THE Budget presented by the Finance Minister has made a number of claims. But true to the Modi Government’s vision of the economy, it believes that once finances are made available, the Indian business community will do the rest. In other words, the animal spirits of capital are enough to propel our dream of a Viksit Bharat. The reality is very different. The animal spirits of capital are for making profits, wherever and however it happens, while national progress is linked to the development of technology across sectors of the economy and to advances in production. This is the difference between finance capital and the old-fashioned industrial capital.

The US and UK, the erstwhile leaders of the capitalist world, shifted from production to controlling the commanding heights of the economy through controlling finance and intellectual property. It is the failure of this mode of control that has resulted in the Trump phenomenon: converting the US military power into outright demands for “imperial” tribute, the equivalent of the hafta that shopkeepers pay to the local thugs. However, any such extraction is only short-term, as the US is no longer able to generate new knowledge or technology, which gave it the edge earlier.

That is why knowledge production or research and development, not only for advancing science but also technology, is critical not only for developing our economy but also our role as an independent nation. Unfortunately, this Budget does not provide any belief that India is investing in a knowledge-based system that will advance science and technology and embed this in advanced production.

RESEARCH AND DEVELOPMENT

So let us start with the Research and Development (R&D) allocation presented in the current Budget. The R&D allocation in the 2026-27 Budget is ₹66,784.67 crore for key science and technology departments, or 0.6–0.65 per cent of the total Budget, the same as in the last few years. Despite the hype around developing a knowledge economy, the Budget provisions for this are just not there. Compare this with what the US and China spend on R&D, roughly about 3 per cent of their GDP, with South Korea spending about 5 per cent of its GDP. In a world where sharp competition is emerging across sectors such as rare earths, electronics, rocketry, and space, all of which depend on cutting-edge science and technology, any decrease in R&D  per cent signals an unwillingness to put money where your mouth is. We may talk about a developed India, but we are not willing to walk the talk, that is, focus on knowledge production itself.

ENERGY SECTOR

In the energy sector, while solar and wind are the priority, India is also discussing nuclear reactors, particularly under the SHANTI Act. In solar and wind, the focus should be on not just manufacturing solar panels but on the entire supply chain, from silicon to solar cells and the equipment required to convert the DC current produced by batteries into the alternating current required by the grid. The sun does not shine nor does the wind blow continuously; we need to store the surplus energy when it does, and supply the stored energy when it does not.

Currently, China dominates both the manufacturing of solar cells and grid-connected batteries, the basic infrastructure for a renewable energy sector (India’s solar industry must break free from Chinese dependence, according to the Policy Circle website). Right now, 80 per cent of our solar cells and batteries are imported, and almost all our grid-connected battery storage systems are imported as well. What we have done in this budget is only to extend the basic customs duty exemption given to capital goods/machinery used for the production of lithium-ion batteries or battery storage cells.

In the nuclear energy sector, the Research and Development (R&D) Budget has been almost doubled, though the amount itself—Rs. 2,411 crore is still quite small. The existing customs duty exemption for nuclear power projects has also been extended till 2035 and expanded to cover all nuclear plants, irrespective of capacity.

BIOPHARMA

Biopharma is the utilisation of living systems, such as cells, to develop cutting-edge pharmaceuticals, including monoclonal antibodies, vaccines, and gene therapies. The budget's main biopharma push is the Biopharma SHAKTI program, which was announced with a headline allocation of ₹10,000 crore over 5 years. This includes building an ecosystem by strengthening the National Institutes of Pharmaceutical Education and Research (NIPERs), establishing a statewide network for clinical trials, strengthening regulatory systems, and training more professionals. This exercise is just another fancily named jumla because it does not examine the structural reasons why past bio-mission funding did not lead to significant innovation. The budget still does not give enough money to basic research, as noted above, which is very important for medical breakthroughs.

DEFENCE

The headline news of a massive jump in defence allocation, while playing to a political narrative, to a highest-ever Rs.7.85 lakh crore ($86 billion), an increase of 15.9 per cent over the Budget Estimates (BE) and about 1.9 per cent of GDP, does not tell the more complex story of a strategic shift in defence expenditure. Much of this increase is under the Capital Expenditure head, which has risen 21.8 per cent from last year to Rs.2,19,306 crore. The average reader may associate this with the known acquisitions of fighter aircraft, related engines and probably drones, for which Rs.63,700 crore has been allocated, up from Rs.48,600 crore budgeted last year, but a closer reading shows that an even larger rise and allocation has been for a cryptically named “Other Equipment” for which Rs 82,217.82 crore has been earmarked this year, up from Rs.63,099.03 crore last year. Sources in or close to the government have revealed that these funds will be mainly spent on network-centric hardware and systems, likely to be mostly indigenous, to modernise the armed forces and address gaps highlighted during the military engagement in Operation Sindoor. In conjunction, allocation for Joint Staff & Services has also risen quite sharply from Rs 2,353 crore last year to Rs 3,138.72 crore, for theaterisation and jointness.

Acquisitions and orders last year for aircraft and engines were mostly for the Tejas Mk1A indigenous fighters and linked GE-404 engines from the US, and perhaps some payments made towards fresh orders for French Rafale-M carrier-borne fighters and a support package for MH60R anti-submarine helicopters. However, it should be noted that actual expenditure or Revised Estimates (RE) in 2025-26 was around Rs.72,000 crore due to bunching up of procurements in the fiscal year. This has been a familiar and problematic trend in defence acquisitions in India, which seems to repeat cycles of ad hoc, small-lot procurement, leading to unpredictability, a lack of long-term planning, and the military being poorly equipped. There was hope that this trend was reversing, with the armed forces finally and firmly supporting indigenous development to become fully self-reliant and free of external supply chains, especially at crucial times. The smooth induction of Tejas Mk1A, followed by uprated and heavier Tejas Mk2 and the 5th generation Advanced Medium Combat Aircraft (AMCA), along with avoidably belated order for 114 Rafales, appeared to set the Air Force on a stable long-term trajectory well into the 2040s. However, there is now talk of another “stop-gap” procurement of Su-57s. It therefore seems very likely that the actual expenditure during 2026-27 would again shoot up mid-year, calling for higher RE.

The Navy receives about the same Rs. 25,000 crore, reflecting its by now customary smooth equipping plans, also probably indicating that the third indigenous aircraft carrier will take a back seat for now, with submarines under Project 75i leading acquisitions.

The ongoing thrust towards indigenous development of defence systems continues, with R&D receiving Rs 17,250.25 crore, compared to Rs 14,923.82 crore last year, and an additional Rs. 1,707.81 crore allotted for prototype development.

CIVIL AVIATION

In contrast, allocations for civil aviation show a persistence of trends associated with this government’s obsession with “development” at all costs, sacrificing long-term multi-sectoral planning and cost-efficiency at the altar of a seemingly linear dash towards “progress.” Throwing good money after bad, the budget continues to splash funds on the poorly conceived and badly implemented UDAAN (Ude desh ka aam nagarik or “may the common citizen fly”) Scheme for regional air-connectivity, which receives Rs. 550 crores on par with last year, although only Rs. 434 crore was actually utilised, despite very poor performance. Of the 923 routes originally awarded since 2016, when the Scheme was initiated, 479 were operational, and around 225 routes, or nearly 50 per cent, have closed down. Supposedly to boost air connectivity to underserved areas, but more as a boastful claim of “development,” the government subsidises 50 per cent of seats on these flights connecting Tier-2 and Tier-3 cities, at a time when this government opposes subsidies everywhere, including in general-class rail travel, where they are badly needed. The routes are poorly planned and have consistently overestimated demand, resulting in this terrible performance and a loss to the exchequer, including high costs of upgrading or reviving regional airports, chasing a pipe dream in a poor country. The UDAAN Scheme needs to be thoroughly audited and completely overhauled.

In a similar vein, the budget proposes to introduce Seaplanes under the UDAAN Scheme, with similar viability gap funding, supposedly to boost tourism and cater to underserved areas. The fate of this scheme may well be imagined by the mercifully quick demise of an inaugural route launched in 2020 from the much vaunted Ahmedabad Riverfront to the Statue of Unity on the Narmada in Kevadia! To top it all, the Budget proposes to subsidise the domestic manufacturing of Seaplanes without any kind of study to even consider such a venture.

The Budget does provide additional funds for pilot training, although this deserves a much bigger thrust, given the yawning gap between the current availability of trained pilots and projected demand. Support for training and skill upgradation of Air Traffic Controllers, another area with a big demand-supply gap, is not specifically mentioned, and skilling programmes are barely visible.

Another bad miss is a well-conceived plan for indigenous design and development of passenger aircraft, which the government has apparently decided to leave to the private sector, which only means continued dependence on foreign OEMs for assembly in India, the world’s third-largest passenger aviation market, with an annual growth of over 7 per cent over the past decade. But that story will keep for another day.