Budget 2026 Expectations: Industry Calls for Higher R&D Funding as India Lags Global Peers

In a detailed memorandum submitted by industry body NASSCOM, the sector has sought higher tax deductions for new employment, changes to foreign tax rules and greater certainty on data centre and treaty-related taxation.

The demand comes as IT companies including Infosys and HCLTech, among others, have announced plans to hire specialised workforce for their Gen AI, cloud services, and other deep-tech offerings.

Stock broking major JM Financial is expecting a possible increase in excise duty on petrol and diesel in the Budget 2026, a key policy move that could significantly risk India's downstream oil marketing companies (OMCs).

In its recent reports, the brokerage firm highlighted two main themes, first, that downstream OMCs like Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL) and Indian Oil Corporation Limited (IOCL) may face fiscal pressure if the government uses excise duty to boost revenue.

The Union Budget 2026 presents a defining opportunity for India’s hospitality industry. Our sector has shown exceptional resilience over the past three years, making substantial contributions to GDP, employment, and foreign exchange earnings.

"Our foremost priority is securing infrastructure status for hotels. This designation would fundamentally transform our ability to access capital on favorable terms, enabling faster capacity expansion despite robust demand from leisure and corporate segments," said Col. Manbeer Choudhary, CMD, Noormahal Group.

He also added that granting industry status to hospitality would be a meaningful step, helping hotels, especially small and mid-sized properties, access institutional finance, reduce borrowing costs, and invest in long-term infrastructure. Choudhary also highlights funding challenges and project delays as an obstacle to the sector's growth.

"As an auto dealership in Haryana and Punjab selling diesel, petrol, and hybrid passenger cars, we seek a fiscal budget that enhances ease of doing business by minimizing government hurdles. Strong support for hybrids—practical and eco-friendly for India's emerging economy—through incentives, tax rebates, and simplified regulations will boost adoption, reduce emissions, and drive sustainable growth for dealerships like ours," said Vivek Datta, MD & CEO, Globe Toyota, JCBL Group.

“The Union Budget is a key opportunity to accelerate India’s drone and deep-tech ecosystem through an infrastructure-first approach. Strengthening Drone Shakti through incentive-based manufacturing will clearly signal India’s shift from pilot adoption to large-scale expansion of the drone economy. Priority support for skill-linked training infrastructure, indigenous component manufacturing, and shared testing and certification facilities is essential to reduce import dependence and speed up innovation," said Dr Preet Sandhu, Founder & Managing Director, AVPL International.

“India’s start-up ecosystem has shown what is possible when policy, capital, and talent come together. In the upcoming Union Budget, we hope to see continued focus on simplifying regulations, improving access to early-stage capital, and encouraging long-term innovation. Measures that reduce compliance friction, support deep-tech and SaaS startups, and create a stable, predictable policy environment will help founders build with confidence. A budget that backs startups at every stage will strengthen India’s position as a global hub for entrepreneurship and innovation," said Vinay Singh, CEO & Co-founder, LdotR.

As the government readies the Union Budget 2026, India’s real estate sector is looking to the government for targeted policy interventions after demonstrating strong resilience through shifting interest rate cycles, inflationary pressures and global uncertainty. 

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Ahead of the Union Budget 2026, education experts have called for a shift towards improving quality, infrastructure, and future-ready skills, PTI reported. With India’s youth population forming the largest demographic cohort globally, experts say strategic investment in higher education infrastructure and upskilling has become the need of the hour.

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India’s crypto investors have steadily moved from hype-driven moves to a more disciplined, long-term approach to virtual digital asset investing.

"As the 2026 Union Budget approaches, we have an opportunity to align regulations with the evolving maturity of Indian crypto investors. While the 2022 Union Budget gave the sector formal recognition, measures such as the 1% TDS on transactions pushed trading activity offshore, reducing transparency within the domestic ecosystem," said Edul Patel, CEO of Mudrex.

"The inability to set off losses against gains has also limited prudent portfolio management. Reducing TDS to 0.1% and allowing loss offsetting could lower friction, encourage responsible participation, and support a transparent, compliant, and sustainable crypto ecosystem in India," he added.

As the Union Budget 2026 approaches, the apparel and textile sector is closely watching for measures on cost competitiveness and export support. These policies will play a key role in the industry’s overall growth.

"Ahead of Budget 2026, the industry will be looking for measures that improve ease of doing business for MSME manufacturers including smoother access to working capital and support for technology adoption across production and sourcing. Continued investment in logistics, warehousing and digital supply chains can help reduce turnaround times for both domestic retail and export markets," said Abhishek Dua, Co-Founder, Showroom B2B.

As luxury housing sales and prices continue to hit record highs, India risks sliding into a deeply unequal housing market, warned Anuj Puri, Chairman of ANAROCK Group.

He added that the country faces a critical moment where affordability pressures could shut millions out of homeownership unless Budget 2026 delivers strong, targeted interventions.

“We are now looking at very real possibility of a two-tiered housing market that makes owning impossible for millions of Indians,” he said.

The consumer durables industry is expecting the Union Budget to revive consumption while strengthening domestic manufacturing, said Jasraaj S Kalra, Managing Director of Noble Group.

He said stable taxation and income-led demand measures could help lift consumer spending, while greater focus on localisation of components and electronics would support scale manufacturing.

“A demand-driven approach supported by strong domestic supply chains will allow Indian manufacturers to expand capacity, improve efficiencies, and reduce import dependence,” he added.

Start-ups are expecting the upcoming Budget to address long-standing challenges in talent management, particularly around employee ownership, said Ankit Aggarwal, Founder of Unstop.

He shared that extending ESOP tax deferral to all DPIIT-recognised start-ups would make stock ownership a real, long-term incentive, improve hiring outcomes and ease financial pressure on employees.

“Allowing taxation only at the point of liquidity would remove this burden, enabling employees to focus on building long-term value rather than worrying about upfront tax liabilities,” Aggarwal asserted.

India’s space tech start-ups are looking to the upcoming Budget for measures that accelerate commercialisation and reduce operational bottlenecks, said Shravan Bhati, Co-founder and CEO of SatLeo Labs.

He said early government purchase orders could help young companies move from validation to scale, while faster approvals for importing critical payload and satellite components would prevent launch delays.

“There is a strong case for single-window, fast-track clearances and smoother customs processes for strategic space tech imports,” he added.

Life insurers are expecting the upcoming Budget to build on the momentum created by the removal of GST on life insurance in 2025. which has improved affordability and demand, said Satishwar B, MD & CEO of Bandhan Life.

He said the industry is looking for better tax benefits for protection and health insurance across both the old and new tax regimes, greater support for pension and annuity products, and a higher premium cap for tax-free maturity of ULIPs to strengthen long-term financial security.

“Simple, inclusive reforms can go a long way in securing India’s financial future and accelerate progress towards ‘Insurance for All by 2047,” he added.

The electric mobility sector is expecting the Union Budget to address the GST mismatch between electric vehicles and charging services, said Karthikeyan S, MD & CEO of Relux Electric.

He said while EVs attract 5% GST, charging services are taxed at 18%, raising operating costs and impacting affordability for users.

“Rationalising GST on EV charging services to 5% would support wider EV adoption and strengthen the financial sustainability of public charging infrastructure," he added.

"For the Union Budget 2026, we propose three priorities. First, subsidized access to quality feed and chromosome-sorted semen to improve animal productivity and support the aggressive dairy push that the Indian government has already announced. Second, expanding veterinary college capacity; India has 68,000 registered veterinarians against a requirement of 1.1 to 1.2 lakh. Third, increasing capital subsidies for mini-dairy units, particularly for women entrepreneurs, to generate rural employment and strengthen decentralized procurement," said Brahmani Nara, Executive Director, Heritage Foods.

"As India moves into the next phase of educational reform, the focus must increasingly shift towards improving learning outcomes and future readiness. Foundational literacy and skill development continue to require attention, even as the country prepares its youth for a rapidly evolving, digital economy," said Devyani Jaipuria, Chairperson, Dharav High School Pro Vice-Chairperson, DPS International Gurugram & DPS Sector 45.

"Continued investments in healthcare infrastructure, expanding digital health adoption, and improving access for international patients have created a strong foundation. The next phase of growth will depend on clearer policy direction and faster, simpler medical visa processes, along with well-defined cross-border care pathways and patient facilitation standards that reduce uncertainty for families planning treatment. Medical tourism is a multi-billion-dollar global industry, and India is well positioned to strengthen its leadership with world-class clinicians, advanced hospital networks, and a compelling value proposition centred on outcomes, affordability, and patient experience," said Pankaj Chandna, Co-Founder, Vaidam Health.

“From 2026 onward, carbon intensity will increasingly function as a trade parameter rather than a sustainability disclosure, particularly with mechanisms like the EU’s Carbon Border Adjustment Mechanism coming into force. For Indian exporters, competitiveness will depend on the ability to provide granular, verified emissions data with clear audit trails that link carbon performance to physical goods. A well-structured domestic carbon pricing and measurement ecosystem can soften CBAM exposure, reduce the risk of double taxation, and help Indian industry compete in carbon-constrained markets,” said Yashodhan Ramteke, CEO, EcoGuard.

"For Budget 2026, the EV sector is likely to see a more pronounced alignment towards fund disbursements with targeted outcomes. Increased investment in R&D expenditure is required to promote innovations in new energy materials, high-performance battery sub-components, and next-generation energy storage solutions. Industry-academia interactions, innovations in PLI schemes, and dedicated budgets for innovation can help drive such advancements. Increased budgets for schemes such as PM E-DRIVE can promote faster adoption rates for EVs, especially in public and commercial mobility sectors," said Anurag Choudhary, CMD and CEO of Himadri Speciality Chemical Ltd.

“For India to convert its strong GCC momentum into sustainable, long-term global investments, the Union Budget must address predictability, competitiveness, and talent enablement. Key policy priorities should include a clear, nationwide tax incentive framework for GCCs, with extended and standardised benefits for IP creation, R&D and high-end services delivered out of India similar to regimes in Singapore and Ireland to help reverse the trend of incremental offshoring to low-tax jurisdictions," said Lalit Ahuja, Founder and CEO, ANSR.

"For India to truly become a product nation, we must move beyond assembly and adoption to designing and developing critical technologies in India. This requires a mission-mode approach for sectors of national importance such as clean energy, clean mobility, AI, rare earth security, and energy security. The government should revive strong R&D incentives, including up to 250% weighted deductions, and act as a demand aggregator for mission-critical technologies. Public procurement must shift from L1 to T1-based evaluation, rewarding companies with 80% local sourcing and indigenous design, particularly in electrolyzers, fuel cells, EVs, energy storage, and hydrogen mobility systems," said Akshay Kashyap, Managing Director of Greenfuel Energy Solutions Pvt. Ltd.

"Recent changes in GST rates were a much needed breather extended by the government. We would expect the budget for 2026 to review the input credit availability for F&B restaurants, even if it is restricted to a few expenditure heads like Rent & Capital. Further, an incentive structure which is linked to employment generated for freshers to motivate the Industry, as retail being one of the largest employers in India," said Rajat Agarwal, CEO, Barista Coffee.

Emobi CEO Bharath Rao urges the government to link EV startup subsidies to actual vehicle sales in Budget 2026. Startups also seek reform in CGTMSE and MUDRA schemes to eliminate rigid collateral requirements by banks.

He said, "An extension of subsidy and support to startup companies based on sales of vehicles is essential to support smaller companies in building manufacturing capabilities. At present, CGTMSE, MUDRA and PMEGP programmes still have requirements from banks and NBFCs of additional collateral, and very few proposals are taken against the security mechanism being offered by Central Governments. Making appropriate guidelines to ease access to Central Government–guaranteed schemes would help the startup industry. Further, effectively monitoring existing schemes and enabling ease of access to startups to the existing schemes would significantly improve the business prospects for startup companies.”

Union Budget 2026 expectations focus on moving India's agri-spend from DBT and MSP support to direct infrastructure investment. Analysts argue for a higher 'Investment Multiplier' to rival USA and China’s agricultural productivity, says Padmanand V, Partner, Grant Thornton Bharat.

“The agri and allied sector budget in FY 2024-25 stood at INR 1.52 lakh crore and for FY 2025-26 stood at 1.37 lakh crore, with related budget spend in terms of MSP and input subsidy effectively at of over INR 3.91 lakh crore. This implies that the bulk of the budget is towards DBT and subsidies and not towards facilitation of investment in farm mechanisation and in infrastructure, which was effectively less to the tune of INR 30,000 crore. It is expected that the upcoming budget would be more rational with greater allocation towards direct infrastructure spend through PPP as well as investment subsidies, as to be more in sync with the practices in other more developed ecosystems such as in the USA and China,” he said.

India's QSR industry urges Union Budget 2026 to rationalise GST and exempt rental RCM from unregistered landlords. Brands seek Input Tax Credit (ITC) on essential expenses to improve unit economics in Jan 2026, says Ajaypal Rathore, CFO, Burger Singh, India's largest homegrown burger QSR chain.

"The upcoming Union Budget presents an important opportunity to further strengthen the operating environment for the QSR and food services sector. Measures that simplify compliance, support ease of doing business, and ensure a more predictable cost structure would go a long way in enabling sustainable growth for homegrown brands," he said.

"We often talk about strengthening India’s innovation ecosystem, but the reality is that India still spends only about 0.7% on research and development. Countries like China, Israel, the US and many European nations invest much more. If we genuinely want scientific progress and global competitiveness, R&D funding has to increase. Earlier, private-sector research was encouraged through income-tax deductions, which are no longer available. We hope this budget restores strong support for R&D for both public institutions and industry," said Dr. R.G. Agarwal, Chairman Emeritus, Dhanuka Agritech Ltd.

“The government’s decision to recognise lab-grown diamonds as a sunrise sector under Make in India has already delivered strong momentum, and the removal of customs duty on diamond seeds has improved industry margins by 5–8%, allowing faster domestic manufacturing and innovation. In the upcoming Budget, continued policy stability, expanded R&D incentives and easier access to financing for manufacturers will be critical to helping India become the world’s largest hub for sustainable diamond production," said Ricky Vasandani, CEO and Co- founder, Solitario.

“Budget 2026 has the potential to be a defining inflection point in accelerating India’s logistics transformation under the PM Gati Shakti vision. Building on the progress made in recent years, the next phase of growth will depend on deeper integration of infrastructure planning across air, road, rail, and multimodal networks, supported by faster adoption of digital platforms that enable seamless coordination across the logistics value chain. For the express logistics sector, sustained investments in airport infrastructure, cargo handling capacity, and regional air connectivity will be critical to improving turnaround times and supporting high-value, time-sensitive shipments," said Balfour Manuel, Managing Director at Blue Dart.