As global geopolitical fault lines deepen, nations worldwide are reassessing their security needs and opening their coffers. The ongoing Russia-Ukraine war, recent US military action in Venezuela, and a more assertive US foreign policy under President Donald Trump have collectively heightened international instability. In this volatile climate, a significant increase in India's defence budget for the fiscal year 2026-27 is widely anticipated by analysts and economists.
Global Conflicts Fuel Defence Spending Spree
The landscape of international relations has become increasingly turbulent. The surprise US military intervention in Venezuela, which led to the capture of President Nicolas Maduro and his wife, sent shockwaves across the globe. This event immediately sparked concerns that China might perceive an opportunity to make a decisive move regarding Taiwan, although experts caution against drawing a direct parallel.
Manoranjan Sharma, Chief Economist at Infomerics Ratings, clarifies the complexity. "China does not view Taiwan through the prism of U.S. behaviour in Latin America. Taiwan is a core sovereignty issue for Beijing," he stated. Sharma explained that Chinese actions are dictated more by the regional military balance, the strength of US alliances in the Indo-Pacific, and domestic political factors rather than distant events.
He further noted that aggressive US posturing, while demonstrating Washington's resolve, is not the primary driver for Beijing. "China is far more influenced by U.S. military posture in the Indo-Pacific, trilateral coordination among the U.S., Japan, and the Philippines, and Taiwan’s own defence preparedness than by events elsewhere," Sharma added.
This perspective extends to India-China relations as well. Sharma points out that Beijing's stance on Arunachal Pradesh is long-standing and strategic. "Beijing calibrates pressure on India based on India–U.S. strategic proximity, India’s military preparedness along the Line of Actual Control (LAC), and internal stability in Tibet. These actions are calculated and strategic," he emphasised.
Why India's Defence Budget is Set to Rise
Against this backdrop of global and regional uncertainty, the consensus among market watchers is clear: India will substantially increase its defence allocation in the upcoming Union Budget. The drivers are multifaceted, extending beyond immediate border tensions.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, left little room for doubt, stating, "Higher allocation for defence in the 2026 Budget is certain." This expectation builds on a consistent upward trend. For the financial year 2025-26, the government had already earmarked over ₹6.8 lakh crore for defence, with a significant ₹1.8 lakh crore dedicated specifically to military modernisation.
Manoranjan Sharma outlined the structured, five-point framework guiding India's defence spending decisions:
- Identifying China as the primary long-term strategic challenge.
- Preparing for a potential two-front contingency involving both China and Pakistan.
- Pushing indigenisation through the "Make in India" and "Atmanirbhar Bharat" initiatives.
- Expanding naval capabilities across the Indian Ocean region.
- Transitioning towards technology-intensive warfare, including drones, cyber, and space domains.
Sharma highlighted that India's approach has been one of steady, sustained increases rather than erratic spikes. The focus has shifted towards prioritising capital expenditure for new equipment over routine personnel costs, with heavy investments flowing into missiles, air defence systems, and advanced surveillance capabilities.
The Path Ahead: Self-Reliance and Strategic Focus
The anticipated budget hike is not merely a reaction to external threats but a part of a broader, deliberate strategy. The push for self-reliance in defence manufacturing is a critical component, aiming to reduce import dependency and build a robust domestic industrial ecosystem.
Experts believe the future trajectory will involve not just higher spending but also improved efficiency in defence procurement. There is an expected greater reliance on private-sector participation and joint production ventures to foster innovation and speed up delivery timelines.
As nations from the United States—where President Trump has proposed raising the military budget to a staggering $1.5 trillion by 2027—to those in Europe ramp up their defence outlays, India's planned increases align with a global recalibration of security priorities. The Union Budget 2026 will be a key indicator of how India plans to navigate this dangerous new world, balancing fiscal prudence with the imperative to secure its borders and strategic interests in an increasingly unpredictable geopolitical era.
