Union budget 2026-27: The first Kartavya and the rise of high-tech India

The Union Budget 2026-27, presented in the newly inaugurated Kartavya Bhawan, signals a transition from reactive policy-making to a long-term strategic mission.The defining theme is the First Kartavya: Accelerating and Sustaining Economic Growth through Productivity, Competitiveness, and Resilience. This is not merely an economic pillar; it is a high-tech blueprint designed to shift India from a consumer of global technology to a primary architect of it.

The First Kartavya outlines a decisive shift toward frontier manufacturing and digital sovereignty. Finance Minister Nirmala Sitharaman has moved beyond the "Digital India" of the last decade, focusing instead on deep-tech self-reliance and the hardening of global supply chains within Indian borders. Here, by targeting productivity through high-precision engineering and AI-led governance, the budget seeks to insulate the Indian economy from volatile global dynamics.

The semiconductor leap: From Fabs to Full-Stack IP

The most ambitious announcement under the First Kartavya is the launch of India Semiconductor Mission (ISM) 2.0. While the initial phase was about attracting large-scale foundries, 2.0 pivotally focuses on the "brain" of the machine, designing full-stack Indian Intellectual Property (IP) and domesticating the production of specialised semiconductor equipment and materials.

With an initial FY27 provision of Rs 1,000 crore and a massive hike in the Electronics Components Manufacturing Scheme (ECMS) outlay to Rs 40,000 crore, the government is incentivising a complete ecosystem. This move aims to ensure that "Designed in India" chips become a reality, reducing the import dependency that currently limits India's technological autonomy.

Rejuvenating legacy industrial clusters

Recognising that modernisation must reach beyond new-age sectors, the government has announced a comprehensive scheme to revive 200 legacy industrial clusters. These aging hubs, which are vital for employment but have often struggled with outdated technology, will receive targeted interventions to improve their cost competitiveness and efficiency. The rejuvenation focus centres on comprehensive infrastructure and technology upgradation, providing these traditional manufacturing centres with the digital tools and modern facilities needed to meet current global standards.

The strategy for these 200 clusters involves a move toward Industrial 4.0 integration, ensuring that even traditional sectors can leverage data analytics and automation. 

Biopharma SHAKTI: Engineering the future of healthcare

The budget introduces Biopharma SHAKTI (Strategy for Healthcare Advancement through Knowledge, Technology and Innovation), a Rs 10,000 crore initiative designed to transform India into a global hub for biologics and biosimilars. This vision is supported by a robust physical and intellectual infrastructure, including three new National Institutes of Pharmaceutical Education and Research (NIPERs) and the upgrading of seven existing ones. By establishing a network of over 1,000 accredited clinical trial sites, the government is laying the groundwork for a data-rich, AI-enabled drug discovery ecosystem that integrates traditional pharmaceutical strengths with modern computational biology.

Creating "Champion SMEs": Scaling the industrial middle

The budget addresses the "missing middle" in India's industrial structure, the budget introduces a dedicated Rs 10,000 crore SME Growth Fund. This fund is a strategic intervention to identify and nurture "future champions", enterprises that show high potential for innovation, export readiness, and technological adoption. Unlike traditional credit-heavy schemes, this fund incentivises growth based on productivity and formalisation criteria. To complement this, the Self-Reliant India Fund has received a top-up of Rs 2,000 crore, ensuring that micro-enterprises continue to have access to vital risk capital as they transition into larger, more stable entities.

Recognising that compliance and regulatory hurdles often stifle small-scale innovation, the government is partnering with premier professional institutions like ICAI, ICSI, and ICMAI to create a new cadre of ‘Corporate Mitras’. These professionals will be trained through short-term, modular courses to provide affordable, high-quality advisory and compliance support directly to MSMEs in Tier-II and Tier-III towns. By institutionalising this professional handholding, the budget aims to bridge the capability gap, allowing small enterprises to focus on their core product development and manufacturing rather than being bogged down by the complexity of modern corporate governance.

Infrastructure: The Rs 12.2 lakh crore multiplier

The budget provides a powerful push to physical connectivity, increasing public capital expenditure to a staggering Rs 12.2 lakh crore for FY 2026-27. To de-risk this massive investment for the private sector, the government is setting up an Infrastructure Risk Guarantee Fund, offering partial credit guarantees to lenders. Additionally, to unlock value from underutilised assets, significant real estate holdings of Central Public Sector Enterprises (CPSEs) will be recycled through the establishment of dedicated Real Estate Investment Trusts (REITs). These fiscal measures are designed to crowd-in private capital and ensure that infrastructure development remains sustainable and results-oriented.

The strategic implication

The First Kartavya fundamentally changes the "Cost of Doing Tech" in India. By automating the Safe Harbour approval process and raising thresholds for IT services to Rs 2,000 crore, the government has provided unprecedented tax certainty. For enterprises, the message is clear: the era of being a "service-only" back office is ending. Whether it is through the tax holiday for cloud providers using Indian data centres or the push for sovereign AI, the infrastructure is being laid, not just in cables and silicon, but in a policy framework that demands high-value, IP-led growth.