Industry leaders are urging the government to translate India’s Artificial Intelligence (AI) ambition into actionable execution in the upcoming Union Budget. With Finance Minister Nirmala Sitharaman due to introduce the Budget on February 1, the technology sector has made specific demands for financing, infrastructure, and skilling to develop sovereign AI capabilities.
Budget 2026: 5 Key Expectations for AI
Stakeholders in the AI ecosystem have agreed on five specific expectations for the Budget. These requests come after the Economic Survey identified AI as a key economic strategy and advocated for a sector-specific, open-systems approach.
- Expanded IndiaAI Funding: There is a call for the IndiaAI Mission allocation to more than double—from ₹2,000 crore to at least ₹5,000 crore annually. This funding is seen as critical to procure over 10,000 GPUs and keep pace with global compute demand. Industry bodies also propose a dedicated multi-year DeepTech fund for startups building sovereign AI models.
- Subsidised Compute Power: The introduction of a Compute Credit Scheme is one of the main expectations. This would provide a 15% subsidy or time-bound GPU hours for entrepreneurs and researchers, drastically lowering the barrier to high-performance computing vital for innovation.
- AI Infrastructure Status: Experts are urging the government to formally grant “Strategic Infrastructure” status to data centres. This measure would provide tax breaks, customs duty reduction for powerful AI hardware such as GPUs, and expedited depreciation to entice large-scale investors.
- Targeted AI Skilling: To develop a future-ready workforce, there is a need for additional funding for national skilling programs, as well as the abolition of the 18% GST for AI-specific vocational training. The goal is to make advanced skills more affordable and to integrate generative AI into the school curriculum.
- Responsible Governance Frameworks: Industry is calling for the announcement of a unified AI governance framework. This would include a light-touch regulatory sandbox to test new applications under oversight, risk-based controls, and clear liability rules for high-risk sectors such as healthcare and banking.
Who is Driving These AI Budget Demands?
The expectations are voiced by a coalition of tech firms, industry bodies, and semiconductor companies. CP Gurnani, Vice Chairman of AI firm AIONOS, stated the Economic Survey “brilliantly captures India's AI momentum” with its pivot to affordable, human-centric AI. Semiconductor industry body IESA President Ashok Chandak emphasized “tax certainty and execution predictability” for capital-intensive chip projects. Logistics SaaS firm FarEye’s Chief Business Officer, Suryansh Jalan, highlighted the need for “incentives for applied AI” to unlock productivity.
How Do Expectations Compare to 2025-26 Budget?
The demands for 2026-27 mark a sharp evolution from the allocations of the previous 2025-26 Budget, shifting focus from foundational setup to aggressive scaling.
- Then (2025-26): The IndiaAI Mission received ₹2,000 crore, a massive increase for initial GPU procurement and starting three Centres of Excellence.
- Now (2026-27 Expectation): In order to maintain and grow the compute cluster to over 10,000 GPUs and support a network of AI Data Labs, industry expects an increase to ₹5,000+ crore.
- Then: Focus was on general data centre expansion with 19,000 GPUs planned.
- Now: Formal "Strategic Infrastructure Status" is requested for data centers in order to obtain tax benefits and, crucially, remission of customs duties on sophisticated AI accelerators.
- Then: A fourth Centre of Excellence for Education was added.
- Now: The push is on financial accessibility, specifically to remove the 18% GST on AI vocational courses to boost skilled workforce creation.
- Then: Governance was framed around the principles of the Digital Personal Data Protection Act.
- Now: Demands have moved to operational liability frameworks and a regulatory sandbox for real-world testing of high-risk AI.
Disclaimer: The article above reflects industry views and proposals. Final budgetary decisions and policy announcements will be confirmed during the Finance Minister’s presentation tomorrow.
