USAF's procurement budget includes everything to do with capital expenses, including modernisation. Both buying new jets and upgrading old jets are covered in it.
MKI MLU is not expensive compared to buying a jet. As per Indranil's tweet, which I opposed, even he said that a $20-30M upgrade is cheaper than a $200M purchase. Since the jet undergoes standard overhauls, the upgrades are coming in during those overhauls, which saves cost. And it's primarily an electronics upgrade, and even if the engine is changed, it's only a drop fit, so most of the costs associated with the upgrade are merely the production and supply of electronics and engine. Even assuming a very expensive $40M per jet, which is unlikely, it's about $11B spread out over 15 years for all the jets. That's less than $750M per year, or even $1B per year for a shorter timeframe. Even at 37-42 overhauls/upgrades a year, even if the upgrade process finishes in just 7 years, it's still only $1.5B a year.
Other aircraft are not expensive compared to fighter jets, 'cause we only buy a handful. Most of our force multipliers in the form of ISTARs (5), AWACS (6), EW (7), tankers (6) etc will be delivered before MRFA and Mk2. Light transports have already been contracted. SAM deliveries will complete in a few more years. New strategic transports are 15 years away, post the completion of MRFA/Mk2. And helicopters are not capital intensive when it comes to procurement. Unit costs range from $5M to $25M per unit depending on the type. Also the fact that the IA will become the primary user of helicopters, not the IAF, so the impact on the IAF's capital budget is a bit more muted in the long run.