Budget 2026 marks a decisive pivot from volatile “accounting rituals” to a regime of trust. By prioritizing long-term stability and decriminalization, India has finally moved beyond the “Tax, Baby, Tax” era toward fiscal certainty. Shailendra Kumar explains
Snapshots
- While nations forge alliances, “zero-dependence” has emerged as the definitive guiding principle for future economic roadmaps
- India’s electricity demand grows 9% annually; by 2035, requirements are projected to match the entire European Union
- Trump-era influence is evident in proposals for Rare Earths Corridors, Biopharma SHAKTI, and the India Semiconductor Mission 2.0
- The Budget prioritizes chip applications through industry-led research and training centers to develop technology and skilled workforces
NOSTALGIA is a strange memory-book of acute human emotions lived and experienced in the past. Such emotions are of not much utility today but they keep popping up on the memory-slate whenever we bump into a mega event. And Union Budget 2026 was one such barn burner event for all the taxpayers in the country. I have posh memories about budget-eve excitements, jitters, and also panic linked to the preparedness to comprehensively report about the fiscal changes. What about the Budget Day? Well, no barometer could capture the paranoia on the D-day. And the disquiet used to be palpable on both sides of the fences – the policy corridors as well as the hapless taxpayers. ‘Gestapo’ sleuths used to be on 24×7 high alert to guard the highly secret budget proposals. For the government of the day, the reigning zeitgeist used to be – tax, baby, tax! And fiscally-bruised taxpayers used to be on the run between the offices of their consultants, media houses, and the North Block, till the day the Union Finance Minister
used to move budget amendments in the House.
Going by the missing kerfuffle and festivities after the Union Budget 2026 was presented, I felt compelled to admit the fact that even though the structural shift of the Indian economy may continue to be a debatable issue, there has been a structural move-away for the annual accounting ritual of the Union of India. And for the fiscal aficionados, there was indeed not much juice worth the squeeze in the budget proposals! Good, or bad? That hinges on the personalistic taste of a taxpayer. For me, as India inches forward towards injecting elements of certainty and trust in its tax regime, I expect less and less drastic fiscal changes in each budget. And the latest one has not dampened my expectations. Whatever fiscal changes we have seen in the Finance Bill, are largely procedural and curative with retro effect a la DIN-related provisions. One exception, which may be bucketed as structural, is the recast of penalty and prosecution provisions. A tectonic shift is towards decriminalisation and substitution by fee. A forward-looking shift in harmony with the global trend as penalty is rarely upheld by our courts and prosecution provisions are ‘paper tigers’ with missing empirical elements of fear psychosis among taxpayers.
GEOPOLITICS IN THE BUDGET PAPERS
Swirling away from taxation, I clearly see the profound impact of a ‘regular-guy’ – Donald Trump, on the making of the budget papers. Though India and the US trade negotiators have been indulging in marathon talks since last February, and the final draft was also ready for months but the trade officials used to fret and throw their hands towards the sky about the signing of the deal! Against the rising silhouette of profound uncertainties, our budget-makers had no choice but to ‘Trump-proof’ the economy and take a few futuristic decisions. And they can be seen in terms of the Union Finance Minister proposing Rare Earths Corridors, Biopharma SHAKTI, India Semiconductor Mission 2.0; Tax holidays for data centres provided data transmits through Indian data centres; carbon capture utilisation and storage, special treatment to capital goods; scheme for container manufacturing; Integrated programmes for labour-intensive
sectors like textile and leather; PLI 2.0 for electronics components manufacturing, high-speed rail corridors, and many more. Ever since China has applied its chokehold on exports of rare earths, this universal input for many new age tech sectors like drones, missiles, mobile phone, AI-powered military technologies etc, has become rarer and precious. Though many developed economies have forged alliances for bilateral and multilateral cooperation but no-dependence on others has come up as a guiding principle for road ahead. Japan has begun taking a deep dive into seas for their exploration. The US has just allocated USD 12 billion for their stockpiles and is keen to enter into cooperation pact with India. EU is the only laggard thus far.
Though semiconductor is a capital-intensive business and developing countries may not afford its production but the Modi Government has foresightedly taken a plunge as, if AI is the future and productivity-enhancer, chips are the bloodlines, which run through all new innovations. Fearful of a stranglehold on chips in the fast-turning geopolitical waters, virtually most geopolitically-aspiring countries have stepped up investments in chips-manufacturing. Is it eye-
popping? Oui, over USD 707 billion in 2025 alone! And USD 588 billion in 2024. The US has cornered a major chunk of these investments. Its importance can be gauged from the fact that its sales are projected to ride a blistering trajectory of USD 1.2 trillion by 2035 from USD 662 billion in 2025. Keeping in mind the future applications of chips, the Budget has legitimately kept its eyeballs on constructing a sprawling eco-system to produce equipment and
materials, design full-stack Indian IP, and fortify supply chains. Thankfully, the FM said that emphasis would also be kept on industry-led research and training centres to develop technology and skilled workforce. Though it is true that there is not even one hardcore AI company in India so far but the world would witness many in the coming years.
The budget has allocated higher capital expenditure of Rs 12.2 lakh crore, and the progress is tactile in terms of sprawling expressways, highways, ports, airports and other assets. However, private capex remains stubbornly anaemic, and calls for
surgical analysis
PUBLIC CAPEX SURGE
Like the past five years, the budget has allocated higher capital expenditure of Rs 12.2 lakh crore. Taking a leaf from the Chinese playbook, the Modi Government is grimly resolved to pump in more and more public spending into all-round infrastructure. Thanks to the sustained efforts, the progress is tactile in terms of sprawling expressways, highways, ports, airports and other assets. However, a major area of worry is the dormant private capex. Though the
government has fired all cylinders – monetary as well as fiscal, to shore up income in the hands of consumers but ironically, private capex remains stubbornly anaemic! This calls for surgical analysis. I am at my wit’s end to decode – What sort of feedback was given by the industry captains during the pre-budget meetings? I am sure that the FM ought to have asked the key industrialists – What more should the Government do so that private capex could also
move up. This is where I detect the missing evidence to symbolise the much-talked about structural change in the economy. A genuine structural shift does not lie only in aggregate output but also in employment, export competitiveness and sustained rise in productivity. At best, I would like to say that India has entered only provisionally a structurally high growth highway.
POWER SECTOR: THE SILENT CONSTRAINT
Another vulnerable zone in my eyes is the power distribution sector. Our electricity demand has been soaring at 9% annually and is projected to double in the next decade. In fact, it is projected to require as much power as the EU by 2035. Our AI-architectured future entirely hinges on efficient power distribution but our grid is creaking. In China, the average loss by distributors ranges between 3-5%. The global average is about 7.5% but India loses over 16%. For industrial users, power prices in India are too high as compared to Vietnam and Indonesia and our exporters are expected to compete against them. Power theft and free power to garner votes are proving to be the nemesis for our DISCOMS. Though the FM has allocated Rs 18000 Crore for them but unless the States fix the DISCOMS problem, all our futuristic plans like power-guzzling data centres, are going to be stalled much sooner.
TRADE RESET
Thankfully, jealous of the EU sealing its FTA deal with India, Trump who is in deep love with carpe diem syndrome, has approved the much-delayed trade deal, which was going through a roller coaster ride for months and off-ramp measures were not fully working. The Trumpian tariffs had badly chipped away the Teflon coating of our exports and the economy in general, albeit we managed to grow above 7% rate.
Despite high capital costs, India’s strategic plunge into semiconductors recognizes chips as the lifeblood of innovation. While the US currently dominates global investment, India is now positioning itself as a critical player in this ecosystem
The US punitive tariff of 25% over and above 25% reciprocal tariff had not only overstrained rupee, which has recovered well now, but also driven away foreign investments worth over USD 23 billion in the past one year. With India agreeing to 18% tariff, a bit higher than America’s allies like Japan and the EU, it would restore the competitive edge of our exports. In fact, we would be better off than some of our neighbours like Bangladesh and Pakistan, saddled with higher tariffs.
STRUCTURAL SHIFT
India appears to have entered a phase of calibrated ambition, less spectacle, more strategy. Whether this marks the consolidation of a structurally stronger economy, or merely a transition phase sustained by public expenditure, will depend on reforms that extend beyond the Budget speech.
With the sword of Damocles gone, the Indian businesses can now get into long-term technology transfer agreements besides wooing investments in the economy. Hopefully, it would also brighten up the FDI prospects, which were fatally bruised for India among all the emerging economies. I sincerely hope that the Indian economy would be roaring back to 10% nominal growth and the wheels of stalled revenue collections would be back on track to
reduce the fiscal deficits further next year! Ciao!
