By Dipak Kurmi
The Artificial Intelligence Summit in Delhi has once again thrown into sharp relief a structural weakness that continues to shape India’s economic trajectory: the persistent gap between ambition and execution. Coming barely two weeks after the Union Budget, the summit offers an immediate and somewhat uncomfortable lens through which to evaluate the credibility of policy intent. Taken together, the two developments tell a story that is by now familiar to observers of India’s reform journey. The country does not suffer from a shortage of vision, fiscal signalling, or policy announcements. What remains uneven is the administrative machinery required to convert intent into outcomes. As India seeks to position itself at the forefront of the global AI and semiconductor race, the challenge is no longer about declaring big goals but about delivering them with consistency and institutional reliability.
Finance Minister Nirmala Sitharaman’s ninth consecutive budget, presented on February 1, reflected a restrained rhetorical tone compared with earlier years. Yet the speech stopped short of undertaking a rigorous stocktaking of past promises and their implementation status, which many analysts viewed as a missed opportunity. After nearly a decade of policy continuity, the moment was ripe for a delivery audit rather than another cycle of fresh announcements. Instead, the 90-minute presentation introduced several new initiatives whose eventual trajectories remain uncertain. India’s recent policy history is dotted with ambitious programmes that generated early enthusiasm but delivered mixed results on the ground. Flagship efforts such as Make in India and Smart Cities Mission illustrate how the distance between announcement and outcome can become the system’s Achilles’ heel. The familiar American phrase about where the rubber meets the road captures India’s present predicament with unusual precision.
Defenders of the current approach may reasonably argue that judgement should be deferred because implementation of Budget 2026 formally begins only in April. Yet many of the government’s stated targets extend deep into the future, with milestones set for 2030, 2035 and even 2047. Such long horizons are not inherently problematic; structural transformation in sectors such as semiconductors, advanced manufacturing and digital infrastructure necessarily unfolds over decades. The concern arises from India’s uneven execution record, which raises legitimate questions about whether today’s ambitions will retain relevance in a rapidly shifting technological and geopolitical environment. The aspiration to become a global data-centre hub, for instance, could be overtaken by new computing paradigms, energy constraints or shifting data-localisation regimes. Similarly, the semiconductor mission’s generous 25-year tax holiday signals strong intent but does not automatically guarantee ecosystem maturity. Fiscal incentives can attract capital, but they cannot by themselves substitute for efficient project clearances, stable regulation and reliable infrastructure delivery.
The AI Summit itself unintentionally illustrated this implementation challenge with striking clarity. Designed to showcase India’s technological readiness and digital leadership, the event simultaneously exposed familiar administrative frictions. Participants reported long queues, overcrowded venues and, most symbolically, cash-only payment counters inside a conference celebrating digital transformation and the success of UPI. The contrast was difficult to ignore. When the physical experience of a flagship technology event lags behind the narrative being projected, it raises broader questions about institutional coordination and last-mile readiness. Such gaps may appear minor in isolation, but in aggregate they shape investor perceptions, influence global credibility and ultimately affect India’s competitiveness in high-technology sectors where execution discipline matters as much as policy intent.
The limits of fiscal incentives in the absence of administrative reform are visible across the broader economy. Despite sustained policy attention and competitive labour costs relative to many peers, including China, India’s manufacturing share has hovered around 16–17 percent of GDP for nearly two decades. Infrastructure spending has increased substantially, and project pipelines have expanded, yet delays linked to land acquisition, regulatory approvals and coordination failures remain familiar. This pattern suggests that India’s development constraint is increasingly institutional rather than financial. The Union Budget today functions more as a directional signal than as an immediate instrument of structural transformation. With the Goods and Services Tax regime largely stabilised, customs duties increasingly shaped by trade commitments, and direct tax rationalisation approaching diminishing returns, the annual budget’s capacity for dramatic fiscal shifts has narrowed. Wealth taxation and agricultural income taxation remain politically sensitive, limiting further revenue experimentation.
Within these constraints, meaningful progress in tax mobilisation will depend heavily on administrative quality rather than headline rate changes. Roughly 90 million individuals are currently within India’s tax net, of whom about 30 million pay income tax. Expanding effective compliance within this base requires simpler rules, lower compliance costs and a less adversarial interface between taxpayer and state. The experience of the United States under Ronald Reagan is often invoked in this context, particularly the idea that improved compliance can sometimes achieve what aggressive rate changes cannot. Digital filing systems have certainly improved transparency and convenience in India, but technology alone cannot generate trust. Predictable enforcement, faster dispute resolution and administrative empathy remain equally important in building a tax culture rooted in voluntary compliance rather than defensive minimalism.
Historical perspective reinforces the importance of execution over proclamation. The landmark 1991 reform budget emerged under crisis conditions when India’s foreign-exchange reserves covered only days of imports, leaving policymakers little choice but to act decisively. Most contemporary budgets operate in far more stable macroeconomic circumstances and therefore cannot replicate that moment of compulsion. Expecting each annual budget to deliver transformational change misunderstands how reform has typically unfolded in India. Prominent economists have long cautioned against excessive policy activism unaccompanied by institutional capacity. Jagdish Bhagwati warned against bureaucratic overreach without clear necessity. Arvind Subramanian argued that steady, credible incrementalism can, over time, produce outcomes comparable to dramatic reform episodes. Montek Singh Ahluwalia consistently emphasised calibrated gradualism suited to India’s political economy. Their shared insight remains highly relevant: implementation ultimately determines whether policy intent translates into durable change.
India’s ambitions in artificial intelligence are neither exaggerated nor misplaced. The country possesses a vast pool of engineering talent, a rapidly expanding digital public infrastructure, abundant data generation and a vibrant startup ecosystem. Global technology firms continue to deepen their presence, and public investment in computing capacity and semiconductor manufacturing is rising. Yet global leadership in AI will depend not only on subsidies or tax holidays but also on governance quality, regulatory predictability, logistics efficiency and administrative competence. Countries that dominate emerging technology ecosystems typically combine financial incentives with disciplined execution frameworks. Without similar institutional reliability, India risks remaining a large market and talent reservoir rather than evolving into a full-spectrum technology powerhouse.
Budget 2026, viewed in this light, represents continuity rather than rupture. Fiscal consolidation remains on course, infrastructure spending continues to anchor public investment, and manufacturing incentives persist despite modest structural movement in output share. Services continue to drive employment and exports, while tax simplification proceeds in incremental steps. None of these trends is insignificant; indeed, gradualism has often served India well. However, they do not fully address the deeper constraint highlighted once again at the AI Summit: the uneven capacity to execute complex programmes at scale. After more than three decades of economic liberalisation, India’s primary development challenge is less about designing the right policies and more about ensuring that existing policies are implemented with speed, consistency and accountability.
This reality invites a provocative but increasingly relevant institutional question. If implementation is the binding constraint, should reform energy now shift toward delivery architecture itself? Some analysts have half-jokingly proposed the creation of an Implementation Commission tasked not with designing new schemes but with ensuring the effective execution of existing ones. The idea may sound paradoxical, since reducing bureaucratic friction by creating another institutional layer risks appearing self-defeating. Yet the underlying logic reflects a serious concern: India’s next phase of growth will depend on administrative modernisation as much as on economic liberalisation. The country has largely mastered the art of announcing bold initiatives. Its next milestone will arrive when the quality of execution consistently matches the scale of its ambition.
(The writer can be reached at dipakkurmiglpltd@gmail.com)
