Budget 2026-27: Focus on Growth, Defence, and Clean Energy
Budget 2026-27 should prioritize growth-enhancing expenditure, defence, and clean energy for economic resilience.
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Editorial Analysis
The author advocates for a Budget 2026-27 that sustains India's growth momentum by prioritizing growth-enhancing expenditure, defence modernization, clean energy transition, and policy certainty. The author emphasizes the need for fiscal prudence while unlocking growth potential across industries.
Main Arguments:
- The government should continue the focus on defence, with higher expenditure on the capex, increasing the share of capital outlay to 30% and boosting the DRDO budget by at least ₹10,000 crore.
- Private enterprises play a key role in augmenting defence exports, and a defence export promotion council should be set up to enhance coordination and achieve the target of defence exports set at ₹50,000 crore by 2028-29.
- A transition toward clean energy, advanced manufacturing, and strategic technologies requires securing critical minerals, supplemented by a dedicated critical minerals tailings recovery program.
- Exports need a policy thrust, and the budgetary allocation for the Remission of Duties and Taxes on Exported Products Scheme needs to be raised significantly to make the exports more competitive.
- Deepening corporate bond markets and addressing disputes pendency are critical for diversification of finance credit and ensuring policy certainty.
Conclusion
Policy Implications
Key Facts
Defence capital outlay share: Increase to 30%
DRDO budget increase: At least ₹10,000 crore
Defence exports target: ₹50,000 crore by 2028-29
Drone PLI outlay: Enhance from ₹120 crore to ₹1,000 crore
UPSC Exam Angles
GS Paper 3: Economy, Defence, Infrastructure
Link to 'Make in India' initiative and Atmanirbhar Bharat
Potential for questions on fiscal policy, defence procurement, and clean energy transition
Visual Insights
More Information
Background
The emphasis on defence production and exports has historical roots in India's post-independence policy of self-reliance. Following the 1962 Sino-Indian War, India recognized the need to reduce its dependence on foreign arms suppliers. This led to the establishment of Defence Public Sector Undertakings (DPSUs) and the Department of Defence Production in 1962.
However, progress was slow due to bureaucratic hurdles and technological limitations. The Kargil War in 1999 further highlighted the urgent need for modernization and indigenous defence capabilities. The 'Make in India' initiative, launched in 2014, provided renewed impetus to defence manufacturing, encouraging private sector participation and foreign investment in the sector.
The evolution of defence procurement policies, from import-dependent to indigenization-focused, reflects India's strategic desire for greater autonomy in its defence needs.
Latest Developments
In recent years, India has taken significant steps to boost defence exports. The government has set an ambitious target of achieving ₹35,000 crore in defence exports by 2025. Several policy reforms have been implemented, including streamlining export procedures, providing financial incentives, and promoting defence attachés in Indian embassies to facilitate exports.
The establishment of two defence industrial corridors in Uttar Pradesh and Tamil Nadu aims to attract investments and promote indigenous manufacturing. Furthermore, the government is actively engaging with private sector companies to enhance their participation in defence production and exports. The increasing focus on clean energy and critical minerals is driven by global trends towards sustainability and the need to secure supply chains for strategic technologies.
India's commitment to net-zero emissions by 2070 necessitates significant investments in renewable energy and energy storage technologies.
Practice Questions (MCQs)
1. Consider the following statements regarding India's Defence Exports: 1. The government aims to achieve ₹50,000 crore in defence exports by 2025. 2. Defence Public Sector Undertakings (DPSUs) are the sole entities responsible for defence exports. 3. The establishment of defence industrial corridors aims to promote indigenous manufacturing. Which of the statements given above is/are correct?
- A.1 and 2 only
- B.3 only
- C.2 and 3 only
- D.1, 2 and 3
Show Answer
Answer: B
Statement 1 is incorrect as the target is ₹35,000 crore. Statement 2 is incorrect as private enterprises also play a key role in defence exports. Statement 3 is correct as the corridors aim to boost indigenous manufacturing.
2. With reference to Critical Minerals, consider the following statements: 1. Critical minerals are essential for strategic technologies and clean energy transition. 2. India has a well-established critical minerals tailings recovery program. 3. Securing critical minerals supply chains is not a priority for India. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.1 and 2 only
- D.1, 2 and 3
Show Answer
Answer: A
Statement 1 is correct. Statement 2 is incorrect as the summary suggests a dedicated program is needed, implying it's not well-established. Statement 3 is incorrect as securing critical minerals is crucial for India's strategic goals.