Budget 2026 will test India’s innovation push and its impact

The article was first published in Moneycontrol.com on January 26 2026. Please click here to read the article.

As India approaches Budget 2026, the country finds itself in a strategically important position: for the first time in decades, it has real momentum in frontier technologies. The India Semiconductor Mission, the newly launched India AI Mission, and reforms across digital public infrastructure have signalled a meaningful shift from aspiration to execution. These are important steps in the right direction.

But momentum alone is not sufficient. For India to translate early wins into global competitiveness, Budget 2026 must deliver a decisive push on three fronts: substantially higher R&D investment, faster innovation adoption through industry partnerships, and mission-scale capital allocation that matches the ambition of a rising technology leader.

R&D is not optional

India has laid a strong foundation. The Semiconductor Mission has begun building capacity in chip design and assembly, with renewed proposals for fabrication plants. The India AI Mission, launched in 2024 with a ₹10,371 crore outlay, is targeting sovereign AI compute infrastructure, indigenous foundational models, and trusted AI frameworks.

Yet India still spends barely 0.7 per cent of GDP on R&D – far below innovation leaders such as the US (3.5 per cent), China (2.4 per cent), and Israel (5.4 percent). If India wants to lead in semiconductors, AI, biotech, new materials, quantum technologies, or climate tech, it must dramatically scale R&D investment.

Budget 2026 should anchor a multi-year national R&D expansion strategy with defined targets for both public and private investment, robust funding for ongoing missions, and concentrated research in areas of India’s natural strengths – digital infrastructure, data-intensive sectors, large-scale manufacturing, and applied engineering.
Fast-track adoption through strong industry partnerships

India does not lack ideas; it needs systematic pathways to turn ideas into scaled commercial outcomes. Global innovation ecosystems – be it Taiwan, South Korea, Israel, or the US – thrive because research institutions and industry work as synchronised partners.

Union Budget 2026 should institutionalise industry-aligned innovation through co-funded research clusters, a Lab-to-Market fast track for real-world adoption of prototypes, and sectoral adoption alliances that pair India AI Mission research teams with leaders in BFSI, telecom, healthcare, energy, and manufacturing to accelerate commercialisation.

The fastest way to build globally relevant innovation is to ensure large enterprises – both domestic and global – are not just observers, but active co-creators.
Invest at a much higher scale

The scale of global technological competition has changed. Leadership in AI, semiconductors, clean energy, and advanced manufacturing requires billions of dollars in sustained public investment and tens of billions in private capital.

Budget 2026 should therefore commit to sovereign-scale AI compute, with national GPU clusters and open-access frameworks for start-ups, researchers, and enterprises. It should accelerate the Semiconductor Mission with deeper capital infusion and international partnerships, and establish a ₹20,000 crore Deep-Tech Fund of Funds to catalyse private investment in critical technologies. Investments in climate technology, bio-manufacturing, next-generation mobility, and materials science must also be scaled to position India for global leadership.
Make trust India’s differentiator

As India expands its digital and technological footprint, it must champion innovation, safe, secure, and reliable systems that the world can adopt with confidence.

Budget 2026 should embed security-by-design and privacy-by-default standards into all publicly funded technology projects. The India AI Mission has already launched AI Governance Guidelines to ensure safe, inclusive, and responsible AI adoption. These frameworks must evolve into enforceable standards, with clear mechanisms for risk assessment and accountability.

If India becomes the world’s trusted technology partner, it will unlock markets, capital, and geopolitical influence.

The opportunity is historic

Budget 2026 is not just an annual exercise – it is a strategic inflection point. The country has laid the tracks with digital infrastructure and bold missions; now it must run the train at full speed.

If this Budget sharply increases R&D investment, forges deeper industry–technology partnerships, and unleashes capital at a scale commensurate with India’s ambitions, it can turn today’s momentum into tomorrow’s lasting impact.

2026 can be the year India stops skimming the surface and starts making deep, irreversible strides towards becoming a global innovation leader. This Budget is about setting India’s innovation trajectory on an upward curve – one that could shape the nation’s economic and technological fortunes well into the next decade and beyond.