Finance Minister Nirmala Sitharaman is set to present the Union Budget 2026 in Parliament on February 1, with just one week remaining until the crucial economic announcement. Industry stakeholders across sectors are closely watching for government plans that will shape India's economic trajectory, with the fintech ecosystem particularly focused on policy measures that can accelerate digital financial services growth.

India's digital payments landscape has undergone a remarkable transformation, evolving from a convenience feature to a standard expectation across various sectors including local commerce, transportation, healthcare, and education. This surge has been driven by UPI's cost-effective and interoperable framework, increased smartphone penetration, affordable internet access, and a regulatory environment that adapts to innovation. These combined factors have fostered trust, promoted economic formalization, and facilitated substantial growth within the digital payments ecosystem.

Industry Expectations for Targeted Budget Measures

Naren Agarwal, CEO of Wealth1, advocates for specific budget measures that can significantly boost the fintech sector. His recommendations focus on multiple areas of support:

Agarwal emphasizes that policy support for artificial intelligence, data analytics, cybersecurity, and regulatory sandboxes will enable fintechs to scale responsibly while deepening financial inclusion and reinforcing India's position as a global hub for digital financial services.

Policy Continuity and Long-term Sustainability Focus

Richika Dadheech, Founder & Managing Director of FiatPe, highlights the industry's desire for policy continuity with enhanced focus on long-term sustainability. While acknowledging that zero MDR has been instrumental in accelerating adoption and inclusion, Dadheech suggests that differentiated economics for high-volume use cases could support continued infrastructure investment, security enhancements, and reliability improvements without negatively impacting smaller merchants.

As transaction volumes continue rising, reinforcing payment resilience, cybersecurity, and fraud prevention becomes increasingly critical. Dadheech notes that technology, particularly artificial intelligence, is transforming fintech operations by enabling real-time fraud detection, system monitoring, and operational efficiency at scale. The next phase of fintech growth will be characterized not just by reach or speed, but by ground-level reliability and user confidence in support systems.

Four Core Expectations for Fintech Ecosystem Enhancement

Rohith Reji, Co-Founder & CEO of Neokred, positions India at a crucial juncture where the "India Stack" could transition from a foundation to a global benchmark. His four key expectations include:

Strengthening Embedded Finance Infrastructure

Building on the government's Digital Public Infrastructure achievements, the expectation for 2026 centers on policies that further democratize banking-as-a-service. Tax incentives for startups developing indigenous middleware would enable even the smallest non-banking entities to offer sophisticated financial products, effectively decentralizing credit and payments systems.

Bridging MSME Credit Gaps Through Account Aggregator Framework

MSMEs represent an essential component of India's economy, yet credit access gaps persist. The proposed solution involves mandates that provide subsidies for integrating the Account Aggregator framework across all financial touchpoints, making data-backed lending the standard approach.

Regulatory Clarity and Operational Efficiency

Expansion of regulatory sandboxes with focus on "green fintech" and AI-driven compliance can significantly improve operational conditions. A simplified GST structure for fintech service providers would enhance operational efficiency and encourage cross-border collaborations, supporting the sector's growth ambitions.

Financial Literacy and Security Incentives

As fintech companies scale operations, security becomes paramount. The proposal includes establishing a dedicated fund for cybersecurity research and development, coupled with digital literacy programs. This approach ensures that the "next 500 million" users entering the formal economy do so with confidence and safety, supporting sustainable ecosystem growth.

India stands at a strategic inflection point as Budget 2026 approaches, with the country demonstrating unprecedented momentum in frontier technologies for the first time in decades. The India Semiconductor Mission and the newly launched India AI Mission, along with comprehensive reforms across digital public infrastructure, signal a meaningful transition from technological aspiration to concrete execution.

Current Technology Foundation Shows Promise

India has established a solid foundation across multiple technology sectors. The Semiconductor Mission has initiated capacity building in chip design and assembly, with renewed proposals for fabrication plants moving forward. The India AI Mission, launched in 2024, represents a significant commitment to technological sovereignty.

R&D Investment Gap Requires Urgent Attention

Despite these positive developments, India's research and development spending remains substantially below global benchmarks. The country currently allocates barely 0.7% of GDP to R&D, creating a significant competitive disadvantage compared to established innovation leaders.

For India to achieve leadership positions in semiconductors, artificial intelligence, biotechnology, new materials, quantum technologies, and climate technology, the country must dramatically scale its R&D investment commitments.

Industry Partnership Strategy for Innovation Acceleration

Global innovation ecosystems in Taiwan, South Korea, Israel, and the United States demonstrate the critical importance of synchronized partnerships between research institutions and industry. India requires systematic pathways to transform innovative ideas into scaled commercial outcomes rather than remaining at the conceptual stage.

The proposed approach includes several key components:

• Co-funded research clusters aligned with industry needs
• Lab-to-Market fast track programs for prototype adoption
• Sectoral adoption alliances pairing India AI Mission research teams with leaders across BFSI, telecom, healthcare, energy, and manufacturing sectors

Capital Allocation at Sovereign Scale

The scale of global technological competition has fundamentally changed, requiring billions of dollars in sustained public investment and tens of billions in private capital for leadership in AI, semiconductors, clean energy, and advanced manufacturing.

Trust and Security as Competitive Differentiators

As India expands its digital and technological footprint, establishing trust through secure and reliable systems becomes essential for global adoption. The India AI Mission has already launched AI Governance Guidelines to ensure safe, inclusive, and responsible AI adoption, providing a foundation for enforceable standards with clear risk assessment and accountability mechanisms.

Budget 2026 represents more than an annual fiscal exercise—it constitutes a strategic inflection point for India's technological trajectory. The country has established the foundational infrastructure and launched bold missions, creating the opportunity to accelerate progress significantly. Success in sharply increasing R&D investment, forging deeper industry-technology partnerships, and unleashing capital at a scale matching India's ambitions could transform current momentum into lasting global impact.