From Defence to R&D, what didn't make the cut in Sitharaman's Budget speech

Key sectors such as defence and railways saw large FY27 allocations in the Budget documents, even though they found little or no mention in Sitharaman's Budget 2026 speech

Finance Minister Nirmala Sitharaman’s ninth consecutive Budget speech on Sunday (February 1) ran through priorities ranging from manufacturing to services, skilling and fiscal consolidation. However, a closer reading of the detailed Budget documents shows that several large-ticket sectors, despite sizeable allocations, found little or no explicit mention in the speech, even as expectations around them were high.

 

Defence spending: Big allocation but limited mention 

Given India’s volatile neighbourhood and ongoing geopolitical tensions, defence was expected to feature prominently in the speech, but it did not. Especially after Operation Sindoor last year, the expectation around a comprehensive defence allocation announcement was high.

 

But it is not to say that the defence sector was sidelined in the Budget as the numbers in the Budget documents tell a different story. For FY27, the estimated allocation for defence has been pegged at around ₹7.85 trillion, a significant rise from the FY26 Budget Estimate of ₹6.81 trillion. This means the declining trend of defence spending as a share of the gross domestic product (GDP) has been reversed with the allocation coming in just short of 2 per cent (1.997 per cent), higher than in FY26 when it was at 1.91 per cent.

 

While the finance minister’s speech did not flag new defence-specific initiatives, the allocation remains one of the largest single components of government spending, highlighting the sector’s fiscal priority even in the absence of rhetorical emphasis.

 

R&D: A trillion rupee focus in previous Budget 

Research and development (R&D) has been a recurring concern in policy discussions, including in the Economic Survey released recently, which has flagged India’s relatively low R&D intensity, noting that Indian companies invest relatively little in R&D and show limited willingness to take long-term risks.

 

In the previous Budget speech, innovation and R&D had figured prominently as one of the Budget priorities. However, this Budget speech made no sector-specific statement on overall R&D spending. In Budget 2025, the FM had announced that the Centre will operationalise the Anusandhan National Research Fund for basic research and prototype development and set up a mechanism for propelling private sector-driven research and innovation at commercial scale. The proposed financing for the scheme was announced at ₹1 trillion.

 

Meanwhile, in this Budget speech, Sitharaman’s speech focused on select technology missions rather than a consolidated highlight upfront.

 

Railways: Capital push intact despite no separate mention 

Since the merger of the Railway Budget with the Union Budget in 2017, railways no longer get a standalone presentation. Still, after multiple fatal accidents in 2025, expectations of a strong mention were high.

 

While the speech did not single out railways, the documents show a record expenditure of ₹2.99 trillion for the sector in the FY27 Budget, up 8 per cent from ₹2.77 trillion in the revised estimate of FY26.

 

Taken together, the FY27 Budget documents suggest continuity in spending priorities across defence, R&D-linked capital formation, divestment and rail infrastructure, areas that remained numerically significant, even though they did not find a mention in the Finance Minister’s Budget speech.

 

Disbanding populism for poll-bound states in FY27 Budget 

Unlike last year’s Budget that focused on specific allocations for poll bound states (Bihar and Andhra Pradesh), this year’s Budget did not see any major announcements for states that have elections coming up this year (West Bengal, Tamil Nadu, among others), except a few schemes and creation of corridors that would help not just the poll-bound states but others as well.

 

These include proposals for setting up dedicated rare earth magnet manufacturing corridors in Odisha, Kerala, Andhra Pradesh and Tamil Nadu, a new freight corridor linking Dankuni in West Bengal with Surat in Gujarat, targeted support for coconut, cashew and cocoa cultivation that would benefit farmers in coastal states such as Tamil Nadu and Kerala, and tourism-linked initiatives such as turtle trails along nesting sites in Karnataka and Kerala, as well as birdwatching circuits around Pulicat Lake, the coastal wetland around Andhra Pradesh and Tamil Nadu.

 

However, this marks a shift from last year’s Budget, which carried a clear focus on Bihar and Andhra Pradesh, with multiple project announcements and spending commitments. In the 2025 Budget, the finance minister had unveiled plans for greenfield airports, setting up of a Makhana Board, a National Institute of Food Technology, Entrepreneurship and Management, funding support for the Western Kosi Canal project covering about 50,000 hectares, and additional capacity at IIT Patna. For Andhra Pradesh, the emphasis last year was on carrying forward earlier assurances, notably the progress on the Amaravati capital city project and the long-pending Polavaram irrigation project.