The Union Budget 2026 marks a clear departure from reactive fiscal policymaking, prioritising long-term capability building across deep technology, manufacturing, MSMEs, and capital markets. With India’s nominal GDP expected to cross USD 4.3 trillion in FY27 and public capex already at a record INR 11.1 lakh crore in FY26, experts believe the government has used this Budget to reinforce institutional depth rather than chase short-term consumption boosts.

Continued allocations for national missions in semiconductors, space, clean energy, artificial intelligence, and quantum technologies underline policy continuity. This is critical for sectors where innovation cycles often exceed 7-10 years and upfront capital intensity remains high. 

The expanded India Semiconductor Mission 2.0, with a broader mandate covering equipment, materials, and full-stack IP, reflects an acknowledgment that semiconductor ecosystems cannot be assembled piecemeal.

Ankit Kedia, Founder and Lead Investor, Capital-A, said, “The announcements made today mark a clear inflection point in India’s manufacturing and deep-tech journey. The expansion of the India Semiconductor Mission into equipment, materials, and full-stack IP reflects an important recognition that semiconductors and advanced manufacturing cannot be built in silos, and that value creation sits across the entire supply chain.”

Beyond this, the Budget has sustained funding for AI-led national research missions and strategic materials, aimed at reducing import dependence and strengthening domestic supply chains. 

Vishesh Rajaram, Founding Partner at Speciale Invest, said that the Budget reinforces a long-term, capability-building approach to deep technology in India. Continued support for national missions across emerging technologies, semiconductors, space, clean energy, AI, and quantum, signals policy continuity that is essential for deep-tech ventures, where innovation cycles are long, and capital requirements are high.

“The emphasis on digital public infrastructure and fibre connectivity is equally strategic. Robust, nationwide connectivity underpins data-intensive and hardware-led innovation, enabling deep-tech startups to develop, test, and scale solutions across manufacturing, defence, climate, healthcare, and space ecosystems. Rather than focusing on short-term outcomes, the Budget prioritises foundational systems that allow deep-tech companies to emerge from India and compete globally. This approach positions India not just as an adopter, but as a creator of frontier technologies over the next decade,” said Rajaram.

As of 2025, India has over 950 million internet users, but broadband quality and last-mile fibre penetration remain uneven. Budget 2026’s connectivity push aims to address this gap, enabling startups to develop and deploy solutions across manufacturing, defence, climate, healthcare, and space ecosystems at scale.

For private investors, this combination of public funding and infrastructure depth helps compress both technology and go-to-market risk, encouraging participation across early and growth stages.

Amit Chand, Founder of BYT Capital, said that the Budget sends a clear signal that India is backing long-horizon capability building, pairing sustained public capex with mission-mode support for emerging technologies. 

“The focus on AI and national research missions, alongside India Semiconductor Mission 2.0 with higher outlay and initiatives aimed at strengthening strategic materials and supply chains, improves the investment case for deep tech by reducing execution risk across talent, infrastructure, and commercialization pathways. The real unlock now is speed and coordination: faster approvals and disbursals, shared testbeds and qualification labs, and predictable government/industry procurement so Indian innovations move from pilots to scaled deployments,” said Chand. 

While deep tech leads the long-term narrative for the country, MSMEs emerge as the most immediate beneficiaries of the Budget. The government announced an INR 10,000 crore SME Growth Fund and an INR 2,000 crore top-up to the Self-Reliant India (SRI) Fund, signalling a shift from pure debt support toward equity and quasi-equity capital. 

This is crucial in an economy where MSMEs contribute nearly 30 per cent of GDP and over 45 per cent of manufacturing output, yet face a credit gap estimated at over INR 20 lakh crore.

The new policy proposal includes systemic measures, such as expanded TReDS coverage, CGTMSE linkages, and digitised compliance frameworks, designed to improve working capital efficiency rather than merely extend credit tenors.

Sai Pramodh, VP – Investments, BlackSoil, said, “This year’s Budget gets the MSME playbook right by moving beyond short-term relief to structural reform. For MSME-focused NBFCs like BlackSoil, it enables responsible credit expansion,  and reinforces India’s commitment to building globally competitive, job-creating and innovation-led small enterprises.”

One of the most important interventions this year has been the deeper integration of TReDS with the Government e-Marketplace (GeM). Faster invoice discounting and improved payment discipline could significantly shorten receivable cycles for small suppliers dealing with large buyers, improving cash-flow predictability and reducing risk.

Padmaja Ruparel, Co-founder, IAN Group, said that the creative integration of TReDS with GeM, which can greatly enhance MSMEs’ cash flow predictability and payment discipline, is noteworthy. 

“These actions, when paired with digital interventions like the Bharat Bistar AI tool for agriculture, demonstrate a deliberate use of technology to increase productivity, fortify organizational resilience, and give companies the confidence to invest, recruit, and grow,” said Ruparel. 

The Budget has addressed friction points in taxation and capital markets. The rollback of the 2024 buyback taxation framework, by treating buyback income as capital gains rather than dividend income, corrects a distortion that had increased compliance complexity and misrepresented shareholder returns. In parallel, continued infrastructure capex and a tax holiday for data centres until 2047 are aimed at anchoring long-duration capital in digital and physical infrastructure.

Siddarth Pai, Founding Partner, 3one4 Capital & Co-Chair Regulatory Affairs Committee, IVCA,  said that the change to treat buyback income as capital gains is welcomed by all. However, the devil in the details lies in how promoters are treated during a buyback.

“The definition of a promoter is similar to SEBI and the Companies Act, 2013, but also includes shareholders holding more than 10 per cent of the Company. Their buyback gains are taxed at 22 per cent for corporates and at 30 per cent for non-corporates. The reduction of the cost of capital is critical to growth,” said Pai. 

Venture investors in the country are seeing the Budget as a subtle but meaningful reset of India’s startup playbook. The emphasis is moving away from app-centric growth models toward manufacturing depth, biopharma, semiconductors, capital goods, infra-tech, and execution-led B2G businesses, sectors aligned with national priorities and patient capital.

Vikram Gupta, Founder and Managing Partner, IvyCap Ventures, said that the budget marks a quiet but consequential shift in India’s startup and venture ecosystem through institution-building systems. 

“India is no longer just supporting startups; it is deliberately building the conditions that produce them. This is not a momentum Budget; it is an institution-building one. And for founders and investors who think in decades rather than funding cycles, this is where the next chapter is being written,” said Gupta.