FM talks AI, tech without hype
The story about technology and AI in Union Budget 2026 begins not with start-ups, digital platforms, or digital India, but with a tax proposal aimed at global cloud companies. The Budget offers a tax holiday for more than two decades that extends till 2047 for firms that provide cloud services to overseas customers using data centre infrastructure in India. Indian users will continue to be served through domestic reseller entities. It is a long-duration incentive, unusual both in its time horizon and in what it is trying to achieve.
Rather than pushing adoption or usage, the measure is designed to anchor physical digital infrastructure inside the country. Data centres, once treated as support industry, are being positioned as strategic assets, and comparable to other sensitive sectors such as ports, highways, or industrial corridors. This signals that the next phase of digital growth will rest on data centres.
Recently, Andhra Pradesh allocated nearly 500 acres to Adani Infra (India) for a 1-GW AI data centre project, which is in partnership with the American tech giant, Google. The $15 billion investment, by 2030, aims to build India’s largest AI data centre campus. The facility will support Google’s AI, search, and YouTube services, and include subsea cable connectivity. It is Adhra Pradesh’s showcase project to enable it to become a Digital-AI hub, apart from IT one.
This Budget proposal on tax holiday, however, sets the tone for how technology appears through the rest of the finance minister’s speech. Budget 2026 does not try to define India’s tech future through consumer-facing narratives. There are no flagship digital products, no new citizen apps, and no attempt to frame artificial intelligence as a universal solution. Instead, the focus remains firmly on the layers underneath: compute, components, services exports, and applied systems that scale quietly across the economy.
This becomes clearer when read against the tech headlines that most people are likely to take away from the speech. The semiconductor mission was expanded. AI platforms were referenced. Digital public infrastructure continued to feature. But the emphasis is not on visibility. It is at capacity. The clearest example is the launch of the India Semiconductor Mission as ISM 2.0, which shifts attention away from manufacturing to equipment, materials, full-stack domestic intellectual property, and industry-led research and training.
The language of the proposal suggests an understanding that semiconductor competitiveness is not won through one-time incentives, but through depth, which involves supply chains that hold, skills that compound, and manufacturing ecosystems that survive price cycles. According to Sitharaman, ISM 2.0 will “produce equipment and materials, design full-stack Indian IP, and fortify supply chains. We will also focus on industry-led research and training centres to develop technology and skilled workforce.”
Artificial Intelligence (AI), too, appears primarily as an input into the systems rather than as a destination. Bharat-VISTAAR, the multilingual AI platform proposed for agriculture, is aimed to integrate existing data sets, and advisory services to reduce risk, and improve farm-level decisions. Similar references to AI appear in logistics, customs risk assessment, and governance processes. These are high-volume, low-margin environments where incremental efficiency gains matter more than novelty. This framing matters because it is a template. Use AI where it improves outcomes in high-scale, low-margin sectors, rather than as a consumer spectacle.
The same logic carries into services exports, another area where Budget 2026 chooses predictability over spectacle. By rationalising safe harbour rules, raising thresholds, and pushing automated approvals for IT and IT-enabled services, the government is addressing friction in a sector that already operates at scale. The objective is not reinvention, but durability. It is to ensure that India’s services sector engine remains competitive as global tax rules tighten and margins come under pressure. In any case, Sitharaman wants India to be a leader in services, and capture 10 per cent of the global market share by 2047 through a focused approach.
If you compare this with last year’s mood, the contrast becomes clearer. Budget 2025’s tech narrative, like most past budgets, was often read through the lens of signaling. This implied maintaining momentum, reassuring investors, and keeping digital transformation high on the agenda. Budget 2026 behaves like a document written for a more settled assumption. Digital adoption is not the bottleneck anymore. The real bottleneck is capacity related to compute, components, and skilled systems that can carry future growth.
This may explain why the finance minister almost doubled the outlay for electronics components manufacturing scheme to Rs 40,000 crore. In line with the global shortages of rare earth minerals, and China’s stranglehold over them, the Budget wants to support the “mineral-rich states of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to establish dedicated Rare Earth Corridors to promote mining, processing, research, and manufacturing” in these areas.
In essence, the idea is to prepare the nation for the AI-world, and prepare the manufacturers to participate in the AI economy. In terms of the former, the terms of reference for the high-level standing committee on education-to-employment is revealing. It will assess the impact of AI on jobs and skill requirements in the future. It will propose specific measures for embedding AI in education curriculum from school level onwards, and upgrading state councils of educational research and training institutes for teacher training.
In addition, the committee will propose measures for up-skilling and re-skilling of technology professionals and engineers in AI, and initiatives for AI-enabled matching of workers, jobs, and training opportunities. Technology can make the informal workflow visible, verifiable, and future-ready, and the committee’s recommendations can help in this direction. It will propose steps to attract skilled diaspora, and foreign talent in tech, AI, and other worlds.
In the words of the finance minister, the three kartavya that she outlined in the beginning of her speech about growth, aspirations and capacities, and inclusive vision, were anchored by several things. These include momentum of structural reforms, robust and resilient financial sector, and “cutting-edge technologies, including AI applications,” that can “serve as force multipliers for better governance.” Hence, being AI-ready is crucial and critical.
This is why when one sees the overall picture that Sitharaman sketched, one can begin where one needs to. Not with consumer AI promises, but with the infrastructure that makes AI and cloud practical, efficient, profitable, and effective at the national scale. It is why the AI mentions that matter most are not about everyday consumer tools, but about embedding intelligence into high-scale systems such as agriculture advisory, customs risk assessment through advanced imaging and AI, and governance improvements.
