Budget 2026 tech highlights: What govt announced on AI, chips, cloud and data infrastructure | Technology News
Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 in Parliament on Sunday, February 1, laying out the central government’s push to scale up manufacturing across seven strategic and frontier sectors, including semiconductor and electronics manufacturing.
The budget comes against the backdrop of a realignment of the global economic order, as trade wars, tariff regimes, supply-chain fragmentation, and rising geopolitical conflict erode the foundations of decades-long globalisation. India has sought to offset these global headwinds by looking to strengthen its domestic resilience, particularly in the technology sector.
Here is a round-up of all the proposals made in the Budget 2026-27 related to new artificial intelligence (AI) tools, AI infrastructure, cloud and data services, electronics component manufacturing, and more.
Semiconductor Mission 2.0 with Rs 8,0000-crore outlay
In her budget speech, Sitharaman proposed to launch the next iteration of India’s semiconductor policy. Building on the India Semiconductor Mission (ISM) 1.0, the ISM 2.0 will look to 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,” she said.
The newly unveiled national semiconductor strategy moves beyond fabs and ATMP (Assembly, Testing, Marking, and Packaging) units, and proposes a design-linked incentive (DLI) scheme with a Rs 100-crore outlay for incentives for at least 30 semiconductor design companies in India, as per the Outcome Budget document.
ISM 2.0 also looks to provide Rs 5,000 crore in fiscal support for the setting up of semiconductor fabs to manufacture compound semiconductors, discrete semiconductors, ATMP units, silicon photonics (SiPh), and sensors. Additionally, the project costs for setting up semiconductor fabs will also be covered under the scheme up to Rs 2,000 crore.
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ECMS outlay expanded to Rs 40,000 crore
“The Electronics Components Manufacturing Scheme, launched in April 2025 with an outlay of ₹22,919 crore, already has investment commitments at double the target. We propose to increase the outlay to ₹40,000 crore to capitalise on the momentum,” Sitharaman said.
Alongside the incentive scheme for semiconductors, the government supports manufacturing for practically all layers of electronics manufacturing, making the sector a crucial growth driver for the Indian economy. The components that the government is looking to target through the scheme include display modules, sub assembly camera modules, printed circuit board assemblies, lithium cell enclosures, resistors, capacitors, and ferrites, among others.
These electronics parts are used in gadgets like smartphones and laptops, and appliances like microwave ovens, refrigerators and toasters, among others. Note, this incentive scheme differs from the government’s earlier production linked incentive (PLI) scheme for electronics manufacturing in how participating companies can avail subsidies.
Rare earth corridors in Odisha, Kerala, Tamil Nadu, and Andhra Pradesh
The government has proposed to set up dedicated rare earth corridors in India’s coastal states Odisha, Kerala, Andhra Pradesh, and Tamil Nadu.
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“We now propose 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,” Sitharaman said in her budget speech.
Heavy rare earth elements (HREE) can be used in advanced technologies ranging from electric vehicles to next-generation fighter jets and robots as well as AI infrastructure such as semiconductors and data centre hardware. India has the world’s third-largest reserves of rare earths (6.9 million tons) but only mines a fraction of it because private companies make limited investments, according to the US Geological Survey.
Tax holiday for cloud services companies till 2047
In an attempt to boost investment in data centres, the Centre has proposed to provide tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India. However, these cloud services companies will have to provide services to Indian customers through an Indian reseller entity.
“I also propose to provide a safe harbour of 15 percent on cost in case the company providing data centre services from India is a related entity,” Sitharaman said. The announcement comes at a time when India is looking to take a bottom-up approach to AI development despite being late to the global AI race.
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Flagging the structural challenges facing India, the Economic Survey 2026-27 noted that the country’s access to cutting-edge compute infrastructure remains severely limited. It further cited World Bank data which said that over 70 per cent of all data centres by count are located in high-income countries, with India accounting for just 3 per cent,
New multilingual AI tool for farmers
The government has proposed to launch a new multilingual AI tool called ‘Bharat-VISTAAR’ that will be integrated with its Agri-Stack portals and best practices with AI systems outlined by the Indian Council of Agricultural Research (ICAR). “This will enhance farm productivity, enable better decisions for farmers and reduce risk by providing customised advisory support,” Sitharaman said.
The Ministry of Agriculture’s Agri-Stack comprises a national registry of farmers and farm plots linked to crop and soil data, accessible to government agencies and approved private players, such as agritech companies, agricultural suppliers, and credit providers.
Content creator labs in schools, colleges
The government has proposed to set up dedicated Animation, Visual Effects, Gaming and Comics (AVGC) content creator labs in over 15,000 secondary schools and 500 colleges across India under the initiative spearheaded by the Indian Institute of Creative Technologies, Mumbai. It added that India’s AVGC sector is projected to require two million professionals by 2030.
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Other tech and AI-related announcements
– National Destination Digital Knowledge Grid: “A National Destination Digital Knowledge Grid will be established to digitally document all places of significance—cultural, spiritual and heritage. This initiative will create a new ecosystem of jobs for local researchers, historians, content creators and technology partners.”
– Non-intrusive scanning of containers using AI: The government has proposed to roll out advanced, AI-powered imaging tools for scanning every major container across all major ports in the country. The roll-out will be carried out in a phased manner, Sitharaman said. She further said that the government is developing a single, integrated, and scalable platform for all customs processes, called Customs Integrated System (CIS), which is expected to be rolled out in two years.
– BCD exemption for manufacturing Li-Ion battery storage systems: The government has proposed to exempt capital goods used for manufacturing Lithium-Ion cells for battery energy storage systems from paying basic customs duty (BCD), in addition to the exemption given for capital goods used for manufacturing Lithium-Ion cells for batteries. It has also proposed to abolish BCD levied on imports of sodium antimonate used to manufacture solar glass.
