India’s Union Budget 2026–27, presented yesterday, makes a quiet but consequential statement: technology is no longer being treated as a “sector.” It is being positioned as national infrastructure, on the assumption that India’s next growth cycle will be compute-led, data-led, and automation-led.
The macro context reinforces this intent. The government has held the fiscal deficit target at 4.3% while raising capital expenditure to ₹12.2 lakh crore for FY27 (Reuters). This pairing—fiscal discipline combined with aggressive capex—forms the runway on which India is attempting to build its digital industrial base.
What follows is not a collection of isolated tech announcements, but a layered strategy with direct implications for enterprises, cloud providers, GCCs, and technology leaders.
1. Cloud and Data Centres: Positioning India as a Global “Compute Address”
The most globally legible move in this Budget is the tax holiday until 2047 for foreign companies providing cloud services to global customers through India-based data centres, alongside a safe harbour framework of 15% on cost for related entities offering data-centre services from India.
Beyond the headline, the strategic signal is clear.
First, it directly addresses one of the biggest investor anxieties: future tax uncertainty on global income linked to India-hosted compute.
Second, it invites hyperscalers and large cloud ecosystem players to plan India capacity the way they plan Virginia, Frankfurt, or Singapore—as a strategic base, not an emerging-market outpost.
Industry response reflects exactly this reframing.
Reacting to the Budget, Mr. Raju Vegesna, Chairman & Managing Director, Sify Technologies Ltd., said:
“The Union Budget for 2026-27 emphasizes accelerating India’s AI journey and strengthening the country’s data center infrastructure. This focus is timely and forward-looking. The Budget combines long-term tax incentives for cloud and data center investments with a broader push for digital infrastructure and innovation. It recognizes that high-quality computing capacity is now crucial to India’s growth, just like roads and power.
As a home-grown, AI-ready data center platform with a growing presence in India’s key digital hubs, we see these measures as a positive sign for sustained, cost-effective capacity creation. They also promote deeper partnerships with hyperscalers and faster cloud adoption by enterprises. These initiatives will allow us to continue investing in energy-efficient, high-density infrastructure that supports India’s AI workloads, protects data sovereignty, and helps global and domestic customers run their most demanding applications in India. Overall, the Budget supports a long-term, demand-driven vision for the country’s digital infrastructure sector, which aligns with our goal of building India’s trusted, large-scale colocation and AI infrastructure platform.”
The ripple effects go well beyond data-centre developers—pulling demand across interconnects, fibre, power procurement, cooling efficiency, storage, security tooling, managed services, and GCC workloads. At the same time, it surfaces hard constraints—power availability and water security—that will ultimately determine how fast this ambition can scale.
2. IT and ITeS Exports: Removing “Compliance Friction” as a Competitive Disadvantage
The Budget also delivers a precise services-sector intervention. The safe harbour threshold for IT services has been raised from ₹300 crore to ₹2,000 crore, and approvals have shifted to an automatic, rule-driven model
Operationally, this may appear prosaic. Strategically, it is powerful.
It signals that if India wants to remain a trusted global delivery base, predictability in tax and compliance treatment is part of the product.
As Mr. Umesh Shah, Director – New Age Technologies, Orient Technologies Limited, highlights:
“The introduction of a defined safe harbour of 15% on cost for data services co-provided from India by related entities further brings clarity to cross-border operating models and reduces uncertainty around transfer pricing. Together, these measures simplify compliance, lower execution risk, and make it easier for companies to scale data centre and cloud-led services from India.”
For enterprises and IT firms, the implications are tangible:
- Greater predictability in cross-border delivery models, especially for mid-sized providers
- Improved margin planning and pricing confidence for multi-year deals
- A subtle but meaningful boost to India’s ‘trust premium’ as a services exporter—less time spent navigating ambiguity, more time shipping outcomes
3. Semiconductors and Electronics: From Assembly to Ecosystem Depth
The Budget reinforces India Semiconductor Mission (ISM) 2.0 as part of a broader push to strengthen electronics and technology manufacturing capabilities (Press Information Bureau). In parallel, multiple reports point to a ₹40,000 crore outlay aimed at electronics manufacturing and components.
The strategic shift is unmistakable: capacity without capability will not win globally.
Reflecting this reality, Deepak Pahwa, Chairman, Pahwa Group & Managing Director, Bry-Air, notes:
“With India Semiconductor Mission 2.0 and a proposed Rs 40,000 crore outlay for electronics manufacturing, the focus now moves beyond capacity creation to process excellence. Semiconductor plants are among the most energy and environment intensive manufacturing units, making energy efficiency, contamination control and decarbonisation non-negotiable.”
For the broader tech stack, this matters because:
- A stronger domestic ecosystem improves supply reliability across consumer electronics, industrial automation, and defence technology
- It accelerates demand for specialist talent in materials engineering, clean-room operations, testing, and electronic design automation (EDA)—linking skilling and industry-led training directly to ISM 2.0 outcomes
4. Deep Tech and AI: From Corporate Tool to National Utility
Even where AI is not explicitly branded as policy, the Budget’s structure implies it is being treated as a general-purpose capability spanning governance, industry, and citizen services.
As Inderjit Makkar, Founder & CEO, Factacy AI, puts it:
“Budget 2026 has officially turned AI into a national utility for Viksit Bharat. The ₹1 lakh crore DeepTech fund and National Compute Credits solve the infrastructure hurdle, while the ‘Education to Employment and Enterprise’ (EEE) committee ensures AI drives massive job generation. For Factacy, this validates our AIaaS mission: leveraging sovereign intelligence to help India capture its goal of a 10% global share in services exports by 2047.”
For enterprises, this signals a hardening of decisions:
- Data gravity, model governance, inference cost control, and security will become board-level architecture questions
- Winners will not be those with the flashiest demos, but those who industrialize AI—repeatability, reliability, and auditability at scale
This infrastructure-first reading is echoed by Ramanujam Komanduri, Country Manager, Pure Storage India, who observes:
“The Union Budget 2026 sends a strong signal about where India is headed. It recognizes that AI-led growth isn’t possible without deep, resilient data and digital infrastructure at its core. With the economy sustaining momentum at around 7% and public capital expenditure increasing to ₹12.2 lakh crore in FY27, the focus on advanced technologies, especially AI, reflects a long-term commitment to building infrastructure at national scale.”
5. Cybersecurity: From Risk Checkbox to Growth Prerequisite
As DPI, cloud, and AI adoption accelerate, the attack surface expands in parallel. One of the most useful ways to interpret the Budget’s technology posture is this: every new digital rail must be matched by a security rail.
Cybersecurity leaders underline the stakes. Dr. Kailash Katkar, CMD, Quick Heal Technologies Limited, rehighlights:
“The focus on AI-driven systems in healthcare, agriculture (AgriStack) and education ecosystems significantly expands the digital footprint of citizens, making data protection and consumer cyber resilience increasingly critical.”
For enterprises, this connects directly to day-to-day reality. As spending shifts toward cloud and AI, boards will increasingly ask a sharper question:
Are we scaling securely—or just scaling?
The Strategic Read: A Three-Layer Technology Budget
Strip away the buzzwords, and the Budget’s technology posture stacks into three clear layers:
- Digital infrastructure: data centres, cloud incentives, interconnection, compute capacity (Reuters)
- Digital industrial base: semiconductors, electronics components, advanced manufacturing (Press Information Bureau)
- Digital competitiveness: predictable IT services frameworks, talent pipelines, and governance mechanisms that support export-led growth and innovation (Press Information Bureau)
The uncomfortable—but necessary—closing insight is this: policy creates optionality; execution creates advantage.
The Budget has opened doors. The market will now determine which parts of India’s technology ecosystem can walk through them at speed.
As Anuj Agrawal, Founder & CEO, Zyoin Group, aptly summarizes:
“The real opportunity now lies in execution — aligning industry, academia, and enterprises to convert these policy enablers into sustainable jobs, stronger GCC capabilities, and globally competitive innovation coming out of India.”
Editorial Team
