Union Budget 2026: Technology Takes Centre Stage With AI, Upskilling & More Union Budget 2026, presented by FM Nirmala Sitharaman, focuses heavily on technology, new AI initiatives, alongside fiscal updates, tax reforms, and a push for skilling and emerging sectors like AVGC and electric mobility.

Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 in the Parliament today. The over-an-hour long speech focused on reforms, tax reliefs, and more. Technology, like previous budgets, has continued to be in the spotlight with several mentions for different sectors and industries. This included semiconductor, rare earth minerals, and AI as well.

Sitharaman began her speech talking about three 'Kartavyas' [duties] for the government. One of these included the mention of "cutting-edge technologies, including AI applications" as force multipliers for better governance.

"Today, we face an external environment in which trade and multilateralism are imperilled and access to resources and supply chains are disrupted. New technologies are transforming production systems while sharply increasing demands on water, energy and critical minerals," she said.

Semiconductors: India is doubling down on its efforts to achieve self-reliance in the semiconductor space with the launch of ISM 2.0 to produce equipment and materials, design fullstack Indian IP, and fortify supply chains. Sitharaman said they will also focus on industry-led research and training centres to develop technology and skilled workforce.

ALSO READ: Nirmala Sitharaman Bets On India Semiconductor Mission 2.0

Component manufacturing: Sitharam said that the Electronics Components Manufacturing Scheme, launched in April 2025 with an outlay of INR 22,919 crore, already has investment

commitments at double the target. The government has proposed to nearly double the outlay to INR 40,000 crore for the same in a bid to tap into the momentum.

Rare Earth minerals: India is now looking to explore deeper into its own geography to find rare earth minerals. This builds on the scheme for Rare Earth Permanent Magnets launched in November last year. The government is now looking 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.

Capital Goods capability: The government plans to launch a Scheme for Enhancement of Construction and Infrastructure Equipment (CIE) to support domestic manufacturing of high-value and technologically-advanced CIE.

Textile: The government is also deploying technology to improve machinery and technology for textile expansions and employ common testing and certification centres.

CCUS: The government has proposed an outlay of INR 20,000 crore for the next five years to support Carbon Capture Utilization and Storage technologies across five industrial sectors, including, power, steel, cement, refineries and chemicals.

Emerging technologies, including AI: The government noted the importance of technology in the 21st century. It however stressed on an inclusive usage of technology that empowers farmers, women in STEM, youth looking to upskill, and disabled ones to access new opportunities.

"The government has taken several steps to support new technologies through [the] AI Mission, National Quantum Mission, Anusandhan National Research Fund, and Research, Development and Innovation Fund," she said.

Upskilling: The government is planning to set up a High-Powered 'Education to Employment and Enterprise' Standing Committee to recommend measures that focus in the Services Sector as a core driver of Viksit Bharat.

"This will make us a global leader in services, with a 10% global share by 2047. The committee will prioritise areas to optimise the potential for growth, employment and exports. They will also assess the impact of emerging technologies, including AI, on jobs and skill requirements and propose measures thereof," she said.

To support the domestic animation, visual effects, gaming and comics sector, the government has proposed to support the Indian Institute of Creative Technologies, Mumbai in setting up AVGC Content Creator Labs in 15,000 secondary schools and 500 colleges. It's worth noting that AVGC is poised to need 2 million professionals by 2030.

India also plans to set up a National Destination Digital Knowledge Grid to digitally document all places of significance—cultural, spiritual and heritage. The government hopes the move will help set up a new ecosystem of jobs for local researchers, historians, content creators and technology partners.

Sports: The government is launching a new Khelo India Mission to reform the sports sector. One of the elements is integration of sports science and technology.

Conventional IT: Software development services, IT enabled services, knowledge process outsourcing services and contract R&D services relating to software development to be clubbed under a single category of Information Technology Services with a common safe harbour margin of 15.5 percent. Moreover, the threshold for availing safe harbour for IT services to be enhanced from INR 300 crore to INR 2,000 crore.

"Safe harbour for IT services shall be approved by an automated rule-driven process, can be continued for a period of 5 years at a stretch. Unilateral Advanced Pricing Agreement (APA) process for IT services to be fast-tracked with the endeavour to conclude it within a period of 2 years, which can be extended by 6 months on taxpayer's request. The facility of modified returns available to the entity entering APA to be extended to its associated entities," according to the government,

Accessibility: To technologically empower disabled humans, the government plans setting up of Assistive Technology Marts as modern retail-style centres where Divyangjans and senior citizens can see, try and purchase assistive products.

Read more about the Union Budget here.

Industry reactions

Puneet Chandok, President, Microsoft India & South Asia

The Union Budget 2026 sets a clear direction for India's next phase of growth, with AI, digital infrastructure, and services positioned as central to national progress. By placing AI at the heart of economic and governance priorities, the Government has signalled its commitment to building a more productive, competitive, and technology‑led economy.

The Budget's focus on data centres, cloud and AI infrastructure is equally significant. Long‑term policy certainty recognises that digital infrastructure is now strategic national infrastructure. As AI adoption accelerates across sectors, secure and resilient compute capacity will underpin public services, enterprise innovation, and long‑term competitiveness.

At Microsoft, our commitments in India closely align with this direction. We are expanding hyperscale cloud and AI infrastructure, including new regions, while continuing to invest in skilling at scale. Our efforts aim to support India's transition from Digital Public Infrastructure to AI Public Infrastructure, enabling trusted, inclusive innovation with impact across the country.

Akshat Rathee, Co-founder and MD of NODWIN Gaming

The Union Budget 2026–27's support for the Animation, Visual Effects, Gaming and Comics (AVGC) sector through the expansion of AVGC creator labs is a strong step toward building India's creative and digital talent pipeline. The government's backing of the Indian Institute of Creative Technologies (IICT), whose inauguration we were proud to be present for, reflects a clear commitment to equipping young Indians with future-ready skills across animation, gaming and storytelling. As organizers of large-scale cultural platforms such as the NH7 Weekender and Comic Con India, we are constantly seeking skilled talent to shape immersive experiences, and initiatives like these will help widen that pool while accelerating original IP creation and high-quality game development. Greater access to creative technologies will enable more homegrown, culturally relevant content to thrive.

Atul Rai CEO and CO founder of Staqu Technologies

The Union Budget 2026–27 clearly recognises artificial intelligence as a strategic driver of inclusive growth and governance efficiency. The emphasis on AI missions, research funding, semiconductor ecosystem development, and capacity building reflects a shift from experimentation to deployment at scale. By aligning AI with national priorities such as infrastructure, public services, logistics, and security, the government is creating a robust ecosystem for applied artificial intelligence.

Equally important is the focus on skilling and education-to-employment pathways, which will ensure that AI adoption is supported by a future-ready workforce. As AI becomes embedded across sectors, solutions that translate advanced research into real-world applications will play a critical role in enhancing productivity, safety, and operational efficiency across India's rapidly expanding digital and physical infrastructure.

Jaspreet Bindra, Co Founder and CEO, AI&Beyond

The Union Budget 2026's strong emphasis on semiconductors, rare earths and advanced manufacturing reflects a clear long term vision to position India as a global technology and innovation hub. What makes this moment especially powerful is the opportunity to simultaneously build an AI literate workforce that can fully leverage these investments. As manufacturing and services become increasingly intelligent and data driven, AI will be embedded across design, production, quality control and supply chains.

A critical enabler of this transformation will be the accelerated development of data centre infrastructure. As AI adoption scales across sectors, the demand for secure, high performance and energy efficient data centres will grow exponentially. Strategic investments in data centres will strengthen India's digital backbone, support sovereign data capabilities and enable low latency, scalable AI deployment, making them a foundational pillar of the country's technology and innovation ambitions.

Equally significant is the focus on building long term AI talent through the establishment of 15,000 AI labs in schools and the launch of 10,000 new technology fellowships at leading institutions such as the IITs. These initiatives will help equip young learners with future ready skills through personalised learning and modern curriculum design, creating a strong pipeline of AI ready talent for the economy.

The decision to set up a high powered panel to review the impact of AI and emerging technologies on the services sector, jobs and skill requirements is a particularly important signal and a welcome move announced by Finance Minister Nirmala Sitharaman in the Union Budget 2026. It shows a clear acknowledgement that technology adoption must go hand in hand with workforce transformation. Strengthening AI literacy at scale across engineers, managers and frontline workers will ensure that India not only builds world class infrastructure but also develops the human capital required to extract maximum value from it, enabling inclusive and sustainable growth.

Hari Krishna, Founder & CEO at Green Drive Mobility

India's shift towards India's push for electric mobility, with the government focusing on electric mobility with a specific focus on public transportation and sustainable last-mile delivery. The PM-eBus Sewa scheme will deploy 4,000 new electric buses, complemented by ₹2,000 crore under the PM E-DRIVE scheme for pan-India EV charging infrastructure, accelerating clean transport adoption. For last-mile delivery, this opens opportunities to electrify logistics fleets, reduce emissions, and enhance operational efficiency. At Green Drive, we see this industry's expectations for 38,000 e-buses by 2029; the government's continued policy support provides the clarity and stability needed to drive India's green mobility transition.

Kulmani Rana, Founder Fibonacci X

The announcement on AVCG content creator labs signals a clear policy push towards building India's Orange Economy, where creativity, technology and entrepreneurship converge. By embedding content creation, animation, gaming and digital storytelling skills into schools and colleges, the Budget recognises creative talent as a serious economic asset. This is a critical step in creating globally competitive startups, export-ready intellectual property and new forms of employment for India's youth, while positioning the creative economy as a long-term growth driver alongside manufacturing and technology.

Nischal Shetty, Founder, WazirX

The Union Budget 2026 maintains the existing tax treatment for Virtual Digital Assets. The continuation of the 1% TDS and the restriction on loss set-off remain key friction points for users and the ecosystem. These measures continue to impact liquidity, participation and India's competitiveness in the global digital asset landscape. We remain hopeful that future policy discussions will address these concerns in a manner that balances innovation, compliance, growth and ease of doing business.

Rohit Kumar, Founding Partner at the public policy firm The Quantum Hub (TQH)

The Budget clearly prioritises building domestic capability and reducing strategic dependencies, while positioning AI as a governance and productivity multiplier. The focus on compute, semiconductors, and data infrastructure is directionally right and the taxation measures - tax holidays for investments in data centres, customs duty exemptions for capital goods for nuclear power and critical minerals, and expanded safe harbour provisions - are especially promising. Together, these signal a shift towards a more trust-based regulatory regime, where the government places greater faith in businesses rather than defaulting to bad faith assumptions. If implemented well, this approach could reduce litigation, improve investor confidence, and mark a meaningful change in how the state engages with business - ultimately supporting stronger economic growth.

Having said that, the Budget stops short of addressing harder questions around sustained R&D funding, private-sector innovation incentives, and long-term access to frontier AI capabilities.

Stay tuned for deep dive on different aspects of Union Budget 2026