buys to plug immediate capability gaps.
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Emergency procurement contracts worth 15% of last year’s budget have already been signed, Singh said, with strict delivery timelines of one year, giving private industry and component manufacturers clear visibility on orders.
Looking ahead, Singh argued that India’s strong nominal GDP growth provides room to scale defence spending without undermining fiscal priorities. While a baseline 10% annual increase is feasible, he said the push must be stronger. “I am aspiring for a bit more — closer to 15% to 20%… to about 2.5%,” he said, signalling that the Budget is only the first step in a multi-year expansion of India’s defence preparedness and manufacturing ambition.
Watch accompanying video for entire conversation.
