
The Finance Minister (FM) Nirmala Sitharaman on February 1 presented the Union Budget 2025-26 in the parliament. The budget is being suggested as a reprieve to middle-class earners with crucial income tax exemptions announced. At the same time, the budget also made key announcements in the innovation, tech, trade, and health sectors. Here goes my attempt at a round-up on these fronts for the Budget 2025-26!
Innovation, Knowledge and Education
The Budget announced the setting up of 50,000 Atal Tinkering Labs (ATLs) in Government schools in the next 5 years. ATLs are the government’s initiative under the Atal Initiative Mission to ‘foster curiosity, creativity, and imagination in young minds; foster inventiveness and inculcate skills such as design mindset, computational thinking, adaptive learning, physical computing etc.’
Importantly, Rs 20,000 crore has been committed to implement private sector driven research, development, and innovation. With respect to R&D, India belongs to a sub 1% R&D to GDP ratio group, with countries like South Africa and Argentina amongst others. In 2023 alone the R&D expenditure for countries like China was USD 723 billion, for Japan USD 183.50 billion, and for Germany USD 132 billion. In 2020-21, India’s Gross Expenditure on R&D (GERD) as percentage of GDP remained at 0.64%. Since, the FM in her speech made this commitment keeping private sector R&D in mind, it is also timely to look at the numbers pertaining to these. In 2020-21, the private sector contribution to GERD was 36.4%. Whereas the corresponding share for Germany, South Korea, China and the United States, the private sector contribution as a percentage of the national GERDs is 67%, 79%, 77%, and 75%, respectively. So, the 20,000 crore investment injection will certainly be a welcome initiative. (Read more here and here)
The FM announced that under the PM Research Fellowship Scheme, the government will provide 10,000 fellowships for technological research at IITs and the Indian Institute of Science (IISc) with enhanced financial support. The PMRF is a stipend scheme for doctoral candidates in these research institutes. I have not been able to figure out yet (since the announcement of this scheme in 2018-19) why the list of eligible institutes for the PMRF are limited in number and only include IITs, IISc, IISERs and few central universities. I think extending an increased stipend for PhD scholars across the spectrum of institutions will further cultivate and stimulate the research environment, also expanding the scope for encouraging researchers at these institutions.
A ‘Gyan Bharatam Mission’ has been announced to ‘survey, document, and conserve the country’s manuscript heritage with academic institutions, museums, libraries, and private collectors’ covering more than one crore manuscripts. The government will set up a National Digital Repository of Indian knowledge systems for knowledge sharing as well. Also, broadband connectivity will be provided to all government secondary schools and Primary Health Centres in rural areas.
AI Centres
The FM had first announced in 2023 the establishment of three Centres of Excellence (CoE) in Artificial Intelligence (AI) for agriculture, health, and sustainable cities. In October 2024, the three centres from the 2023 budget were announced with AIIMS Delhi and IIT Delhi leading the health CoE, IIT Ropar for agriculture and IIT Kanpur for the sustainable city initiative. An additional Centre of Excellence in AI for education has been announced with a 500 crore budget in this year’s budget.
Foreign Investment
The budget announces the remodeling of the Model Bilateral Investment Treaty (BIT) 2016 to ‘encourage sustained foreign investment’ and ‘in the spirit of ‘first develop India’. This has been aimed at making the country more investor-friendly. Prathibha Sivasubramanian and Sreenath Namboodiri had previously discussed the impact of recent free trade agreements (FTAs) in the Indian IP landscape. Although FTAs and BIT are separate pacts, concerns have been raised with respect to the negotiation of investment protection under the FTA. With the government focussed in making the country investor-friendly, hopefully transparency, accountability, and robust IP safeguards are not compromised.
Regulatory Updates
On making regulations keep up with technological innovations, the budget has announced updating of regulations made under old laws and creating an appropriate ‘regulatory framework for the twenty-first century’. This has been proposed to be done by – High Level Committee for Regulatory Reforms, Jan Vishwas Bill 2.0 ( to decriminalize more than 100 provisions in various laws), setting up a Financial Stability and Development Council (to evaluate impact of the current financial regulations) and an Investment Friendliness Index of States. The Jan Vishwas Bill 1.0 was suggested to have negative implications on small businesses, competition and public health with several amendments reducing criminal responsibility in crucial provisions such as Section 68 of the Copyright Act and failure to file Form 27 information. With a clear intent of achieving ‘ease of doing business’ in India, hopefully Jan Vishwas 2.0 takes into account the public interest while decriminalising relevant provisions.
Medicine and Health
36 lifesaving drugs and medicines have been added to the list of medicines fully exempted from Basic Customs Duty (BCD). A proposal to add 6 lifesaving medicines to the list attracting concessional customs duty of 5% has also been made. Full exemption and concessional duty will also apply on the bulk drugs for manufacture of the above drugs. In addition to this, specific drugs under Patient Assistance Programmes run by pharma companies will be fully exempt from BCD, provided that medicines are supplied free of cost. 37 more medicines will be added to this list along with 13 new patient assistance programmes. Readers can check the full list here. (Read more on the Health Budget here)
I had previously covered the issue of Risdiplam, a high priced rare disease medicine, which also finds itself in the exemption. But news reports have stated that this exemption will not make a huge difference. Since Risdiplam is priced at Rs 72,00,000, a 15% BCD exemption would mean the cost would be Rs. 61.2 lakh, which still is very high.
Conclusion
Although prima facie promising on several fronts, a bigger question on announcement vs implementation looms over. I am not able to find exact numbers to confirm this but Kaushik Deka, in his report here, has pointed to some inconsistencies in the intent of establishing AI CoEs and focus on new-age technologies, the budget for which has been reduced to Rs 475 crore from last year’s 1800 crore. On the R&D front, the report says, the budget for several research-related initiatives (such as Implementation of the IMPRINT Research Initiative (Impacting Research Innovation and Technology), Scheme for Promotion of Academic and Research Collaboration (SPARC) amongst others) has seen a reduction from Rs 355 crore to Rs 327 crore, and an abysmally low spending of Rs 74.5 crore in the last fiscal year. A closer scrutiny at several other expenditures may also reveal a bigger picture on the actual implementation of different announcements made by the FM.
If readers have some insights and thoughts on what else to look for in the Budget 2025-26, do let us know!