In the Union Budget 2025–26, AI featured more prominently within broader digital and technology allocations. This year, with AI adoption accelerating across enterprises, startups, and government departments, AI startup founders and industry stakeholders expect the Budget to further push the envelope and treat the technology as a long-term growth driver.
The buzz is strong. Prime Minister Narendra Modi recently met 12 Indian startups selected under the IndiaAI Mission to build sovereign large language models. The Budget will also precede the highly-anticipated IndiaAI Impact Summit, where homegrown AI companies Sarvam AI and BharatGen are expected to showcase their LLMs.
Ahead of the Budget, AI and deep tech startup founders and industry leaders are calling for greater focus on compute infrastructure and honing AI talent, as well as policy overhaul around employee stock options and government procurement.
More Compute and Data Centres
Last year, finance minister Nirmala Sitharaman gave IndiaAI Mission a shot in the arm with a significant allocation of ₹2,000 crore, helping it boost the national AI compute capacity with 38,000 GPUs deployed and accessible for AI development and research. The government body is now preparing to open another bidding round to onboard an estimated 12,000–15,000 NVIDIA B100 and B200 GPUs, according to a Business Standard report.
Moreover, Ashwini Vaishnaw, minister of electronics and information technology, recently met with NVIDIA officials to discuss manufacturing its DGX Spark workstation in India.
With India achieving early momentum through initiatives such as the IndiaAI Mission and Digital Public Infrastructure, industry stakeholders want Budget 2026 to position AI as a core digital infrastructure.
In a conversation with AIM, Ankush Sabharwal, founder and CEO of conversational AI platform CoRover.ai, says the government should focus on targeted incentives for indigenous large language models, agentic AI platforms, and sovereign AI stacks. “We hope to see larger allocations for GPU infrastructure, sandbox environments for regulated sectors, and outcome-based incentives for AI deployments in public services, MSMEs and Bharat-focused solutions,” he adds.
Meanwhile, Narendra Sen, founder and CEO of RackBank Datacentres and NeevCloud, hopes Budget 2026 will treat data centres and AI infrastructure as new sovereign territories rather than just physical facilities. With India’s data centre capacity projected to reach 1.7 GW this year, he says the focus must now shift from “housing hardware to powering intelligence.”
Sen notes that a production-linked incentive for compute, with priority for indigenous cloud platforms, would be critical to building an Atmanirbhar AI ecosystem.
Industry experts also share similar expectations. S Anjani Kumar, Partner, Deloitte India, states that the Budget should continue to bolster the India AI Mission, enabling it toimprove access to GPUs, create AI-ready datasets, strengthen research, and support AI application development.
“Measures such as full GST input tax credit on data-centre capital assets, customs duty waivers on critical imported equipment, and compute-credit schemes for startups, universities, and research institutions can meaningfully enhance affordability and speed up AI innovation on domestic infrastructure,” he says.
Jaspreet Bindra, co-founder of AI & Beyond, agrees that scaling India’s AI capacity would require sustained public investment and stronger fiscal incentives. “Data centres and cloud infrastructure must expand rapidly to meet the rising demand of the AI segment,” he notes.
He expects the government to consider extending multi-year support for AI with a higher outlay, including a second phase of the IndiaAI Mission with increased infrastructure grants. He also hopes the Centre will announce new centres of excellence (CoEs), building on last year’s Budget when the government allocated ₹500 crore to set up a CoE in AI for education.
Further, Bindra calls for a national compute credit programme that would allow startups and research labs to access subsidised cloud and GPU hours on India-based platforms. He also stresses the need to earmark funds for AI deployments in priority sectors such as public health, agriculture, education, and smart cities to drive real-world use cases.
Building India’s AI Talent Pipeline
A 2024 NASSCOM report estimated that India’s AI workforce will expand from roughly 6–6.5 lakh professionals to over 12.5 lakh by 2027, reflecting an annual growth rate of about 15%.
This is driven by rising demand for roles in data science, data curation, AI engineering, and analytics. As of August 2025, nearly 3.2 lakh individuals had enrolled in or completed training in AI and Big Data Analytics—in step with India’s booming AI market, which is projected to reach $130.63 billion by 2032 at a ~39-40% CAGR, according to Kotak Securities.
Last year, the government rolled out YUVA AI for All, a national AI literacy programme under the IndiaAI Mission, to build foundational AI awareness across the country. The initiative focuses on introducing core AI concepts to students, young professionals, and first-time learners through a free national course.
Kumar asserts that the upcoming Budget presents an opportunity to advance a balanced approach by scaling AI infrastructure while simultaneously deepening talent development. “Investments in data centres, cloud platforms, and compute capacity can be complemented by project-based AI learning initiatives across schools, universities, and research institutions.”
Solving Teething Issues
Beyond targeted AI initiatives, Ajai Chowdhry, co-founder of HCL and chairman of the EPIC Foundation, highlights that the current ESOP taxation system is creating problems for startups and employees.
“India stands at a critical juncture in its journey to become a global innovation hub, and ESOPs framework of a country plays a critical role in supporting the growth of the startup ecosystem,” Chowdhry notes. “India’s dual taxation model on ESOPs—taxing employees at exercise and again at sale—creates significant friction that is actively pushing Indian startups and founders toward offshore relocation.”
He hopes the government considers simplifying ESOP taxation in the upcoming Budget to support the growing startup ecosystem.
Taken together, these measures can sustain India’s AI growth momentum and ensure the country matches step with the rest of the world as AI moves from pilots to performance.
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