India’s startup journey, which began cautiously, has shifted gears and gathered significant momentum over the past few years. Fuelled by the Startup India initiative and a rapidly evolving digital infrastructure, the sector’s growth narrative has been both broad-based and compelling. From early e-commerce ventures to deep-tech, fintech, and AI-led enterprises, nearly 50% of startups are reported to have emerged from Tier 2 and Tier 3 cities, with as many as 44,000 startups registered in 2025 alone.
As the country heads into the Union Budget 2026, founders, investors, and market participants across financial assets, technology, manufacturing, and digital services are looking for policy clarity, execution certainty, and targeted fiscal support to help startups scale sustainably while strengthening India’s global competitiveness.
Fiscal discipline, capital allocation, and market priorities
Gaurav Garg, Lemonn Markets Desk, expects the Union Budget 2026 “to be a cautious, tightly balanced budget focused more on strategic prioritisation than big announcements.” With tax revenues under pressure due to last year’s income-tax relief, he notes that the government’s focus will be on funding rising needs such as defence, renewable energy, and semiconductors “without breaking fiscal discipline.” Garg adds that Budget 2026 is likely to emphasise “disciplined spending, targeted capital allocation, and private sector crowding,” with preference for defence, green energy, urban infrastructure, and manufacturing.
Nikhil Aggarwal, Founder & Group CEO, Grip Invest shares, “The upcoming Budget can accelerate bond adoption by reducing friction and improving liquidity. A recent report by Niti Aayog on Deepening the Bond Market clearly identifies tax asymmetries such as slab-rate taxation of interest, TDS inefficiencies, and unfavourable capital-gains treatment as major deterrents to long-term bond investing. Rationalising these, especially for long-tenor listed bonds and retail-focused fixed-income products, would materially improve household participation.”
“Over the long term, India needs a sustained shift toward market-based financing through coordinated regulation, deeper secondary markets, broader issuer participation beyond AAA credits, and stronger recovery and enforcement mechanisms. This will gradually reduce over-reliance on bank credit and enable the bond market to fund infrastructure, MSMEs, and long-duration assets at scale.”
Digital assets and regulatory recalibration
India’s Virtual Digital Assets (VDA) ecosystem is now at a pivotal juncture, with adoption expanding nationwide. Ashish Singhal, Co-founder, CoinSwitch, observes, “However, the current tax framework presents challenges for retail participants by taxing transactions without recognising losses, creating friction rather than fairness. A reduction in TDS on VDA transactions from 1% to 0.01% could improve liquidity, ease compliance, and enhance transparency while preserving transaction traceability. Raising the TDS threshold to ₹5 lakh would help protect small investors from disproportionate impact.”
He notes that VDA taxation, introduced in 2022 as a stopgap in the absence of regulation, has since been reinforced by stronger oversight from FIU-IND and improved compliance standards. Singhal adds, “It (the budget) presents a great opportunity to revisit the framework in a manner beneficial to both investors and the government. We remain hopeful that the government will recognise this gap and consider reviewing the current framework soon.”
Technology, deep-tech, and digital resilience
The technology and startup ecosystem is expecting strong policy support and fiscal measures to accelerate innovation, deepen digital infrastructure, and enhance global competitiveness. Raghu Pareddy, CEO & Founder of Wissen Technology, shares, “A forward-looking budget that treats technology as a core economic enabler will be critical in positioning India as a global hub for innovation and digital services. An understanding to enhance funding for deep-tech, AI, data, and cybersecurity startups, rationalised tax and ESOP reforms, and simplified compliance will be the key to enabling sustainable growth. Continued focus on AI, data centres, semiconductor design, and R&D incentives will help build long-term digital resilience, while large-scale upskilling initiatives can address the growing tech talent gap.”
With India increasingly establishing itself as a manufacturing hub, Prateek Jain, Co-founder and COO, Addverb, believes the next phase of growth will be driven by large-scale, repeatable automation deployments rather than isolated pilots. He elaborates, “Policy consistency enhanced industrial corridors and the continued thrust under Make in India have provided a solid base. Now the emphasis must turn to creating globally competitive manufacturing abilities which are driven by smart automation.” He adds, “With India shifting beyond automation deployment to automation IP design and ownership, smart factories and agile supply chains will characterise its leadership in the advanced manufacturing.”
Echoing this view, Raviteja Chivukula, Co-founder and CEO, Perceptyne Robots, calls this a defining moment to reposition India from a technology consumer to a technology builder and explains, “High-capex innovation areas like robotics, semiconductors, advanced manufacturing, and AI need targeted capital subsidies to reduce early risk and accelerate scale-up. Globally, developed economies are powered by strong private-sector R&D, supported by clear and attractive corporate R&D tax credits. Strengthening these incentives in India can unlock private capital at scale. Encouragingly, policy signals beyond tax breaks, such as the RDI framework, show intent in the right direction; now, execution and scale will matter.”
Gurvinder Gandhi, CFO, Mitsubishi Electric India, observes, “India’s manufacturing journey is moving from automation adoption to automation depth. The upcoming Union Budget can accelerate this by enabling the domestic manufacturing of advanced factory automation tools, including PLCs, industrial robots, cobots, and servo systems. The incentives in these segments can assist the Indian industry to go beyond fragmented automation to interconnected, data-based, and intelligent factory ecosystems that are consistent with global standards.” He adds, “The incentivisation of more advanced and energy-efficient technologies in air purification can provide quantifiable benefits in terms of cutting down the losses associated with pollution, enhancing the urban living conditions and supporting the overall climate commitments of India.”
Consumption, D2C brands, and startup scale-up
“The 2025 Union Budget supported consumer sentiment by reinforcing purchasing power,” points out Ganesh Sonawane, Co-founder and CEO of Frido, a lifestyle, wellness, retail and D2C startup. He adds, “With GST 2.0 moving towards rate rationalization and simpler slabs, the market received a clearer, more predictable tax environment. That combination helped brands pass on efficiencies more confidently, making everyday spending feel lighter and driving steadier consumption.”
He further shares that the emphasis now should be on creating an environment where Indian D2C brands can build and scale from within the country with confidence. Sonawane explains, “Consistent tax policies, simpler GST compliance, and better access to working capital, along with extending PLI incentives to a wider set of consumer and wellness categories, can encourage brands to invest deeper in local manufacturing, product quality, and supply chains.”
Interestingly, pet care is another area where new players are entering. Growing at 18% to 20% CAGR, this market is projected to cross ₹60,000–₹70,000 crore by the end of the decade. Dhanu Roy, Founder-Director, Right4Paws, a pet care brand, says, “Budget 2026 should actively support Make-in-India pet nutrition by incentivising domestic manufacturing, ingredient sourcing, and food processing infrastructure instead of relying on imported formulations.” Though pets fall under companion animal category and do not contribute directly to animal husbandry sector, it is important to note the role they play in society. As companions, they help with physical and psychological support to both young and senior citizens who are staying away from their families in different cities of India.
Media, AI, and digital services
In the media and advertising ecosystem, Anand Bhadkamkar, CFO, LS Digital, observes that MarTech, AdTech, and AI have become indispensable for businesses to scale. He says the industry would benefit if Budget 2026 focuses on enabling “faster and more responsible adoption of these technologies”. Bhadkamkar adds, “For Indian companies, navigating through the impact of regulations like DPDP Act alongside broader economic headwinds has been challenging. In this context, clear direction around AI-led innovation, along with incentives that encourage domestic digital businesses to invest and expand, can play a meaningful role in sustaining growth.”
With businesses across sectors increasingly exploring AI and ML as growth drivers, Vineet Khunger, Co-founder, IndieVisual, an AI and deep-tech startup, praises India’s startup ecosystem for its “remarkable resilience, often innovating with far fewer resources than global peers.” He cautions, however, that “early-stage companies, especially those building production and infrastructure technology, cash flow and long R&D cycles remain major challenges.”
According to Khunger, practical interventions such as faster TDS refunds, smoother GST input credit refunds in the early years, and the expansion of initiatives like the Startup India Seed Fund Scheme to more cities and sectors could substantially ease operational strain. He adds, “Policy frameworks that recognise longer R&D timelines through tax and grant support would make it easier for founders and investors to commit to long-term deep-tech innovation.”
His colleagues and Co-Founders at IndieVisual Prashanth Naik and Prashant Pavithran, add that targeted support for applied AI, deep-tech infrastructure, and media technology platforms could help Indian startups build durable, enterprise-grade solutions and move up the global value chain.
