Global Storms, Local Anchors: India’s Budget in Focus

The Union Budget 2025-26 feels like a steadying hand in choppy waters, but does it offer enough safeguards against the global headwinds? For a country like India with strategic global ambitions, the amalgamation of geoeconomic realities with national concerns remains crucial. The budgetary oversight of the global trends viz. weaponization of AI, blitzkrieg of innovation, hawkish tariffs, looming trade wars, growing protectionism is perplexing.

On the contrary, the government seems to have adopted a more inward-looking approach by augmenting local anchors — boosting domestic manufacturing, improving agricultural productivity and employability, promoting exports and supporting MSMEs —many of these measures have remained on the agenda for a long time. This begets an important question: are these efforts enough to keep the Indian economy afloat in uncertain times to comes?

Old Measures for New Challenges

As the world continues to grapple with the evolving trade dynamics, India needs a bold new strategy to position itself as global trading hub with export competitiveness. However, this budget has fallen short of addressing some of the major challenges that continue to hinder India’s export potential.

While it addresses some of the longstanding concerns, like tariff rationalization and duty inversion, the budget fell short of laying a roadmap for increasing India’s export competitiveness by addressing infrastructural bottlenecks, global supply chain integration, incentivizing sectors with high global demand like semi-conductors or a clear strategy for sectors facing global tariff threats.

The ₹ 2,250 crore Export Promotion Mission — to support MSMEs with documentation, trade barrier compliance, access to export credit — is a welcome step, but will it be enough to boost India’s share in global exports from a meagre 2.8% or to protect the industries from looming tariff shocks?

Muted Focus on AI

Recently, China’s DeepSeek rattled the tech industry worldwide, plunging US stocks with some even dubbing it as the modern-day “Sputnik moment”. With AI shaping up to be the next big revolution, rejigging the current global balance of power, leading countries like China and USA are pouring billions to win the AI race.

Despite the strategic significance of AI, the Union Budget has completely missed on targeted investments and policy frameworks for developing a competitive AI ecosystem in India.

While the announcement of the ₹10,000 crore deeptech fund of funds is laudable for promoting innovation in cutting-edge technologies by inviting the next generation of startups, it certainly is not enough to develop a strategic edge in AI and other sophisticated innovations, inevitably needed in the face of growing global security and economic challenges.

Gamble in the Global Energy Security Race

Through the Nuclear Energy Mission, the government’s push for Small Modular Reactors (SMRs) with an outlay of ₹20,000 crores is a positive step towards strengthening India’s energy security and developmental needs while remaining committed to its net zero goals.

By inviting the private sector to take the lead and discussing regulatory reforms, the government seems committed towards building energy self-sufficiency along with export potential, in the near future. However, the question remains whether these measures are too little, too late as China has already taken a massive lead in the development of SMRs, in terms of technology and capacity.

The unabated geopolitical turmoil in energy-rich regions of the world requires a more proactive approach for an energy-hungry country like India.

Holding onto the Familiar in an Age of Disruption

The budget seems disconnected from the rapidly evolving global dynamics. Amid a plethora of political and economic tensions, the budget favors conventional strategies over innovative measures that are urgently needed to maintain a competitive position in critical areas.

It lacks foresight regarding the potential external shocks that can disrupt the Indian economy and doesn't adequately address the technological disruptions unfolding globally.

As George Kennan once said, “The future is not something we enter. The future is something we create”, yet this budget misses an opportunity to shape a more resilient and forward-looking future for the Indian economy.

The Big Question

The budget has adequately focused on building a strong domestic base with forward-looking measures for exports, MSMEs, and domestic manufacturing. These local anchors will certainly aid in boosting domestic consumption and rural prosperity.

However, the bigger question remains whether they are enough to weather the global storms ahead — especially when it comes to critical areas like AI, energy security, and high-tech manufacturing — to truly secure our future?

The budget is a likely starting point. It remains to be seen if the government has robust plans for sustainable development amid tectonic shifts in the politico-economic and security spheres.