India at an inflection point: How Budget 2026 can shape the next decade

The Budget should therefore prioritize rationalizing expenditures from input-based spending to outcome-focused allocations. A case in point are PLIs that directed spending to outcomes rather than to making investments. More allocations can be directed towards drivers of competitiveness, such as urban infrastructure, AI and new technologies, human resources and R&D.

To navigate potential future headwinds, the Budget can emphasize bolstering manufacturing, catalyzing private capital expenditure, streamlining business operations, and securing access to critical resources and advanced R&D.

Growing manufacturing and securing supply chains

A cornerstone should be elevating manufacturing’s share in GDP to 25% while recognizing the intensifying global competition where manufacturing GVA is increasingly concentrated in a few hubs. To thrive, India must prioritize 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 products like semiconductors and rare earth permanent magnets should be identified. A systemic framework to assess these risks, to map dependencies and devise tailored plans for domestic capacity building needs to be created. Sectors like electronics and electrical equipment, where import reliance remains high and where demand will increase with growing role of technology and electrification warrant immediate attention.

Complementing this, a comprehensive review of customs tariffs is essential to eliminate inverted duty structures, ensuring duties on raw materials are lower than on intermediates, which in turn are lower than on finished goods. Alongside a medium-term tariff roadmap on tariffs that provides predictability, together with stable quality measures will provide investors with long term confidence while making investment decisions.

Further reforms could incentivize states to align industrial power tariffs with actual costs, advance land reforms for increased availability for industrial and commercial usage, and expedite pending logistics projects for more competitive factor markets. Collectively, these steps will elevate manufacturing GVA, generate jobs and fortify India against geo-economic risks.

Boosting Investments

Boosting private capital expenditure is another critical lever. The Budget should outline clear targets and implementation roadmaps for the public-private partnership (PPP) pipeline and asset monetization programs.

Institutional capacity can be increased through establishing centers of excellence for PPP project design, standardizing processes for amendments in cases of force majeure, and enhancing capacity to craft concession agreements that allocate risks equitably between public and private partners. Accelerating these will create productive capacity like road, energy infrastructure, rail without increasing Government expenditure and debt, crowd in private investment and fuel sustained growth.

Enhancing ease of doing business

Continuing ease of doing business reforms at both central and state levels like rationalising environmental approvals and construction permits, decriminalisation of economic laws, is vital to inject dynamism, accelerate capital deployment, and mitigate business risks.

This involves ongoing digitization of approvals, decriminalization of minor offenses, review of licensing and putting a statute of limitation in economic laws. Easing regulatory burdens, especially those that disproportionately affect smaller enterprises is crucial to foster entrepreneurship and job creation.

Securing Resources

Future competitiveness hinges on securing access to essential resources and advancing R&D. These can be weaponised in the current geo-political scenario. On resources, incentivizing mineral exploration is imperative, as India lags significantly despite its potential. India spends less than 1% of global mineral exploration expenditure.

To address this, the mining code could introduce security of tenure for explorers i.e., successful discoveries should grant automatic mining rights, subject to environmental approvals, mirroring India’s petroleum regime and successful models in Australia and Canada.

R&D and technology as growth multipliers

For R&D, while the government is already advancing 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 AI and bio-technology.

A potential deep tech venture fund to support startups in AI, robotics, semiconductors, space, and advanced manufacturing can also be considered.

On AI, a 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 can be considered.

In conclusion, with strong economic growth and fiscal discipline, the Budget can prioritize investments in manufacturing resilience, critical resource security, private capital, ease of doing business reforms, and scaled R&D/AI. These targeted steps will drive innovation led productivity, attract global investment, create jobs, and position India as a self-reliant, technology-powered global leader.

The writer is partner, tax and economic policy group, EY India.