What the Budget didn't do

Budget 2026 is a business-as-usual exercise that increases some outlays, announces some new schemes, corrects some duty perversions, contains the fiscal deficit, and undertakes to devolve resources recommended by the Finance Commission to states. It gets a thumbs up by normal standards.But these are not normal times. We are experiencing what Mark Carney at Davos called a rupture in the global order. Trump has demolished old certainties about geopolitical alliances and enmities. No erstwhile US ally - European, West Asian or Asian - can count on Marines rushing to their rescue in the event of hostilities that, just a year ago, would have triggered intervention by the world's most powerful military. Every nation is scrambling to enhance its capacity to defend itself.While never an ally of the US, India had grown accustomed to considering itself a partner, not just formally in a grouping like Quad but in a comprehensive campaign, in general, to pre-empt any military adventurism by China in the Indo-Pacific. India's rise as an economic and military power is widely understood as a necessary condition to keep China's rise peaceful. Trump has ploughed such assumptions deep underground.Russia has been a reliable source of support. But Russia is beholden to China, for supplying critical inputs to its war against Ukraine. China has consistently dragged its feet over settling the border dispute with India, builds up and arms Pakistan as a convenient force multiplier, and engages with India's other neighbours in South Asia to neutralise them, if not turn them against India.India has to build up its strategic capacity, double-quick: buy and build arms, rid its communications and weapons systems of dependence on Chinese electronics, create a satellite constellation in low-Earth orbit to monitor developments on the ground, spot and lock in on targets, and supply vital battlefield communications, including to drones used by individual soldiers or patrol units.Simultaneously, there is strategic and economic challenge from AI. It's essential for commercial entities to develop AI applications that ride on foundation models from Western tech firms, and even open-source models available from China. But AI is increasingly used for military purposes. For that, India cannot rely on any model that can be withheld or corrupted by an external agent. India must develop its own.AI is a product of the computing capacity derived    from armies of high-speed, parallel processing chips housed in data centres, and programming. India has neither. But it has the potential to create both.India's semiconductor missions are ridiculous. The only reason to build chips in India, rather than import them, is to shield ourselves from weaponised technology access of the kind the US has used against China. That purpose is not served by handing over billions of dollars to foreign chip companies to set up low-end fabs in India. That money is better spent on developing our own chip-making ecosystem.A thought-through semiconductor mission would start with identifying every single element of the chip-making ecosystem, assemblies in each one of them, sub-assemblies and components. Fund five startups to develop every single item in this array, ranging from extreme ultraviolet lithography machines, lenses used to focus the laser to etch grooves on silicon wafers, to the kit to deposit vaporised metal in grooves and clean up afterwards.Not all of them will deliver. Some funds would be swallowed by the well-connected. But in this process of reinventing the wheel, India would create indigenous capability to keep innovating beyond the existing frontiers in this field.Can India do this? China has. Foreign companies have set up high-end R&D centres in their GCCs in India, employing Indian talent. What prevents Indian enterprise from doing this? Only the missing vision, courage and funding. Instead of luring foreign chip companies to set up shop in India, let GoI lure Indian tech talent working at the cutting edge in many parts of the world, to lead startups that would deliver Indian AI.All this calls for large amounts of money, which cannot be found by business-as-usual budgets. Given the strategic imperative, extraordinary measures have to be taken. GoI must draw back from its populist trespass into state subjects, and mindless subsidies, such as that for urea, which depresses nutrient use efficiency and inhibits the spread of complex fertilisers.It must put an end to the ethanol-blending farce, which only serves to reduce the crop under oilseeds and increase prices of maize, chicken feed, eggs and chicken. More than half of ethanol is derived from grain, including rice, all grown with subsidised, energy-intensive water and fertiliser.When Lal Bahadur Shastri called on people to hand over their gold to finance the war thrust upon India, Indians responded. India today faces a similar existential crisis. Indians will respond with sacrifice - provided it is shared by all sections, and funds are utilised wisely.Reorienting the budget is politics, not economics. It calls for political courage, honesty of purpose, and articulate engagement with the public. Is that too much to expect?

from Economic Times https://ift.tt/FBtrwjl