India stands at a pivotal economic inflection point as it prepares for Budget 2026, with the potential to shape the nation's trajectory for the next decade. The Union Budget should prioritize a strategic shift from traditional input-based expenditures to outcome-focused allocations, ensuring that every rupee spent delivers measurable results and drives sustainable growth.
India's Current Economic Landscape
The Indian economy is demonstrating remarkable resilience and robust performance, with GDP growth projected at an impressive 7.4% for the current fiscal year. Inflation remains contained at a manageable 1.7%, while monetary policy continues to ease in support of economic expansion. This strength is further underscored by surging global interest, evident in substantial investment proposals for data centres from leading international technology firms, positioning India for enhanced digitisation and technological advancement.
The Government has already implemented several proactive measures, including resetting GST rates to enhance efficiency and providing income tax cuts to boost disposable incomes and stimulate consumption. However, with gross tax revenues during April to November 2025 having grown at less than the budgeted growth rate of 10.9%, and the need for maintaining a prudent Government debt to GDP ratio, the scope for broad-based increases in spending remains limited. Therefore, Budget 2026 must focus on rationalizing expenditures through outcome-oriented approaches, similar to the successful Production Linked Incentive (PLI) schemes that directed spending toward tangible results rather than mere investments.
Strategic Priorities for Budget 2026
Elevating Manufacturing and Securing Supply Chains
A cornerstone of India's economic strategy should be elevating manufacturing's share in GDP to 25%, recognizing the intensifying global competition where manufacturing Gross Value Added (GVA) is increasingly concentrated in a few hubs. To thrive in this competitive landscape, India must prioritize building resilient supply chains. This begins with identifying vulnerabilities in key imports whose demand is set to rise and whose shortages could disrupt downstream industries.
More critical products like semiconductors and rare earth permanent magnets should be systematically identified. A comprehensive framework needs to be created to assess these risks, map dependencies, and devise tailored plans for domestic capacity building. Sectors such as electronics and electrical equipment, where import reliance remains high and demand will increase with growing technological adoption and electrification, warrant immediate attention.
Complementing this, a thorough review of customs tariffs is essential to eliminate inverted duty structures, ensuring that duties on raw materials are lower than on intermediates, which in turn are lower than on finished goods. Alongside a medium-term tariff roadmap that provides predictability and stable quality measures, these steps will offer investors long-term confidence while making investment decisions.
Further reforms could incentivize states to align industrial power tariffs with actual costs, advance land reforms to increase availability for industrial and commercial usage, and expedite pending logistics projects for more competitive factor markets. Collectively, these measures will elevate manufacturing GVA, generate substantial employment opportunities, and fortify India against geo-economic risks.
Boosting Private Capital Expenditure
Boosting private capital expenditure represents another critical lever for economic growth. Budget 2026 should outline clear targets and implementation roadmaps for the public-private partnership (PPP) pipeline and asset monetization programs. Institutional capacity can be enhanced through establishing centers of excellence for PPP project design, standardizing processes for amendments in cases of force majeure, and improving capabilities to craft concession agreements that allocate risks equitably between public and private partners.
Accelerating these initiatives will create productive capacity in areas like road, energy infrastructure, and rail without increasing Government expenditure and debt, while simultaneously crowding in private investment and fueling sustained economic growth.
Enhancing Ease of Doing Business
Continuing ease of doing business reforms at both central and state levels remains vital to inject dynamism, accelerate capital deployment, and mitigate business risks. This involves rationalizing environmental approvals and construction permits, decriminalizing economic laws, and ongoing digitization of approval processes. A review of licensing requirements and implementing statutes of limitation in economic laws can further streamline operations.
Easing regulatory burdens, particularly those that disproportionately affect smaller enterprises, is crucial to foster entrepreneurship and job creation across the nation.
Securing Critical Resources and Advancing R&D
Future competitiveness hinges on securing access to essential resources and advancing research and development capabilities, which can be weaponized in the current geo-political scenario. On resources, incentivizing mineral exploration is imperative, as India lags significantly despite its substantial potential. Currently, India spends less than 1% of global mineral exploration expenditure.
To address this gap, the mining code could introduce security of tenure for explorers, where successful discoveries should grant automatic mining rights subject to environmental approvals, mirroring India's petroleum regime and successful models in countries like Australia and Canada.
R&D and Technology as Growth Multipliers
For research and development, while the government is already advancing various initiatives, the focus should shift toward collaborative frameworks. Recommendations include establishing centers of excellence through public-private partnerships and strategic planning for frontier technologies like artificial intelligence and biotechnology.
A potential deep tech venture fund to support startups in AI, robotics, semiconductors, space, and advanced manufacturing could be considered. On artificial intelligence specifically, multi-year funding for GPUs, high-performance computing, indigenous large language models (LLMs), agentic AI, and increased data accessibility by making available non-personal data tailored to India's languages and use cases through marketplaces and interoperability standards should be prioritized.
Conclusion: Positioning India for Global Leadership
With strong economic growth and fiscal discipline as foundational pillars, Budget 2026 can strategically prioritize investments in manufacturing resilience, critical resource security, private capital mobilization, ease of doing business reforms, and scaled R&D and AI initiatives. These targeted steps will drive innovation-led productivity, attract substantial global investment, create millions of jobs, and position India as a self-reliant, technology-powered global leader for the coming decade.
