The Union Budget 2026–27 marks a clear shift in India’s economic strategy, moving away from consumption-led stimulus towards supply-side enablers, digital infrastructure, and long-term capacity creation, according to insights released by startup data platform Tracxn. The Budget, it said, underscores fiscal discipline and execution while continuing to back innovation-driven sectors that support India’s position as the world’s third-largest startup ecosystem. 

Focus on infrastructure-led growth

Capital expenditure has been pegged at ₹12.22 lakh crore, or 4.4% of GDP, despite constrained tax inflows and a rising interest burden that now accounts for nearly 49% of net tax revenues. Tracxn noted that this highlights the government’s continued focus on infrastructure-led growth, with private capital expected to complement public spending to achieve the targeted 10% nominal GDP expansion. 

From a startup perspective, the policy direction reflects an ecosystem maturing toward capital efficiency and durable innovation. Tracxn data shows Indian startups raised an estimated $11 billion in 2025, even as overall funding moderated to 12–13% year-on-year. Investor preference has shifted toward defensible intellectual property, sustainable unit economics and deep-tech capabilities rather than rapid scale alone. 

AI a key horizontal productivity driver

Artificial intelligence emerges as a key horizontal productivity driver across sectors. Measures such as tax benefits for foreign companies setting up data centres in India until 2047, higher IT and telecom allocations of ₹74,560 crore, and expanded Safe Harbour provisions are expected to strengthen domestic compute capacity and ease regulatory friction. Tracxn data shows India hosts 483 AI infrastructure companies that have raised $404 million, along with 207 cloud infrastructure startups and 64 data-centre-focused firms. 

Deep Tech Fund

Deep-tech enablement forms another pillar of the Budget. Proposals such as a Deep Tech Fund and the rollout of ISM 2.0 aim to build full-stack Indian IP across semiconductors, AI, biotech, defence, and advanced manufacturing. India’s semiconductor ecosystem includes nearly 3,000 active startups that have raised about $930 million over the past five years, with funding accelerating sharply in 2025. 

Clean energy, defence, and space also see higher allocations, alongside reforms to improve liquidity and capital access for startups and SMEs. Measures such as extended startup tax holidays, an SME Growth Fund and faster mergers are expected to ease financing constraints. 

“Union Budget 2026–27 reflects a structural approach to growth, where execution and long-term capacity building take precedence over short-term sentiment management,” said Neha Singh, Co-founder of Tracxn.