India’s Defence Modernisation Drive

• 07 Feb 2026

This editorial is based on “Defence spending rises in Union Budget, but capability gains remain key” which was published in The Business Standards on 04/02/2026. This editorial examines the rise in India’s defence spending in Budget 2026–27 and argues that real security gains will depend on efficient execution, jointness, and capability creation rather than higher allocations alone.  

For Prelims: iDEX Scheme,Agnipath Scheme,Project 17A,Operation Sindoor, Integrated Air Command and Control System (IACCS),Indian Ocean Region. 

For Mains: Current development in India’s defense sector, key issues and measures. 

India’s defence sector has entered a phase where higher spending is no longer enough, capability creation has become the real benchmark. The Union Budget’s push to raise defence outlay to 2% of GDP, shaped by recent operational realities, reflects a strategic shift from intent to preparedness. However, enduring constraints of legacy manpower costs, procurement delays, and industrial absorptive limits continue to test outcomes. The future of India’s defence readiness will thus depend on how efficiently resources translate into credible military capability, not merely on budgetary expansion. 

What are the Major Developments in India’s Defence Sector?  

• Historic Budget Allocation for Defence Modernisation: The Union Budget 2026-27 marks a decisive shift from revenue-focused spending to capital-intensive modernisation, allocating a record ₹7.85 lakh crore to the Ministry of Defence.  
  • It is a 15.19% hike over FY25 estimates signals a robust fiscal commitment to bridging critical capability gaps in fighter squadrons and naval platforms amidst volatile northern borders. 
  • Further, capital outlay stands at ₹2.19 lakh crore (up 21.8% YoY), with ₹1.39 lakh crore strictly earmarked for domestic procurement to boost local manufacturing. 
• Strategic Reset Post-"Operation Sindoor" & Tri-Service Integration: Following the integrated "Operation Sindoor"in May 2025, the armed forces have accelerated the theatre command structures, moving beyond theoretical doctrines to combat-proven jointness.  
  • The operation exposed gaps in drone warfare and infantry coordination, prompting the immediate raising of specialized "Rudra" integrated brigades to decentralize surveillance capabilities. 
  • The Army reorganised infantry battalions to include dedicated 'Ashni' drone units and established Integrated Air Command and Control System (IACCS) nodes for seamless air-ground coordination. 
• Strengthening the Nuclear Triad: India has solidified its second-strike capability with the commissioning of advanced sea-based assets and rail-mobile delivery systems, ensuring survivability against pre-emptive strikes.  
  • The focus has shifted to operationalizing the third leg of the nuclear triad to counter the expanding maritime presence of adversaries in the Indian Ocean Region (IOR). 
  • Commissioning of INS Aridaman (3rd Arihant-class SSBN) in early 2026 and the Agni-Prime rail-based test (September 2025) confirm a mobile, survivable deterrent force. 
• Indigenous Fighter Ecosystem: The indigenous aviation sector has moved from development to mass production, critical for arresting the IAF's depleting squadron strength, with the US-India GE F414 deal reaching final execution stages. This partnership secures the powertrain for future platforms like the Tejas Mk2 and AMCA, reducing dependency on Russian propulsion systems while ensuring technology transfer. 
  • For instance, recently, Hindustan Aeronautics Limited (HAL) has confirmed that five Tejas Mk1A fighter jets are fully ready for delivery to the Indian Air Force (IAF). 
• Naval Indigenisation & Project 17A Stealth Frigates: The Indian Navy is aggressively pursuing a "Builders Navy" capability, delivering stealth platforms that enhance blue-water reach and anti-submarine warfare (ASW) prowess without foreign reliance.  
  • This push is visible in the rapid commissioning of stealth frigates and the P-75 submarine program, ensuring dominance over key maritime choke points. 
  • Commissioning of INS Vaghsheer (6th Scorpene) in January 2025 and induction of Project 17A frigates like INS Taragiri underscore a fleet expansion to 170+ ships by 2027. 
• Strategic Diversification in Defence Cooperation: Breaking away from traditional alignment, India signed a landmark security pact with the European Union in January 2026, expanding defence cooperation into cyber, space, and maritime domains.  
  • This diversification reduces reliance on any single bloc and opens access to European high-tech markets for critical components like sensors, chips, and marine propulsion. 
  • The EU and India also have annual Security and Defence Consultations and launched a Strategic Dialogue on Foreign and Security Policy in June 2025. 
    • Both sides continue to participate in dedicated sectoral dialogues in areas such as maritime security, cyber security, counterterrorism and non-proliferation.  
• Strengthening Air Defence: "Mission Sudarshan Chakra" serves as a multi-layered, network-centric umbrella that autonomously prioritizes aerial threats ranging from low-cost "suicide" drones to high-velocity hypersonic glide vehicles.  
  • By integrating the IACCS (Integrated Air Command and Control System) with real-time satellite data, the mission creates a "kill-web" that ensures no single point of failure can compromise national airspace. 
  • As of early 2026, India has operationalized three S-400 squadrons (renamed Sudarshan units) with the final two batteries arriving to complete the strategic shield. 
• Deep-Tech Self-Reliance: The government has structurally institutionalized innovation by moving beyond traditional DPSUs, empowering a "Startup-to-Soldier" pipeline through the iDEX (Innovations for Defence Excellence) framework and high-value ADITI grants.  
  • By coupling these financial incentives with strict Positive Indigenisation Lists (PILs), India is creating a captive domestic market for deep-tech solutions in AI, quantum, and autonomous systems that were previously imported.   
  • For instance, in July 2024, the Ministry of Defence on July 16 notified the fifth positive indigenisation list (PILs) of 346 items for Defence Public Sector Undertakings (DPSU) which includes strategically important Line Replacement Units. 
• Space Defence Convergence: The integration of space-based intelligence into tactical operations has transformed India’s "Sensor-to-Shooter" loop from a linear process into a multi-dimensional "kill-web" that ensures total situational awareness. 
  • The Government of India has entered into a nearly ₹3,000-crore agreement with NewSpace India Limited (NSIL), the commercial arm of ISRO, for the procurement of an advanced communication satellite, GSAT-7B. 
  • GSAT-7B will deliver high-throughput, secure communication services to the Army, with the total project cost estimated at ₹2,963 crore. 
  • The deal is strategically significant as the Indian Army currently lacks a dedicated communication satellite, unlike the Air Force and the Navy. The satellite is expected to be operational by 2026. 
• Surge in Defence Exports & Manufacturing Corridors: India’s defence industrial base has transitioned from import-dependency to becoming a net exporter, major breakthroughs include the export of BrahMos missiles to the Philippines and Pinaka Multi-Barrel Rocket Systems to Armenia, validating India's technological maturity.  
  • The maturing Defence Industrial Corridors (DICs) in UP and Tamil Nadu are now generating tangible output, attracting FDI and integrating MSMEs into the global supply chain. 
  • Defence exports hit a record ₹23,622 crore in FY25 (12% growth), 75% of the capital budget is now reserved for domestic industry to sustain this manufacturing boom. 

What are the Key Issues Associated with India’s Defence Sector? 

• Skewed Revenue-to-Capital Ratio & Pension Burden: Despite the record ₹7.85 lakh crore allocation in Budget 2026-27, the defence budget remains heavily weighed down by revenue expenditure, specifically pensions and salaries, which leaves limited fiscal space for critical modernization.  
  • For instance, pensions alone consume ₹1.71 lakh crore while the Capital Outlay for modernization is ₹2.19 lakh crore, maintaining a suboptimal ratio that barely meets the committed liabilities of past deals. 
  • This structural imbalance forces the armed forces to prioritize "sustenance" over "transformation," delaying the acquisition of next-gen platforms needed to counter China's rapid military modernization. 
• Critical Fighter Squadron Depletion & Aerial Gap: The Indian Air Force is confronting a serious capability shortfall, fielding only about 29–31 fighter squadrons against an authorised strength of 42 needed to effectively counter a potential two-front collusive threat, even as China has deployed J-20 stealth fighters at bases located less than 150 kilometres from the border. 
  • The retirement of legacy MiG-21s has outpaced the induction rate of indigenous Tejas Mk1A jets, leaving air defence vulnerable, especially as the Multi-Role Fighter Aircraft (MRFA) deal for 114 jets remains stuck in procedural delays. 
• Persistent Import Dependency in Strategic Technology: While "Atmanirbhar Bharat" has boosted low-to-mid-tech manufacturing, India remains critically dependent on foreign OEMs for high-value strategic subsystems like jet engines, marine propulsion, and advanced sensors.  
  • This dependency creates a vulnerability where supply chain shocks (as seen in the delay of GE F414 engines) can paralyze indigenous production lines of key platforms like the Tejas Mk2 and AMCA. 
  • Also, according to the Stockholm International Peace Research Institute (SIPRI), India ranks as the world’s second-largest arms importer, after Ukraine. 
• "Turf Wars" Delaying Integrated Theatre Commands: The transition faces internal resistance and doctrinal divergence, particularly regarding the control of limited assets like air power and long-range artillery.  
  • The Shekatkar Committee (2016) recommended the creation of three integrated theatre commands, Western, Northern, and Southern, to improve tri-service integration and optimize resource utilisation. 
  • The lack of a common "joint fighting doctrine" and disagreements over the structure of the Air Defence Command have stalled the operationalization of the Jaipur (Western) and Lucknow (Northern) theatre commands, hindering true jointness. 
    • The establishment of the Maritime Theatre Command, headquartered in Thiruvananthapuram, has also been delayed. 
• Structural Constraints in India’s Defence Innovation Ecosystem: India's defence Research & Development (R&D) spending is disproportionately low compared to China, leading to a technological asymmetry in emerging domains like hypersonics, AI, and directed energy weapons.  
  • The DRDO's monopoly and bureaucratic sluggishness contrast sharply with China's "civil-military fusion" model, which has allowed Beijing to field operational hypersonic missiles while India is still in the testing phase. 
  • The Comptroller and Auditor General (CAG) has flagged serious deficiencies in high-priority DRDO projects, citing widespread time and cost overruns, irregular closures, and instances where projects were declared successful despite unmet objectives.  
    • Of 178 projects reviewed, 119 missed original timelines, with delays ranging from 16% to 500%, and 49 projects exceeding their scheduled duration by over 100%. 
• Manpower Retention Issues: The "Agnipath" recruitment model is facing teething issues regarding the retention of skilled personnel, with the 25% retention cap creating a potential "skill void" in technical wings like the Navy and Air Force.  
  • Feedback from the first batches suggests that the 4-year tenure is insufficient to master complex weapon systems, leading to operational risks and a loss of unit cohesion in specialized infantry regiments.  
  • Further, internal surveys indicate 72% of Agniveers report job stress due to uncertainty. 
• Infrastructure Asymmetry at the LAC: Despite the increased allocation to the, India's border infrastructure on the Line of Actual Control (LAC) still lags behind China's "dual-use" villages and high-speed rail networks in Tibet.  
  • This logistical asymmetry restricts the Indian Army's ability to rapidly mobilize heavy armour and artillery to forward areas during winter, giving the PLA a distinct mobilization advantage. 
  • For instance, China has been constructing over 600 Xiaokang or “well-off villages” along India's borders with the Tibet Autonomous Region. 
    • However, the Border Roads Organisation (BRO) is yet to complete a 130-km alternative all-weather road to the Daulat Beg Oldie (DBO) outpost in eastern Ladakh, aimed at ensuring secure, year-round access. 
• Vulnerability to Cyber and Grey-Zone Warfare: India's defensive posture is largely kinetic, leaving critical military networks vulnerable to non-kinetic "grey-zone" attacks such as cyber-espionage and crippling of command-and-control systems.  
  • The recent rise in cyber-attacks and the lack of a dedicated offensive cyber doctrine expose a soft underbelly that adversaries can exploit without firing a shot. 
  • For instance, an October 2025 report alleging APT36’s targeting of India’s BOSS Linux system highlights the expanding scale of Pakistan’s cyber-espionage activities and underscores the urgent need to strengthen India’s digital defence architecture. 

What Measures are Needed to Strengthen India’s Defence Sector?  

• Institutionalising "Civil-Military Fusion" in R&D: India must move towards a "National Civil-Military Fusion Framework" to dismantle the silos between defence labs, private academia, and commercial industries, ensuring dual-use technologies like AI and quantum computing are seamlessly adapted for military application.  
  • This requires statutory backing to enforce the cross-pollination of research, allowing the armed forces to leverage rapid civilian innovation cycles rather than relying solely on sluggish, bespoke military development pathways for emerging threats. 
• Implementing an "Agile Acquisition Protocol": The Ministry should transition from the rigid Defence Acquisition Procedure (DAP) to an "Agile Acquisition Protocol" for software-defined and asymmetric technologies, permitting the rapid spiral development of prototypes rather than demanding finalized operational requirements upfront.  
  • This shift would empower the services to procure "Minimum Viable Products" (MVPs) from startups and iterate based on field feedback, drastically reducing the "sensor-to-shooter" timeline gap that currently plagues indigenous deployment. 
• Operationalising a Non-Lapsable Modernisation Fund: The government must operationalise the "Non-Lapsable Defence Modernisation Fund" (NLDMF) to insulate capital acquisition budgets from fiscal year-end lapses, thereby enabling long-term strategic planning for mega-projects like aircraft carriers and fighter squadrons.  
  • This financial structuring would provide certainty to domestic OEMs and foreign partners, eliminating the "rush-to-spend" syndrome and allowing for multi-year payment milestones that align with complex manufacturing lifecycles. 
• Enforcing "Performance-Linked Accountability" in PSUs: A "Performance-Linked Oversight Mechanism" for DRDO and Defence PSUs must be mandated by an independent parliamentary body to enforce strict accountability on project timelines, penalizing cost overruns and delays with budget cuts or management restructuring.  
  • By decoupling production from development and privatizing non-strategic manufacturing verticals, the state can focus purely on high-risk strategic technologies, breaking the monopoly that currently stifles the efficiency of the defence industrial base. 
• Unifying Legal and Logistical Codes for Jointness: Accelerate the integration of Integrated Theatre Commands (ITCs) by establishing a "Joint Services Administrative Code" that unifies legal, logistical, and training standards across the Army, Navy, and Air Force, replacing archaic single-service acts.  
  • This measure must prioritize the creation of a "Joint Logistics Backbone" to eliminate redundant supply chains, ensuring that interoperability is not just a command structure concept but a ground-level operational reality that optimizes resource utilisation. 
• Adopting a "Forward Defence" Cyber Doctrine: India needs to formulate a distinct "Grey Zone Warfare Doctrine" that actively integrates offensive cyber capabilities and cognitive warfare under a centralized command to counter non-kinetic statecraft and sub-conventional threats.  
  • This requires shifting from a passive cyber-defence posture to "Forward Defence," empowering the Defence Cyber Agency to conduct pre-emptive operations that neutralize adversary networks before they can disrupt critical national infrastructure or military command loops. 
• Elevating Defence Exports to "Diplomatic Statecraft": Policy must elevate defence exports to a primary instrument of foreign policy by creating a "Defence Diplomacy Wing" within the MEA, specifically tasked with securing credit lines and long-term maintenance contracts for friendly foreign nations.  
  • This strategic pivot involves bundling hardware sales with training and joint exercises, thereby creating "dependency networks" in the Indian Ocean Region that serve India’s geopolitical interests while providing economies of scale for domestic manufacturers. 
• Modernising Professional Military Education (PME): The Professional Military Education (PME) curriculum requires a complete overhaul to include mandatory "Technological Statecraft" modules, training the officer cadre in the strategic management of disruptive technologies like autonomous systems and space warfare.  
  • This intellectual modernization must be paired with a "Lateral Entry Scheme" for niche specialists in data science and cryptography, ensuring the command hierarchy possesses the technical literacy required to lead in modern, multi-domain battlefields. 

Conclusion 

India’s defence transformation now hinges less on the size of allocations and more on the speed, coherence, and quality of capability creation. While Budget 2026-27 signals strategic intent through higher capital outlays and indigenisation, structural bottlenecks in manpower, technology, and jointness continue to dilute outcomes. Bridging this gap requires institutional reform, agile procurement, and deep civil-military integration across emerging domains. Only then can defence spending translate into credible deterrence and sustained strategic autonomy in an increasingly contested security environment. 

Drishti Mains Question

Despite a rise in defence expenditure, India continues to face persistent capability gaps. Examine the structural and institutional factors that limit the translation of higher defence spending into effective military capability. 

FAQs

1. Why is the 2026–27 defence Budget considered significant?
Because it raises defence spending to nearly 2% of GDP with a strong shift towards capital expenditure and modernisation.

2. What operational event influenced the current defence allocations?
Operation Sindoor (2025), which exposed capability gaps in joint operations, drones, and air defence.

3. What is the main concern with higher indigenisation targets?
Slow delivery timelines and limited absorptive capacity of domestic defence manufacturers.

4. Why does the revenue–capital imbalance remain a problem?
High pension and salary liabilities continue to constrain funds available for future-oriented platforms.

5. What determines real defence capability beyond budget size?
Efficient execution, timely procurement, jointness, and technological self-reliance, not just higher allocations. 

UPSC Civil Services Examination, Previous Years Questions (PYQs)   

Prelims

Q. Operations undertaken by the Army towards upliftment of the local population in remote areas to include addressing of their basic needs is called: (2024)

(a) Operation Sankalp   

(b) Operation Maitri   

(c) Operation Sadbhavana   

(d) Operation Madad   

Ans: C

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Mains 

Q. “Increasing cross-border terrorist attacks in India and growing interference in the internal affairs of several member-states by Pakistan are not conducive for the future of SAARC (South Asian Association for Regional Cooperation).” Explain with suitable examples. (2016).

Q. The terms ‘Hot Pursuit’ and ‘Surgical Strikes’ are often used in connection with armed action against terrorist attacks. Discuss the strategic impact of such actions. (2016)