AI and New Technologies Take Centre Stage in the Union Budget 2026–27

The Union Budget 2026–27, presented by Nirmala Sitharaman, marks a visionary decisive shift towards an AI-first development framework, positioning artificial intelligence as a catalyst for jobs, productivity, and global competitiveness. 

From AI-driven governance, skilling, and agriculture to semiconductors, data centres, quantum technologies, and research ecosystems, the Budget outlines a coordinated national strategy where technology augments human potential rather than replaces it. 

The Union Budget 2026–27 places artificial intelligence and emerging technologies at the centre of India’s long-term development strategy, even though it avoids announcing a single standalone “AI budget”. Instead, AI is woven across governance, skilling, services, customs, research, and innovation frameworks.

The Finance Minister clearly links technology with productivity, employment, and ease of living, signalling that AI is being treated as a systemic growth enabler rather than a narrow sectoral investment. This approach reflects a shift from technology as an experiment to technology as public infrastructure.

Strategic Focus Areas under Viksit Bharat: 

1. Semiconductors and Semiconductor Materials 

2. Data infrastructure Advanced manufacturing

3. Deep-tech ecosystems

This signals India’s transition from scale-led growth to technology depth and capability-led development under the Viksit Bharat vision.

4. Semiconductors and Electronics - A major pillar of the Budget is the launch of India Semiconductor Mission 2.0, which expands the focus beyond fabrication to include: Chipmaking equipment & Full-stack Indian IP design

The objectives are  to:

1. Fortify supply chains

2. Promote industry-led research and development

3. Establish training centres for a skilled semiconductor workforce. 

4. This marks a strategic shift towards end-to-end semiconductor sovereignty, reducing long-term dependence on imported tools and inputs.

5. Complementing this, the Electronics Components Manufacturing Scheme has seen its outlay increased to ₹40,000 crore, up from ₹22,919 crore. 

Institutional Support for AI and Emerging Technologies

The Budget speech explicitly states that the Government has already taken several steps to support new technologies through the AI Mission, the National Quantum Mission, the Anusandhan National Research Fund, and the Research, Development and Innovation Fund reiterating support for these existing national-level initiatives. 

Science Infrastructure for which the Budget strengthens national science infrastructure through the setting up or upgradation of four major astronomy and astrophysics facilities: 

1. The National Large Solar Telescope

2. National Large Optical-Infrared Telescope

3. Himalayan Chandra Telescope

4. COSMOS-2 Planetarium. 

These investments reinforce India’s long-term capabilities in fundamental scientific research.

The budget speech does not mention fresh year-wise rupee allocations or new consolidated funds for these initiatives, their repeated reference in the core budget narrative shows continuity and prioritisation. 

The absence of new figures suggests that the focus for 2026–27 is on implementation, scale, and integration of these missions rather than symbolic announcements. This also indicates a maturing policy phase where AI is no longer introduced as a novelty but treated as an ongoing national capability.

Ministry-wise Allocations Relevant to AI and New Technology

1. Under the Department of Space, allocations directly support advanced technology development. Space Technology has been allocated ₹10,397 crore for 2026–27, increased from the previous year. 

2. Space Applications have received ₹1,725 crore. While these allocations are not labelled as AI-specific, space technology and applications rely heavily on data analytics, automation, and AI-enabled systems, making them significant for India’s high-technology ecosystem.

3. Under the Ministry of Skill Development and Entrepreneurship, the Skill India Programme has been allocated ₹2,800 crore. In addition, a new Integrated Scheme in Skilling Architecture has received an allocation of ₹600 crore. These allocations are crucial for AI and emerging technologies because the Budget explicitly links skilling, re-skilling, and technology adoption, especially in AI-related jobs and services. 

4. The Department of Biotechnology has received ₹2,300 crore for the Biotechnology Research Innovation and Entrepreneurship Development (Bio-RIDE) initiative. This allocation supports research, innovation, and technology-driven entrepreneurship, including data-driven and AI-supported biotechnological research.  

5. In pharmaceuticals and biotechnology, the Budget deepens India’s push into advanced manufacturing and announces the Biopharma SHAKTI programme with an outlay of ₹10,000 crore over five years. While not labelled as an AI scheme, the emphasis on clinical trials, research networks, and regulatory strengthening implies extensive use of data analytics and advanced technologies. 

6. One of the most significant AI-driven initiatives directly deployed and announced through Bharat-VISTAAR (Virtually Integrated System to Access Agricultural Resources). 

This multilingual AI tool will integrate - 

• AgriStack portals and ICAR’s agricultural practice packages with advanced AI systems. 

• Bharat-VISTAAR aims to provide farmers with customised, real-time advisory services, improve farm productivity, support informed decision-making, and reduce risks related to climate, pests, and market fluctuations.  

This would help farmers to foresee climate conditions and plan sowing - harvesting accordingly.

• AI based crop cultivation feature would enable farmers to stay resilient in the times of floods, heat waves, ground water unavailability and suggest farmers to choose relevant cropping patterns which are feasible. 

This initiative marks a major step towards AI-led precision agriculture and digital empowerment of farmers.

7. The highest increase in allocation went to the IndiaAI mission which was launched in April 2024. Under this mission the government allows start-ups and researchers to access subsidised graphic processing units (GPU), in hopes of building a homegrown AI model. The Finance Ministry has allocated ₹2000 crore to this mission for FY26. This is a whopping increase 1056% from the revised estimates in the 2024-25 budget, where ₹173 crore is allotted!

8. Semiconductors and Electronics - Advanced Manufacturing and Deep Technology 

9. Critical minerals and rare earths receive strategic attention through the development of dedicated Rare Earth Corridors in : Odisha, Kerala, Andhra Pradesh, Tamil Nadu. 

These corridors will cover:  Mining - Processing - Research - Manufacturing. Customs duty exemptions have been extended to capital goods for critical mineral processing, monazite, sodium antimonate used in solar glass, and lithium-ion battery manufacturing equipment.

AI in Employment, Education, and Skill Formation

A major policy signal on AI as an enabler and not a job destroyer comes through the proposed High-Powered “Education to Employment and Enterprise” Standing Committee. The terms of reference clearly mandate the committee to assess the impact of emerging technologies, including AI, on jobs and skill requirements. 

It is also tasked with proposing measures to -

1. Embed AI in education from the school level onwards, upgrade teacher training institutions.

2. Recommend large-scale upskilling and reskilling of professionals in AI and related technologies, to prepare workforce for AI-driven economy

3. Focus on AI-augmented roles, not human replacement

4. Strong education–employment linkage to create future-ready careers

5. Special focus on the services sector, India’s largest employer. 

The objective is to  use AI to move ahead, create jobs, and boost global competitiveness.

Institute of Creative Technologies (IICT), Mumbai, which will establish, post recognising the rapid growth of the AVGC (Animation, Visual Effects, Gaming, and Comics) Content Creator Labs in 15,000 secondary schools and 500 colleges, strengthening India’s digital creative talent pipeline. This is projected to require two million professionals by 2030. 

This initiative aligns with new-age digital content creation, gaming technologies, immersive media, and AI-enabled creative industries, preparing youth for technology-intensive careers.

This reflects a demand-side understanding of AI, where the government recognises that technological growth without workforce readiness can deepen inequality. The Budget therefore treats AI not just as a productivity tool, but as a skill transition challenge that requires institutional planning.

AI as a Governance and Efficiency Tool

The Budget introduces concrete AI use cases in public administration, especially in customs and trade facilitation. It announces the expansion of non-intrusive scanning using advanced imaging and AI-based risk assessment, with the objective of scanning every container across major ports in a phased manner. This is a significant governance reform, as it combines technology with regulatory efficiency, reduces human discretion, and speeds up trade processes. 

Basic Customs Duty (BCD) exemptions provided for:

1. Specified parts used in microwave oven manufacturing

2. Components and parts used in civil aircraft manufacturing

3. Electronics toll manufacturing in bonded warehouses to receive targeted support

4. Safe harbour profit margin fixed at 2% for toll manufacturing operations

Unlike earlier digital reforms focused on digitisation, this move reflects algorithmic governance, where AI supports decision-making in real time. However, the Budget does not elaborate on safeguards, data accountability, or oversight mechanisms, leaving questions about transparency and bias unaddressed.

AI, Services Sector, and Economic Strategy

The Finance Minister repeatedly links emerging technologies with the services sector, which is projected as a core driver of Viksit Bharat with a target of achieving a 10 % global share by 2047.  AI is presented as a force multiplier for services exports, productivity, and employment creation. 

By placing AI within services rather than manufacturing alone, the Budget signals India’s intention to compete globally in high-value digital and knowledge-based services. This reflects a comparative advantage approach, recognising India’s human capital strength, but it also raises concerns about uneven access to advanced skills across regions and social groups.

With respect to Data Centres and Cloud Infrastructure the Budget makes a decisive push to position India as a global data centre and cloud services hub. A tax holiday till 2047 has been announced for foreign companies providing global cloud services using data centre infrastructure located in India. 

To provide tax certainty, a 15 percent cost-based safe harbour margin has been introduced where an Indian data centre entity serves a related foreign company. Together, these measures aim to establish India as a neutral, trusted global base for cloud computing and digital infrastructure.

In the area of tax administration and compliance, the Budget introduces technology-driven simplification. The New Income Tax Act, 2025, effective from April 2026, will be supported by redesigned, simplified digital tax forms and automated processes to ease compliance for ordinary citizens. Results in a globally competitive effective tax rate, improving India’s attractiveness as a manufacturing base.

Rule-based automated systems will allow small taxpayers to obtain lower or nil TDS certificates without approaching tax officers, reinforcing the move towards faceless, technology-enabled governance.

Technology, Inclusion, and Assistive Innovation

The Budget also highlights AI integration in assistive technologies for Divyangjan through the Divyangjan Kaushal Yojana: ₹200 crore, Divyang Sahara Yojana: 100 crore. It proposes supporting Artificial Limbs Manufacturing Corporation of India to support and invest in ALIMCO for R&D, scale up production, and integrate AI into assistive devices. 

This shows an inclusive application of AI, where technology is not only about efficiency or profit but about dignity and accessibility. While no explicit fund allocation is mentioned in the speech, the policy intent is clear: AI is being extended to social welfare domains, not confined to elite or commercial use.

Critical Assessment 

While the Budget strongly endorses AI and emerging technologies across sectors, it remains cautious in announcing fresh financial commitments or detailed regulatory frameworks. The emphasis is more on committees, missions, and integration rather than new schemes with defined outlays. This makes the approach stable but also somewhat opaque, as the lack of explicit numbers makes it difficult to assess scale, accountability, and prioritisation. 

Moreover, ethical concerns such as data protection, algorithmic bias, and labour displacement are acknowledged indirectly through skilling measures but not addressed head-on. The Budget therefore positions AI as inevitable and beneficial, but leaves governance and rights-based questions largely open.

Conclusion

Overall, the Union Budget 2026–27 treats artificial intelligence and new technologies as foundational to India’s economic growth, service-sector leadership, and governance reforms. Instead of headline-grabbing allocations, it embeds AI within institutions, skills policy, customs administration, research ecosystems, and inclusive welfare schemes.

This integrated but cautious approach suggests confidence in existing frameworks, while also highlighting the need for clearer financial transparency and stronger regulatory clarity in future budgets.