Context:

• The recent Artificial Intelligence (AI) Summit in Delhi, held shortly after the Union Budget 2026, has sparked a wider debate about India’s developmental trajectory.
• India’s policy ambition remains bold — ranging from AI leadership to semiconductor manufacturing and data-centre expansion.
• However, the summit exposed a persistent structural weakness: the gap between announcement and implementation.

The Budget 2026 - Ambition Without Retrospection:

• Detailed review avoided: Finance Minister (Nirmala Sitharaman) presented her ninth consecutive Union Budget, notable for its restrained rhetoric. However, the speech avoided a detailed review of past flagship programmes.
• Key observations:
  • Multiple new initiatives announced.
  • Long-term commitments, for example, 25-year tax holiday for semiconductor manufacturing, incentives for data centres and cloud infrastructure, and long-term skill development programmes.
  • Fiscal consolidation path maintained.
• Structural limitation of Budgets:
  • With GST institutionalised, customs duties aligned with trade agreements, and limited room for major direct tax reforms, annual budgets now signal direction rather than drive transformation.
  • Wealth tax and agricultural taxation remain politically sensitive.
  • Only about 30 million individuals pay income tax out of roughly 90 million in the tax net.
  • However, meaningful gains now depend on administrative reform, not fiscal announcements.

The AI Summit:

• Symbolism vs reality: The AI Summit was intended to project India as a global AI leader. However, operational lapses — long queues, overcrowding, and notably, cash-only counters at a digital summit — symbolised deeper administrative weaknesses.
• The irony: A summit celebrating digital infrastructure, UPI ecosystem, and AI innovation was undermined by basic logistical failures.
• This reflects a recurring governance pattern: Strong policy vision, weak last-mile execution. 

The Broader Economic Pattern:

• Manufacturing stagnation:
  • Manufacturing share remains around 16–17% of GDP for nearly two decades.
  • This is despite lower labour costs than competitors (including China), Production-linked incentives, infrastructure expansion, etc.
  • This is because of execution bottlenecks like project delays, regulatory hurdles, land and compliance issues.
• Fiscal incentives vs governance quality:
  • Tax holidays and incentives (e.g., semiconductor mission, data centres) cannot substitute for predictable regulation, administrative efficiency, judicial speed, logistics and supply chain management, and trust-based taxation.
  • The Laffer Curve (logic popularised by Ronald Reagan) highlights that lower compliance costs and trust-based taxation may improve collections more sustainably than coercion.

Lessons from Reform History:

• The 1991 moment:
  • The landmark reforms of 1991 occurred during a balance-of-payments crisis when foreign exchange reserves covered only days of imports.
  • Unlike that crisis-driven transformation, contemporary reforms operate without existential urgency.
• Reform thinkers and incrementalism:
  • Several prominent economists have warned against excessive bureaucratic activism without necessity, advocated credible incremental reforms, and emphasised calibrated gradualism suited to India’s political economy.
  • Common insight: Implementation determines success more than policy design.

The Core Governance Challenge:

• After 35 years of economic liberalisation, India’s development constraint is no longer primarily policy design.
• It is the execution deficit, like,
  • Weak last-mile delivery.
  • Institutional capacity constraints.
  • Compliance burden.
  • Adversarial tax administration.
  • Regulatory unpredictability.
• Even digital filing systems alone cannot build trust.

Institutional Reform:

• Creating an “Implementation Commission”: Focused not on designing schemes but on ensuring delivery.
• Main idea: Though paradoxical — creating bureaucracy to reduce bureaucratic inefficiency — the idea underscores the urgency of -
  • Outcome-based monitoring.
  • Inter-ministerial coordination.
  • Process simplification.
  • Administrative accountability.
  • Governance innovation.

Other Challenges and Way Forward:

• Policy overproduction: Too many schemes, insufficient review. Shift from scheme-centric to delivery-centric governance. Evaluate old schemes before launching new ones. Institutionalise sunset clauses and outcome audits.
• Trust deficit in tax administration: Trust-based taxation, resulting in lower compliance costs, stable regulatory regime, and predictable dispute resolution.
• Event management vs institutional strength: Civil service reforms - Specialised technical cadres for AI, semiconductor, and digital sectors. Project management capabilities.

Conclusion:

• The AI Summit and Budget 2026 together highlight a critical truth: India does not lack ambition, it lacks consistent execution.
• Incremental reform can indeed produce transformative change — but only if implementation itself becomes the central reform agenda.
• India’s next developmental leap will begin when delivery replaces declaration as the metric of success. Ultimately, the question is not what India announces — but what it implements.