AI, Cyber and Drone Warfare to Drive India's Defence Budget 2026 Priorities

Union Budget 2026 is set against rising security risks, with the defence sector seeking higher capital spending, faster modernisation and stronger support for Indian-made technologies. Industry bodies, including FICCI, want the government to treat AI-driven, networked warfare and cyber resilience as core priorities rather than optional upgrades, while also pushing for a long-term plan on exports and manufacturing stability.

FICCI has already asked for a 10% rise in overall defence allocation for 2026, with at least 30% ringfenced for capital expenditure. The memo frames defence outlay as a strategic need, not a discretionary cost, and links higher spending to technology-led upgrades that can secure India's territorial integrity and long-term strategic autonomy.

Budget 2026 defence expectations for AI-led and technology-driven warfare

Security experts say India's risk profile is shifting heavily towards digital, cyber and unmanned domains. They argue that adversaries are investing in artificial intelligence, drones and advanced cyber tools, making technology-led preparedness essential. The sector therefore wants stronger funding for AI-enabled surveillance, predictive intelligence systems, scalable counter-drone platforms and advanced cyber forensic capabilities that can move beyond demonstration projects.

Industry stakeholders stress that many AI-based and technology-driven tools remain stuck in pilot phases. They want dedicated budget support that helps these systems shift into steady, long-term deployment. This includes predictable procurement pipelines, clear standards for trials and operational acceptance, plus policy frameworks that reward real-world adoption of Indian solutions within the armed forces and internal security agencies.

Budget 2026 defence expectations for indigenous innovation and research

There is strong demand for sustained investment in Indian research and development, particularly through organisations like DRDO. FICCI recommends that the government allocate an additional Rs 10,000 crore to DRDO, focused on basic research in frontier technologies. Industry voices say this could improve self-reliance over time, while also cutting dependence on imported platforms and subsystems.

Alongside direct funding, experts highlight the need for secure data infrastructure, easier access to high-performance computing and a pipeline of specialised talent. These elements are seen as the backbone of a competitive defence technology ecosystem. A budget that supports such foundations could boost operational readiness and also strengthen India's long-term technological autonomy in sensitive areas.

Budget 2026 defence expectations for manufacturing, exports and capital stability

Sharing expectations from Budget 2026, Vamsi Vikas, founder and managing director of Raghu Vamsi Aerospace Group, says India's defence industry has already created strong capabilities, infrastructure and skilled teams. According to Vikas, intent is not the issue; instead, the challenge is protecting the ecosystem as it moves from early promise to sustained delivery across long production cycles.

Vikas describes the move from initial production runs to full-scale manufacturing as the weakest stage. "This is the stage at which development timelines tend to stretch, costs escalate due to refinements and testing, and programme momentum can weaken," he said. Vikas points out that capital investments are long-term, while budgeted orders may vary year to year.

Such uneven spending, Vikas warns, can affect capacity planning, quality systems, regulatory compliance and after-sales support, even when headline allocations look stable. On exports, Vikas notes growing global interest in sourcing defence systems from India but cautions that foreign sales cannot be treated as a simple copy of domestic procurement models, especially on reliability and support.

For export credibility, Vikas says companies must commit early money to certifications, regulatory clearances, structured documentation and robust maintenance networks abroad. FICCI also pitches a dedicated Defence Export Promotion Council to coordinate agencies and work directly with foreign governments and buyers. Industry leaders believe a budget that reflects these structural needs, without micromanaging projects, can strengthen national security while adding durable economic value.

FICCI also urges a strategic shift away from platform-only upgrades towards integrated, networked and AI-enabled capabilities, matching future warfare that is multi-domain and technology-driven. Stakeholders expect that if Budget 2026 backs higher capital outlay, stronger DRDO research support and clearer export mechanisms, it could give India a more resilient defence architecture aligned with evolving geopolitical and technological pressures.