Union Budget 2026: Can India put its AI ambitions on fast track?

India today counts among the world’s largest users of ChatGPT and other generative AI tools, underscoring how deeply artificial intelligence has seeped into everyday work, learning and consumption.

As enterprises experiment with AI at scale and startups race to build India-first models, the Union Budget 2026 is being keenly watched for signals on whether the government is ready to back this adoption with hard infrastructure, funding and long-term policy support.

Industry leaders argue that the next phase of India’s AI journey hinges on compute, capital and capability. “Building India’s AI capacity will depend on new investments and incentives,” says Jaspreet Bindra, co-founder of AI&Beyond. He points to the urgent need to scale data centres and cloud infrastructure to meet surging demand from AI-led applications. Bindra bats for a second phase of the IndiaAI Mission with a higher outlay, expanded grants for infrastructure, new centres of excellence and sector-specific AI challenges.

A key ask is a national Compute Credit programme that would allow startups, researchers and labs to access subsidised GPU and cloud hours on India-based platforms. “Funds should also be allocated to build and operate large shared AI compute centres,” Bindra adds, alongside enhanced R&D support through tax credits, direct grants and deep-tech seed or matching funds. Continued backing for IndiaAI Foundation Models, open-source AI initiatives and global research collaborations is also critical, he says, as is earmarked funding for AI use cases in public health, agriculture, education and smart cities. Extending the PLI scheme to emerging areas such as AI, space and robotics could further catalyse private investment.

From an infrastructure lens, Deepak Kedia, CFO of Mastek Group, expects Budget 2026 to put a sharp focus on data centres. “Recognising data centres as essential national infrastructure like roads or airports could significantly speed up approvals and investments,” he says. Assured access to competitively priced green power, faster clearances for captive and renewable-linked capacity, and dedicated power corridors are seen as crucial to sustaining AI-led growth.

Tax and regulatory clarity are equally important. Time-bound tax holidays linked to capacity creation and sustainability targets, smoother GST input credit on capital assets, and customs duty relief on AI infrastructure imports could make India more attractive for global investors, Kedia notes. Clearer guidance on data localisation and tighter implementation of DPDP rules may also unlock stalled investments.

Both experts converge on talent as the missing link. From project-based AI learning and apprenticeships to large-scale AI literacy programmes for youth and enterprises—possibly through an expanded Yuva.ai—Budget 2026 has an opportunity to turn India’s massive AI user base into a globally competitive AI-building ecosystem.