February 2, 2026 – Finance Minister Nirmala Sitharaman presented Union Budget 2026-27 in the Lok Sabha, marking the ninth consecutive budget presentation by the Finance Minister. The budget contains significant allocations and policy measures focused on artificial intelligence, semiconductors, data centers, and technology infrastructure. This document provides a comprehensive factual overview of all AI and technology-related announcements.
IndiaAI Mission: ₹1,000 Crore Allocation
The IndiaAI Mission receives ₹1,000 crore allocation for FY 2026-27. This represents a reduction from the ₹2,000 crore originally proposed for FY 2025-26, though it exceeds the revised estimate of ₹800 crore actually spent in the previous fiscal year.
Background Context
The original FY 2025-26 allocation of ₹2,000 crore was revised down to ₹800 crore during the fiscal year, indicating that less than half the proposed budget was utilized. The FY 2026-27 allocation of ₹1,000 crore represents a 25% increase over actual spending but remains 50% below the original FY 2025-26 proposal.
AI Infrastructure Components
The IndiaAI Mission encompasses multiple initiatives:
AI Labs Establishment: The budget proposes establishing 80 IndiaAI Labs to foster innovation and skills development in artificial intelligence.
AI Centres of Excellence: ₹500 crore has been allocated specifically for AI Centres of Excellence focused on advanced research and development.
Compute Capacity: The IndiaAI Mission includes provision of subsidized compute resources for AI development, utilizing the total allocation to make high-performance computing accessible for innovation.
Bharat Vistar: AI-Powered Agricultural Platform
The budget introduces Bharat Vistar (Virtually Integrated System to Access Agricultural Resources), a multilingual AI-based platform for farmers.
Platform Capabilities
Integration Scope: Bharat Vistar integrates existing agricultural digital resources including AgriStack portals and Indian Council of Agricultural Research (ICAR) packages into a unified system.
AI-Driven Services: The platform leverages artificial intelligence to provide customized insights across multiple domains:
- Crop planning guidance based on local conditions
- Soil health monitoring and recommendations
- Weather pattern analysis and alerts
- Market condition information and price trends
- Pest management strategies
- Best practices from ICAR research
Language Support: The platform offers multilingual support to serve farmers across different regions with advisory services in regional languages.
Implementation Framework
The platform aims to:
- Lower barriers for small and marginal farmers accessing agricultural guidance
- Enhance economic resilience in rural areas through data-driven decision-making
- Link research institutions, digital infrastructure, and on-ground farmer support
- Align production patterns with weather forecasts and market signals
Education and Workforce Development in AI
The budget includes several initiatives focused on building AI-ready talent and integrating AI into educational systems.
School-Level AI Infrastructure
15,000 AI Labs in Schools: The budget proposes establishing 15,000 AI laboratories in schools across India to provide early exposure to artificial intelligence technologies.
These labs aim to:
- Introduce students to AI concepts and applications
- Enable hands-on learning with AI tools
- Create foundational understanding of emerging technologies
- Build a pipeline of AI-aware students entering higher education
Higher Education Initiatives
10,000 Technology Fellowships: The budget announces 10,000 new technology fellowships at premier institutions including the Indian Institutes of Technology (IITs).
AI in Curriculum: Emphasis on embedding AI into educational curricula at various levels, with focus on:
- Personalized learning approaches using AI
- Modern curriculum development incorporating AI concepts
- Teacher training programs for AI education delivery
- Integration across multiple subjects and disciplines
Skills Development and Reskilling
The budget addresses the need for continuous skill development:
Technology Professional Reskilling: Programs aimed at reskilling technology professionals to work with AI and emerging technologies.
Labour Market Analysis: AI-powered systems for analyzing labour market trends and skill requirements to align education with industry needs.
High-Powered Committee on AI Impact
The budget announces formation of a High-Powered Education to Employment and Enterprise (E2E) Standing Committee.
Committee Mandate
The committee is tasked with:
Impact Assessment: Evaluating the impact of AI and other emerging technologies on:
- Employment patterns and job creation/displacement
- Skill requirements across sectors
- Services sector transformation
- Economic growth and productivity
Policy Recommendations: Suggesting policy measures for:
- Strengthening the services sector as a core driver of development
- Managing technological disruption while maximizing economic benefits
- Creating pathways from education to employment
- Supporting enterprise development in technology sectors
Standards Development: Recommending standards for:
- Education-to-employment transitions
- Skills certification and recognition
- Enterprise capabilities in technology services
India Semiconductor Mission 2.0
The budget launches India Semiconductor Mission 2.0 with substantial funding and expanded scope.
Financial Allocation
₹40,000 Crore Outlay: The total allocation for Semiconductor Mission 2.0 over its duration is ₹40,000 crore, representing one of the largest technology infrastructure investments.
FY 2026-27 Provision: ₹1,000 crore has been specifically allocated for ISM 2.0 in the current fiscal year.
Focus Areas
ISM 2.0 concentrates on four primary domains:
1. Semiconductor Equipment Manufacturing
- Designing semiconductor fabrication equipment
- Manufacturing semiconductor production machinery
- Developing testing and assembly equipment
- Building indigenous equipment capabilities
2. Materials Production
- Manufacturing materials used in semiconductor production
- Developing substrate materials
- Producing chemical inputs for chip fabrication
- Creating packaging materials
3. Full-Stack Design Ecosystem
- Creating comprehensive design capabilities
- Developing Indian intellectual property (IP) for semiconductors
- Building design tools and methodologies
- Establishing design services infrastructure
4. Supply Chain Strengthening
- Creating resilient semiconductor supply chains
- Reducing import dependence for critical components
- Establishing domestic sourcing options
- Building buffer capacity for strategic needs
Workforce Development
ISM 2.0 includes emphasis on:
- Industry-led research and training centers
- Advanced technology skill development
- Creating specialized semiconductor workforce
- Academic-industry collaboration programs
Context: ISM 1.0 Foundation
India Semiconductor Mission 1.0 established the foundational semiconductor industry in India. ISM 2.0 builds on this base by moving beyond assembly and packaging toward comprehensive ecosystem development including design, equipment, and materials production.
Electronics Components Manufacturing Scheme Enhancement
The budget significantly expands funding for electronics component manufacturing.
Budget Increase
Previous Allocation: Approximately ₹22,000 crore New Allocation: ₹40,000 crore Increase: ₹18,000 crore (approximately 82% increase)
Industry Response
The Electronics Components Manufacturing Scheme (ECMS) received 149 applications, significantly exceeding the initially expected 50-55 applications. This strong response indicated higher industry interest than projected, leading to the enhanced allocation to accommodate demand.
Scheme Objectives
ECMS focuses on:
- Manufacturing electronic components domestically
- Reducing import dependence for electronics production
- Building complete supply chains for electronics assembly
- Supporting both large manufacturers and MSMEs
- Creating employment in electronics manufacturing
Manufacturing Growth Context
Indian mobile phone production increased approximately 30-fold from ₹18,000 crore in FY 2014-15 to ₹5.45 trillion in FY 2024-25. The enhanced ECMS allocation aims to replicate this success across broader electronics components.
Data Center Infrastructure: Tax Holiday Till 2047
The budget introduces unprecedented long-term tax incentives for data center investments.
Tax Holiday Structure
Duration: Tax holiday extends until 2047 (21 years from budget date)
Eligibility: Foreign companies providing cloud services to customers globally using data center infrastructure located in India
Service Requirements: Eligible companies must serve Indian customers through an Indian reseller entity
Related Entity Provision: Where the data center service provider in India is a related entity, a safe harbour margin of 15% on cost has been proposed
Policy Rationale
The long-term policy framework for data centers aims to:
- Position India as a leading global destination for AI and cloud infrastructure
- Attract sustained foreign investment in digital infrastructure
- Provide policy certainty for multi-decade infrastructure projects
- Reduce transfer pricing disputes for multinational technology operations
- Simplify compliance for global cloud service providers
Infrastructure Context
Data centers are recognized as critical digital infrastructure essential for:
- AI model training and inference
- Cloud computing services
- Digital service delivery
- Technology sector growth
- Data sovereignty and security
IT and ITeS Safe Harbour Provisions
The budget proposes new safe harbour rules for information technology sectors.
Safe Harbour Framework
Scope: IT and IT-enabled services (ITeS)
Benefits:
- Higher thresholds for transfer pricing compliance
- Competitive margins for international transactions
- Reduced uncertainty in tax matters
- Simplified documentation requirements
Objective: Provide tax certainty to strengthen India’s position as a global IT hub
National Quantum Mission Funding
The budget continues support for quantum computing research.
Allocation
FY 2026-27: ₹6,003 crore allocated to National Quantum Mission
Mission Focus
The National Quantum Mission targets:
- Quantum computing research and development
- Quantum communication technologies
- Quantum sensing applications
- Building quantum technology infrastructure
- Developing quantum-ready workforce
Anusandhan National Research Fund
The budget supports broad-based research and development initiatives.
Purpose
The Anusandhan National Research Fund promotes:
- AI adoption across sectors
- Research and development in priority areas
- Commercialization of research outcomes
- Deep technology development
- Digital economy research
Priority Areas
Specific focus includes:
- Quantum computing
- Biotechnology
- Digital economy technologies
- Deep technologies
- AI applications across domains
AI in Governance and Service Delivery
The budget emphasizes AI as a governance tool.
Government Applications
AI is positioned as a “force multiplier” for:
Public Service Delivery: Enhanced service delivery through AI-powered systems in:
- Healthcare systems
- Logistics and supply chain management
- Agricultural support services
- Education delivery
Energy and Climate: AI-driven solutions for:
- Energy transition planning
- Climate action monitoring
- Resource optimization
- Environmental management
Strategic Sectors: AI applications in:
- Defence systems and capabilities
- Space technology and satellite operations
- National security infrastructure
- Critical infrastructure protection
Decision Support
AI is framed as enabling:
- More informed policy decisions
- Data-driven governance
- Predictive analysis for planning
- Efficiency improvements across government operations
Deep Tech Fund Proposal
The budget proposes establishing a Deep Tech Fund.
Fund Purpose
The Deep Tech Fund aims to:
- Support AI and deep-tech startups
- Provide capital for high-risk, high-potential ventures
- Enable commercialization of research
- Bridge gap between research and market
- Position India as global AI and deep-tech leader
Target Areas
The fund would support ventures in:
- Artificial intelligence
- Quantum technologies
- Advanced materials
- Biotechnology
- Space technology
- Other deep technology domains
Rare Earth Mineral Corridors
The budget announces development of rare earth mineral supply infrastructure.
Geographic Coverage
Rare earth mineral corridors planned for:
- Odisha
- Kerala
- Andhra Pradesh
- Tamil Nadu
Strategic Importance
Rare earth minerals are critical for:
- Semiconductor manufacturing
- Electronics production
- Advanced technology manufacturing
- Clean energy technologies
- Defense applications
Objective
The corridors aim to:
- Secure raw material supply for high-tech industries
- Reduce dependence on imports
- Develop domestic rare earth processing
- Support indigenous manufacturing
Content Creator Economy Support
The budget includes provisions for the animation, visual effects, gaming, and comics (AVGC) sector and content creation.
Content Creator Labs
The budget proposes:
- Establishing content creator labs
- Supporting animation and gaming education
- Building skills in visual effects
- Developing the creator economy infrastructure
- Integrating creative skills into school and college curricula
Orange Economy Focus
The “orange economy” (creative industries) receives attention through:
- Skills development programs
- Infrastructure for content creation
- Support for gaming industry
- Animation sector development
- Digital content creator support
Technology-Specific Allocations Summary
The following table summarizes key financial allocations:
| Initiative | Allocation (₹ Crore) | Purpose |
|---|---|---|
| IndiaAI Mission | 1,000 | AI development and deployment |
| AI Centres of Excellence | 500 | Advanced AI research |
| India Semiconductor Mission 2.0 (Total) | 40,000 | Semiconductor ecosystem |
| ISM 2.0 (FY 2026-27) | 1,000 | Current year semiconductor funding |
| Electronics Components Manufacturing | 40,000 | Electronics supply chain |
| National Quantum Mission | 6,003 | Quantum technology development |
| Data Center Tax Holiday | – | Tax exemption (not direct allocation) |
Statistical Context
The budget references several statistical benchmarks:
AI Mentions: The budget speech contained 11 mentions of “Artificial Intelligence,” representing the highest count of AI references in any Union Budget to date.
Services Sector: The services sector receives significant attention given that 46.1% of India’s workforce depends on agriculture, with services representing the next major employment sector.
Mobile Manufacturing Growth: Mobile phone production in India grew 30-fold from ₹18,000 crore (FY 2014-15) to ₹5.45 trillion (FY 2024-25), providing context for electronics sector ambitions.
Technology-Led Economy: The budget frames the 21st century as “technology-driven,” emphasizing that technology adoption must benefit all sections of society.
Sectoral AI Integration
Beyond dedicated AI programs, the budget emphasizes AI integration across multiple sectors:
Agriculture
- Bharat Vistar platform (detailed separately)
- Precision farming support
- Market intelligence systems
- Weather prediction integration
Healthcare
- AI-powered diagnostic support
- Healthcare delivery optimization
- Disease surveillance systems
- Resource allocation planning
Education
- Personalized learning systems
- Teacher training support
- Curriculum development assistance
- Learning outcome assessment
Manufacturing
- Process optimization
- Quality control automation
- Supply chain management
- Predictive maintenance systems
Logistics
- Route optimization
- Demand forecasting
- Warehouse management
- Last-mile delivery planning
Implementation Timeline
The budget provides limited specific timeline details. Key timeframes mentioned:
Immediate (FY 2026-27):
- IndiaAI Mission allocation release
- ISM 2.0 initial funding
- AI labs in schools implementation begins
- Bharat Vistar platform launch
Long-term (Through 2047):
- Data center tax holiday period
- Semiconductor ecosystem maturation
- Rare earth corridor development
- Comprehensive AI integration across sectors
Industry and Stakeholder Responses
While this document focuses on factual budget content rather than opinions, it’s factually relevant to note that major technology companies and industry associations issued statements following the budget announcement.
Microsoft, which announced a $17.5 billion investment in India for AI and cloud infrastructure over 2026-2029, stated alignment between their investment plans and budget priorities.
The India Cellular and Electronics Association (ICEA) noted the strong response to ECMS (149 applications vs. expected 50-55) as context for the enhanced allocation.
Industry bodies highlighted the policy stability provided by long-term frameworks like the 2047 data center tax holiday.
Budget Context Within Technology Policy
The Union Budget 2026-27 builds on existing technology policy frameworks:
Make in India: Semiconductor and electronics manufacturing initiatives align with domestic manufacturing goals.
Digital India: Data center infrastructure and AI deployment support digital transformation objectives.
Atmanirbhar Bharat: Focus on indigenous design, equipment, and materials in semiconductors supports self-reliance goals.
Skill India: Education and workforce development programs connect to national skilling initiatives.
Startup India: Deep Tech Fund and AI infrastructure support startup ecosystem development.
Cross-Sectoral Implications
The AI and technology initiatives have implications across multiple budget areas:
Infrastructure: Digital infrastructure supports physical infrastructure planning and delivery.
Agriculture: Bharat Vistar directly impacts agricultural productivity and farmer income.
Education: AI labs and fellowships affect educational outcomes and workforce readiness.
Healthcare: AI in governance includes healthcare delivery improvements.
Energy: AI-driven energy transition planning supports renewable energy goals.
Defence: Strategic sector AI applications enhance national security capabilities.
Conclusion
Union Budget 2026-27 allocates substantial resources to artificial intelligence, semiconductor manufacturing, data center infrastructure, and technology education. The ₹1,000 crore IndiaAI Mission, ₹40,000 crore Semiconductor Mission 2.0, enhanced electronics manufacturing funding, and unprecedented tax holiday for data centers until 2047 represent significant policy commitments to technology sector development.
The budget emphasizes AI integration across agriculture, education, governance, and services, with specific programs like Bharat Vistar and 15,000 school AI labs aimed at broad-based technology adoption. Education and workforce development receive focus through fellowships, reskilling programs, and the high-powered committee examining technology’s impact on employment.
These initiatives position technology and artificial intelligence as central to India’s development strategy, with funding, policy frameworks, and institutional mechanisms designed to support comprehensive technology ecosystem development over the coming years.
This document provides factual information about Union Budget 2026-27 AI and technology provisions based on official budget documents and announcements. All figures and programs are as stated in official budget materials released February 1, 2026.
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