Blueprint to unleash India's 'suppressed soul': Why the 2026 Budget is more than just numbers

As transformative documents go, the Union budget presented by Manmohan Singh in 1991 heralded the comprehensive reforms that helped India unleash its potential. When Finance Minister Nirmala Sitharaman present her ninth consecutive Budget, will it be another transformative document or another Annual Financial Statement?

In her previous Budget, Sitharaman made two tweaks to income taxes that left a swathe of taxpayers legally outside the tax net; the GST revision that followed brought down the cost to consumers. Also, the corporate tax rate is neither high enough to drive capital away nor low enough to not contribute to the Union's tax receipts. So major hikes or cuts to taxes are unlikely.

Then there's the Trump effect. To an already VUCA (volatile, uncertain, complex, and ambiguous) world grappling with AI's impact on jobs and the challenges of global warming, we now have deglobalisation. Earlier, anyone could simply plug into the global flow of goods, services, capital, technology and people swirling around. Not anymore. This has added to the already burgeoning list of sectors labelled strategic or of national security importance. And the moment something gets added to this list, the state has to fund, seed, or provide scaffolding for it, which requires not just funds but also focus. That leaves that much less for welfare and development, with India being no exception. To sum up, there’s nothing much to give away to anyone.

For India, 2025 heralded troubles not just from Trump but also from a troubled neighbourhood. Preoccupied with it, India’s focus is less on being a ‘Vishwaguru’ and more on itself. In such a backdrop, where could Modi 3.0 leave a mark? On the domestic economy, with a transformative reform package, teaser or trailer to which could be the upcoming Union Budget.

Already, India is the fourth-largest economy, but it has a huge population. Being a constitutional democratic republic, the state is ultimately answerable to its citizens. But if a vast swathe of them is far below the decent living standards of the 21st century, isn’t that a state failure? Shouldn’t this be set right by the centenary of our independence? The solution, then, is economic growth. With little to give away, the sole option is the further unshackling of the economy's productive forces.

With the GST cuts and labour reforms, the Union Government has already displayed its reform instincts. Especially the latter – GST cuts were popular with only states grumbling over revenue loss. But labour reforms were tougher with widespread opposition. Quite good for a coalition government dependent on allies, lately bolstered by the Bihar election victory.

But the change of MNREGA to VB G RAM G shows the pitfalls of overconfident reforms. What was an on-demand, rights-based work scheme is now inverted into a supply-based one at the state government's discretion. Increasing the days from 100 to 125 and quadrupling the state share to 40 per cent were just right. For a country like India, such a right-to-work programme extending for a third of a year is necessary and was the right counterweight to the labour law reforms. Though the new labour codes stipulate minimum wages, their enforcement will be patchy. Thus, a more enforceable right-to-work scheme was the perfect antidote. Hiking the state share was also a clever tweak – it would starve states of funds that would otherwise have gone as freebies or non-merit spending. But the self-goal of making it supply-driven made the reform implode.

So the obvious next question is what should be the target of reforms. India has 65 per cent of its population under 35. Also, around 54 per cent of the Indian workforce is in agriculture, while 45 per cent of India's population depends on it for livelihood. But its contribution to GDP is just 18 per cent. Thus, reforming these two segments could yield the highest dividends.

First to farming. As per the above, a farmer earns just one-third of the per capita income (PCI). Will it be possible to triple the farmer's income to equal the current PCI? Before laughing at the question, the Netherlands, whose arable area is 18,000 sq km, had agri exports worth $150 billion, against India’s $50 billion (both 2024 data). But India has an arable area of 1.5 million sq km – a whopping 83 times! Clearly, there is much value left in Indian agriculture to be extracted through modernisation, not just through the cliched strategy of moving farm workers into manufacturing. And we have an emulatable example amid the agriculture sob stories in Sahyadri Farms based in Nashik, Maharashtra, called the ‘Amul of fruits and vegetables’. It is India’s largest farmer-owned fruits and vegetables company, and the first such company to receive foreign investment.

Now to human capital. Even though school enrolments and credentials have improved over the years, the employability and skills of the passouts are woefully inadequate. Thus, schooling upto secondary levels should focus more on vocational and real-world skills. Here, a thoughtful use of AI could compensate for a lack of teacher skills as more of India becomes connected. And to employ those under 35 in the working age, skilling should be coupled with further ease of doing business through deregulation. 

We take pride in Indian origin global tech CEOs, ISRO's rocketry, the quality of IIT passouts and so on, but not in our poverty statistics or standard of living. A day should come when it's plainly visible to anyone that most Indians lead a good life - not by statistical measures, but by simple observation. And that day could well be the moment ‘when the soul of a nation long suppressed finds utterance’. The coming Budget could be the blueprint towards that worthy goal. Let's hope the FM heeds the call.

(Views are personal)