The Union Budget 2025-26 was presented by the Government of India on February 1, 2025, outlining the government’s vision for accelerating economic growth, boosting investments, and ensuring inclusive development. This year’s budget focuses on enhancing spending power, invigorating private sector participation, and securing a balanced development path for various sectors, aligning with the aspiration of “Viksit Bharat” (Developed India).
The Budget 2025-26 brings a strong focus on innovation, intellectual property, and technology-driven growth, parallel to India’s ambition to become a global leader in research, development, and high-value industries. With massive investments in R&D, digital transformation, semiconductor manufacturing, biotechnology, and space technology, the government has outlined a visionary roadmap for the future.
Reforms to Strengthen Innovation and R&D
One of the key highlights of Budget 2025-26 is the INR 20,000 crore investment in private sector-driven Research, Development, and Innovation (RDI) initiatives. The introduction of a Deep Tech Fund of Funds is aimed at catalysing the growth of next-generation startups in India. This strategic initiative is designed to significantly boost the number of patent filings, facilitate the transfer of developing technologies from research institutions to the marketplace, and fortify the country’s IP ecosystem. By placing a strong emphasis on advanced fields such as deep-tech research, AI, and biotechnology, the government has ensured that India remains a visible player in the global innovation arena.
In the field of biotechnology, the Bio-RIDE scheme has been allocated INR 2300 crore. This program is designed to foster innovation in biomanufacturing and biotechnology and promote bio-entrepreneurship and startup ecosystem development. The scheme will also bridge the gap between academic research and industrial applications by accelerating research and enhancing product development, putting India on the path to becoming a global leader in bio-manufacturing and life sciences innovation.
Amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act have been proposed, marking a significant step forward in nuclear governance. In line with this, the ambitious Nuclear Energy Mission has been set up to develop a substantial capacity of 100 gigawatts (GW) of nuclear energy by the year 2047. To support this initiative, a considerable budget of INR 20,000 crore is earmarked for the development and deployment of Small Modular Reactors (SMRs), which are expected to be operational by 2033. This investment will not only advance clean energy technologies but also enhance energy security in the country.
Additionally, a 2nd Gene Bank will be established, which will house a collection of 10 lakh (1 million) germplasm lines. This gene bank will play a crucial role in ensuring future food security and enhancing nutritional quality across different demographics, thereby addressing both current and future agricultural challenges.
The National Geospatial Mission, aimed at developing foundational geospatial infrastructure and integrating PM Gati Shakti, will play a critical role in modernising land records, urban planning, and design of infrastructure projects, indirectly propelling IP-based innovations. This initiative will support startups and enterprises leveraging geospatial data for AI, drone technology, and digital commerce, creating new opportunities for patent filings and IP commercialisation.
Furthermore, the launch of BharatTradeNet, a digital public infrastructure for international trade, will streamline trade documentation and financing, enhancing IP protection for export-oriented businesses. This aligns with the government’s Export Promotion Mission, which aims to provide cross-border factoring support and easy access to export credit, ensuring that Indian innovators can expand globally while securing their IP rights.
A comprehensive national framework will be developed to serve as guidance for states aimed at promoting Global Capability Centres (GCCs) in emerging tier 2 cities across the country. This framework will outline strategic initiatives and best practices to effectively attract multinational research and development (R&D) centres, positioning India as a premier destination for innovation. By implementing targeted incentives and support mechanisms, the framework will enhance the country’s appeal for patent filings and facilitate seamless technology transfers.
Boosting Semiconductor, Electronics and EV Manufacturing
Recognising the strategic importance of semiconductors and electronics manufacturing, the government has allocated the Modified Programme for Development of Semiconductors and Display Manufacturing Ecosystem, a massive fund of INR 7000 crore. This includes setting up of semiconductor fabs and display fabs in India, development of compound semiconductors, silicon photonics, and sensor fabs, strengthening Semiconductor Assembly, Testing, Marking, and Packaging (ATMP) facilities, modernisation of the Semi-Conductor Laboratory in Mohali, and expansion of the Design Linked Incentive Scheme to support semiconductor startups and innovators. These measures are expected to reduce India’s dependency on semiconductor imports, foster a domestic chip-making ecosystem, and attract investments in high-tech electronics manufacturing.
In a significant push toward sustainable and electric mobility, the government has introduced the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme, with a budget allocation of INR 4000 crore. This scheme aims to promote indigenous electric vehicle (EV) manufacturing and battery technology, encourage clean and green transportation, reduce dependency on fossil fuels, and support research and development in next-generation mobility solutions. With this initiative, India is set to accelerate the adoption of electric vehicles, strengthen EV infrastructure, and position itself as a leader in sustainable automotive technology.
Digital India and AI Innovation
The Digital India Programme remains a cornerstone of India’s technological transformation, receiving INR 4071 crore in funding. This investment will support electronic governance, IT hardware manufacturing, cybersecurity projects, digital transactions, and capacity-building initiatives. The government’s focus is on enhancing digital infrastructure, expanding the National Knowledge Network, and promoting India as a global IT hub.
To further bolster India’s leadership in artificial intelligence, the government has launched the IndiaAI Mission with an INR 2000 crore allocation. This mission will drive AI research, innovation, and applications across industries, fostering the development of cutting-edge AI solutions for healthcare, education, finance, and governance.
The establishment of a Centre of Excellence in Artificial Intelligence for Education will be supported by a substantial allocation of INR 500 crore. This initiative highlights the government’s focus on employing AI to enhance learning experiences, improve educational outcomes, and prepare students for the demands of a rapidly evolving digital economy.
The Department of Space has received a significant allocation of INR 13416 crore, supporting central projects such as Space Technology, Space Applications, Space Sciences, and the INSAT Satellite System. This investment will help develop next-generation satellite technologies, strengthen India’s space exploration missions, and enhance commercial satellite manufacturing and deployment.
Reforms for a Stronger Innovation Ecosystem
A total of INR 321.34 crores has been allotted to the Intellectual Property sector, aiming to bolster innovation and further improve the functioning of the CGPDTM Office. This funding will support initiatives such as enhancing trademark registration processes, improving patent examination procedures, and promoting awareness of intellectual property rights among creators and businesses. Additionally, the investment is expected to facilitate research and development efforts, ultimately creating a more robust ecosystem for intellectual property development in the region.
INR 3935.74 crores have been allotted to the Make in India schemes, including the Scheme for Investment Promotion, Credit Guarantee Fund, Fund of Funds 2.0, Fund of Funds, Startup India, Startup India Seed Fund Scheme (SISFS), Ease of Doing, Production Linked Incentive Scheme (PLI) for White Goods (ACs and LED Lights), and Manufacturing Mission – Furthering Make in India.
The government has also announced the Jan Vishwas Bill 2.0, with the aim of decriminalising over 100 legal provisions across various sectors. This reform seeks to reduce the burden of compliance on individuals and businesses by eliminating unnecessary criminal liabilities associated with minor offences. The proposed changes are expected to further streamline IP prosecution and protection processes and enhance efficiency in the overall IP management landscape.
A High-Level Committee for Regulatory Reforms will be established to conduct a comprehensive review of all regulations, certifications, licenses, and permissions pertaining to the non-financial sector. This committee will be tasked with identifying inefficiencies and proposing actionable recommendations within a one-year timeframe. In particular, the committee will focus on implementing transformational measures that significantly improve the ‘ease of doing business.’ This includes simplifying procedures related to inspections and compliance requirements and reducing bureaucratic hurdles that hinder business operations. By doing so, the committee aims to create a more favourable business environment that encourages investment and drives entrepreneurial activity.
An Investment Friendliness Index for States will be launched, ranking Indian states based on their ease of doing business, encouraging a more competitive business environment.
Under the Financial Stability and Development Council (FSDC), a robust evaluation mechanism will be established to assess the effectiveness and impact of current financial regulations and their subsidiary instructions. This initiative seeks to promote transparency, accountability, and innovation, in order to support a resilient financial system that can adapt to an evolving economic landscape.
Skill-Building Reforms
The Budget 2025 prioritises skilling initiatives to support IP creation and technological growth, ensuring that India’s workforce is ready for high-tech industries. The PM Research Fellowship Scheme has been laid down to provide 10,000 fellowships to researchers in IITs and IISc, building a strong pipeline of skilled innovators.
New infrastructure will be developed across the five Indian Institutes of Technology (IITs) established after 2014 for an additional 6,500 students. This expansion will include state-of-the-art classrooms, laboratories, and research facilities designed to foster a conducive learning environment for students pursuing various engineering and technology disciplines. Additionally, the hostel capacity and overall infrastructure at IIT Patna will be significantly upgraded to accommodate the increasing student population, ensuring that all students have access to essential amenities and support services for their academic and personal development. The focus will be on creating an inclusive and modern campus that promotes innovation and academic excellence.
Five National Centres of Excellence for Skilling will be established, drawing on global expertise and forming strategic partnerships aimed at equipping the country’s youth with the necessary skills for the ambitious “Make for India, Make for the World” manufacturing initiative. These institutions will be pivotal in cultivating a high level of expertise in patent-intensive sectors such as artificial intelligence, robotics, and clean energy, thereby positioning the country’s workforce at the forefront of technological innovation and sustainability.
The Indian government has announced the initiative to establish 50,000 Atal Tinkering Labs across schools over the next five years. This initiative aims to nurture early-stage innovation by providing students with hands-on experience in science, technology, engineering, and mathematics (STEM).
Additionally, the Bharatiya Bhasha Pustak Scheme has been announced as a significant effort to digitise a vast array of Indian-language books for both school and higher education. This initiative aims to enhance the accessibility of knowledge resources across diverse linguistic backgrounds.
The Gyan Bharatam Mission has been launched with the objective of conducting a comprehensive survey, thorough documentation, and effective conservation of India’s rich manuscript heritage. This initiative will involve collaboration with academic institutions, museums, libraries, and private collectors, aiming to meticulously cover and preserve over 1 crore (10 million) manuscripts that reflect the country’s diverse cultural and intellectual legacy.
Infrastructure Development Reforms
The foreign direct investment (FDI) limit for the insurance sector is poised to increase from the current 74 per cent to a full 100 per cent. This change applies to companies that allocate their entire premium investments within India, thereby promoting a greater influx of capital and expertise into the domestic insurance market.
The National Bank for Financing Infrastructure and Development (NaBFID) will establish a ‘Partial Credit Enhancement Facility’ specifically designed to support the issuance of corporate bonds for infrastructure projects. This initiative aims to bolster investor confidence and attract more capital into the infrastructure sector.
In a complementary move, public sector banks are set to implement a ‘Grameen Credit Score’ framework developed by Grameen Credit as a scoring system to assess the creditworthiness of members of Self-Help Groups (SHGs) and individuals residing in rural areas.
Increased Classification for MSMEs and Other MSME Reforms
The Budget 2025 has provided for a new classification of MSMEs as follows:
- For micro enterprises, the investment limit has been increased from INR 1 crore to INR 2.5 crore, and the turnover from INR 5 crore to INR 10 crore.
- For small enterprises, the investment limit has been increased from INR 10 crore to INR 25 crore, and the turnover from INR 50 crore to INR 100 crore.
- For medium enterprises, the investment limit has been increased from INR 50 crore to INR 125 crore, and the turnover from INR 250 crore to INR 500 crore.
The credit guarantee coverage for micro and small enterprises has increased from the current INR 5 crore to INR 10 crore. This adjustment aims to foster growth and sustainability in these enterprises over the next five years, generating an additional credit facility amounting to INR 1.5 lakh crore, which can be utilised for expansion, innovation, and operational efficiency. The credit guarantee cover for startups will also see a substantial rise from INR 10 crore to INR 20 crore. This increase is accompanied by a reduction in the guarantee fee to 1% for loans granted within 27 designated focus sectors, all structured to support the Atmanirbhar Bharat initiative, which encourages self-reliance and domestic production.
Additionally, the credit guarantee for term loans has now been extended to INR 20 crore, specifically for well-managed exporter MSMEs. This move aims to bolster the exporting capabilities of these enterprises, ensuring they have access to the necessary financial resources to compete effectively in the international market. To support micro-enterprises further, credit cards with a limit of INR 5 lakh will be introduced for businesses registered on the Udyam portal. Furthermore, a new Fund of Funds will be established with an expanded scope to enhance financial support for SMEs and startups. This fund will receive a fresh contribution of INR 10,000 crore, designed to stimulate growth, innovation, and greater access to capital within the sector.
Strengthening the Pharmaceutical and MedTech Sectors
The pharmaceutical and medical technology industries have received a substantial boost in this budget, reinforcing India’s role as a leading global supplier of medicines and medical devices. INR 1615 crore allocation has been made for the development of the pharmaceutical industry, ensuring modernisation, infrastructure development, and the expansion of domestic production.
To further enhance manufacturing capabilities, the Production Linked Incentive (PLI) scheme for pharmaceuticals has been allotted INR 2445 crore. This initiative will encourage domestic production of essential drugs, active pharmaceutical ingredients (APIs), and high-value medical products, reducing reliance on imports. Additionally, an INR 360 crore allocation has been made to strengthen India’s medical device industry, promoting research, innovation, and manufacturing excellence.
The Promotion of Research and Innovation in Pharma-MedTech (PRIP) scheme has been granted INR 245 crore, ensuring cutting-edge R&D, drug discovery, and advanced medical technology solutions. Furthermore, INR 40 crore has been set aside for the Protection of Plant Varieties and Farmers’ Rights Authority, highlighting the government’s commitment to agricultural biotechnology and plant-based pharmaceutical advancements.
Boost to Manufacturing Sectors
A National Manufacturing Mission will be set up to encompass small, medium, and large industries. This mission will propel the ‘Make in India’ initiative by developing strategic roadmaps, ensuring robust policy support, and creating a governance and monitoring framework to guide the efforts of central ministries and state governments, thereby enhancing the overall manufacturing landscape in the country.
Moreover, a dedicated Mission to promote Clean Tech manufacturing will be established, aimed at increasing domestic value addition and the production of key technologies such as electric vehicle (EV) batteries, solar photovoltaic (PV) cells, electrolysers, motors and controllers, wind turbines, ultra-high voltage transmission equipment, and grid-scale batteries. This initiative seeks to position India as a thriving hub for clean technology, aligning with the global shift towards sustainable energy solutions.
A key initiative introduced in this budget is the new scheme for Plug-and-Play Industrial Parks, with an allocation of INR 2500 crore. These industrial parks aim to provide investment-ready zones equipped with complete infrastructure, allowing businesses to set up operations quickly and efficiently. This scheme is expected to reduce the time and cost involved in setting up new industries, thereby attracting both domestic and foreign investments. It will also enhance India’s manufacturing capabilities in key sectors such as electronics, semiconductors, and pharmaceuticals, making the country a preferred destination for global investors.
A new initiative will be launched to empower 5 lakh women, along with individuals from Scheduled Castes and Scheduled Tribes, who are embarking on their entrepreneurial journeys for the first time. This scheme aims to provide term loans of up to INR 2 crore over the next five years, allowing access to necessary capital for business development. Additionally, online capacity-building programs will be organised to enhance managerial and entrepreneurial skills, equipping these entrepreneurs with essential tools for success.
Furthermore, a focus product scheme will be implemented to bolster the production of high-quality, non-leather footwear. This initiative is expected to contribute to a significant turnover of INR 400 crore in revenues and INR 1.1 lakh crore in export earnings. By promoting sustainable and locally produced footwear, the scheme aims to position India as a leader in this market segment.
In a bid to position India as a global hub for toy production, a comprehensive new scheme will also be introduced. This initiative will concentrate on developing both skills and manufacturing clusters, thereby creating a thriving ecosystem for sustainable toys that embody the ethos of the ‘Made in India’ brand. The objective is to enhance domestic manufacturing capabilities while catering to the growing global demand for environmentally friendly toys.
To further advance food processing in the Eastern region of India, a National Institute of Food Technology, Entrepreneurship, and Management will be established in Bihar. This institution will focus on fostering innovation and improving food processing techniques, ultimately boosting the efficiency and competitiveness of the local food industry.
The budget allocation for the Ministry of Ayush has seen a significant increase, rising to INR 3992.90 crore. This increase reflects the government’s commitment to promoting traditional Indian systems of medicine, including Ayurveda, Siddha, Unani, and Homeopathy. In particular, the National Medicinal Plants Board has received a dedicated allocation of INR 18.59 crore. Furthermore, the Pharmacopoeia Commission for Indian Medicine and Homoeopathy (PCIM&H) has been allocated INR 21.96 crore to enhance the standardisation and quality control of these medical systems, thereby supporting innovation, integrity and efficacy of traditional medicines. These allocations signify a robust commitment to advance the research, development, and promotion of traditional medicine in India, ensuring that these ancient practices continue to thrive and contribute to public health.
Customs-Related Reforms
The Budget 2025-26 also introduces sector-specific customs incentives to strengthen IP-driven industries such as manufacturing, pharmaceuticals, and clean technology.
25 critical minerals that are not available domestically have received full Basic Customs Duty (BCD) exemption. Cobalt powder, lithium-ion battery scrap, lead, zinc, and 12 more critical minerals are also fully exempt to support domestic manufacturing and job creation.
The government has announced the complete exemption of 36 additional life-saving drugs from the Basic Customs Duty, aiming to provide significant relief to patients battling serious health conditions such as cancer, rare diseases, and chronic ailments. Among these, six newly introduced medicines will now attract a reduced customs duty rate of 5%, facilitating greater access to essential treatments and boosting more R&D in these medicines. Furthermore, bulk drugs used in the production of these vital medicines will also qualify for the same exemption, thereby encouraging manufacturers to produce these life-saving treatments at a lower cost. Additionally, 37 more medicines in various pharmaceutical companies’ Patient Assistance Programmes, in which certain medicines are provided free of cost, have been granted full exemption from customs duties.
Duties exemptions are also announced on capital goods crucial for the manufacturing of lithium-ion batteries and electric vehicles (EVs) to boost green technology innovation and promote IP creation in sustainable energy solutions. Specifically, the government has proposed exemptions from BCD on 35 essential capital goods that are vital for the production of EV batteries, which are at the forefront of the shift towards cleaner transportation. Additionally, the exemption extends to 28 more capital goods required for manufacturing mobile phone batteries, highlighting a broader commitment to advancing energy-efficient technologies across multiple sectors.
To address the issue of inverted duty structure, the BCD on Interactive Flat Panel Displays (IFPD) has been increased from 10% to 20%. This change aims to create a level playing field for domestic manufacturers. In contrast, the BCD on open cell components and other related parts has been reduced to 5%. Furthermore, to further promote local production, open cell components used in LCD and LED televisions have now been granted complete exemption from BCD. This strategic move is intended to incentivise domestic manufacturing efforts and IP creation, thereby enhancing the competitiveness of the Indian electronics industry in the global market.
In the textiles sector, there have been significant policy updates concerning manufacturing equipment and fabric classifications. A full exemption has been announced on two additional types of shuttle-less looms specifically designed for the production of technical textiles. This exemption aims to encourage innovation and efficiency in manufacturing processes. Furthermore, the revised BCD on knitted fabrics has been adjusted to a new rate of 20% or INR 115 per kilogram, whichever amount is higher. This change is intended to balance the import costs and support domestic fabric producers while ensuring that the quality and variety of knitted textiles remain competitive.
The Budget 2025 also includes Basic Customs Duty (BCD) exemption on raw materials, components, and consumables essential for shipbuilding for an additional ten years. This measure aims to bolster the competitiveness of the domestic shipbuilding industry by reducing costs and inviting more investment. Furthermore, the BCD exemption has been extended to the shipbreaking sector, which is expected to enhance its competitiveness and promote sustainable practices in recycling and decommissioning vessels.
In the telecommunications sector, the BCD on carrier-grade ethernet switches has been reduced from the current rate of 20% to a more competitive 10%. This adjustment aligns the duty on carrier-grade equipment with that of non-carrier-grade ethernet switches, thus promoting a more level playing field in the market. By reducing the financial burden on telecommunications providers, this policy is anticipated to encourage infrastructure development, boost IP innovation and enhance service quality for consumers.
The Maritime Development Fund (MDF) has been announced with a corpus of INR 25,000 crore, aiming to support India’s maritime sector through financial assistance via equity or debt securities. The government will contribute up to 49% of this fund, while the remaining contributions will come from ports and private sector investments. In addition to promoting shipbuilding, the MDF will actively bolster the growth of cruise tourism in the country. The fund aims to support critical activities such as the mechanisation and capacity expansion of existing ports through collaborative public-private partnerships.
The Budget 2025-26 also announces the establishment of an Export Promotion Mission, a strategic initiative aimed at bolstering the nation’s export capabilities. This Mission will set specific targets, both sectoral and Ministerial, and will be collaboratively driven by the Ministries of Commerce, Micro, Small and Medium Enterprises (MSMEs), and Finance. Key features of the Mission include the provision of streamlined access to export credit facilities, enabling businesses to secure the necessary financing to expand their international operations. Additionally, it will introduce cross-border factoring support, allowing exporters to convert their receivables into immediate cash, thereby improving liquidity and reducing financial strain. By addressing challenges such as regulatory compliance, quality standards, and logistical hurdles, the Mission aims to enhance the competitiveness of Indian exporters on a global scale. Through these concerted efforts, the government seeks to create a more supportive environment for export growth and resilience in the face of international market dynamics.
Concluding Remarks
The Union Budget 2025-26 lays a strong foundation for India’s transformation into a global innovation powerhouse by prioritising R&D investments, digital infrastructure, and regulatory reforms. By providing progressive initiatives for startups, researchers, and businesses, the budget strengthens India’s innovation drive and accelerates manufacturing reforms. By providing financial incentives and grants for increasing R&D funding across critical sectors such as artificial intelligence (AI), biotechnology, semiconductors, and clean energy, the budget encourages both private and public sector collaboration, ensuring that innovation remains at the forefront of India’s economic strategy. Additionally, tax benefits and simplified compliance procedures create a more business-friendly environment, allowing enterprises to focus on scaling their innovations.
The expansion of digital infrastructure further reinforces India’s ambition to become a global tech hub. Investments in AI-driven solutions, high-speed internet connectivity, and cloud computing facilities will strengthen the digital ecosystem, enabling seamless integration of emerging technologies into various industries. Moreover, the emphasis on data security and regulatory transparency will ensure that businesses can operate with confidence in a well-regulated digital landscape. As these initiatives take shape, India moves one step closer to becoming a developed and self-reliant nation, truly embracing the spirit of “Viksit Bharat”.
Authors: Manisha Singh and Shivi Gupta