Artificial intelligence (AI) companies are urging the government to treat AI as core national infrastructure in the Union Budget for 2026-27, calling for targeted fiscal support on compute, research, skilling and data to help domestic companies scale and compete globally as adoption accelerates across the economy.
Executives, investors, educators and legal experts say Budget 2026 must shift decisively from pilot programmes to execution, at a time when AI underpins sectors ranging from finance and healthcare to logistics, education and public administration.
AI As Core Infrastructure
“Our expectation from the upcoming Union Budget is that it should treat AI as core digital infrastructure for India’s growth in 2026 and beyond,” said Ankush Sabharwal, Founder and CEO at CoRover.ai.
“The government has already taken encouraging steps with IndiaAI and DPI-led innovation, but this is the year to double down with targeted incentives for indigenous LLMs, agentic AI platforms and sovereign AI stacks that are built in and for India’s diverse languages and use cases,” he said.
Sabharwal said the industry was seeking “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.”
“With the right push on talent, compliance, and compute, India can not only democratise AI access for every citizen but also emerge as the world’s applied AI capital in 2026,” he added.
Legal experts also called for infrastructure recognition. “A key expectation from Budget 2026 is that it should acknowledge how central AI has become to everyday economic activity,” said Ranjana Adhikari, Partner at Shardul Amarchand Mangaldas & Co. “AI can no longer be considered a niche technology as it now underpins services across sectors ranging from finance and healthcare to media, logistics and even public administration.”
“In that sense, there is a strong case for formally recognising AI as ‘core infrastructure’,” she said, adding that incentives were needed for “computing, cloud and data centres, sustainable energy,” as well as greater support for deep-tech R&D in health and cybersecurity.
Compute Costs And Cloud Infrastructure
A recurring concern across the ecosystem is the high cost of compute and cloud infrastructure, which industry executives estimate accounts for 40-60 per cent of operating costs for AI product companies.
“From the AI industry’s perspective, Budget 2026-27 must directly address the cost structures that determine whether Indian AI companies can scale globally,” said Aniket Tapre, Founder and CEO at Neural Arc.
“Targeted fiscal support such as subsidised compute access, cloud credits, or accelerated depreciation for AI infrastructure would materially reduce this burden,” he said.
Tapre also called for AI-specific R&D tax credits, noting that “model training, fine-tuning, and evaluation often require multi-year investments before commercial returns are realised.”
“With global AI spending expected to cross USD 300 billion by 2026, India’s Budget has an opportunity to ensure a meaningful share of that value is created by Indian AI companies, not just consumed by them,” he added.
R&D Incentives And Deeptech Funding
Founders are also seeking stronger tax and funding support for long-gestation innovation.
“To bridge the R&D gap—where India’s 0.7 per cent GDP spend lags the 1.93 per cent global average—we urge the restoration of the 200 per cent weighted deduction for R&D,” said Amit Kumar Tyagi, CEO at TrueReach AI. “This is vital for deep-tech startups facing long-gestation cycles.”
Tyagi said the industry was also seeking “a national ‘Compute Credit’ scheme and a 3–5-year customs duty holiday on critical hardware like GPUs and TPUs.”
“Capital remains the third pillar,” he said, calling for faster rollout of the Rs 20,000 crore Deep Tech Fund of Funds and extension of the PLI scheme to AI and robotics to incentivise domestic intellectual property.
“Finally, we must solve for ‘Data and Talent,’” Tyagi said. “Establishing a structured India Dataset Platform for anonymized data and offering tax incentives for corporate upskilling are non-negotiable if we are to meet the demand for one million AI professionals by 2026.”
Investor Focus On Execution
Investors say the success of Budget 2026 will hinge on execution rather than new announcements.
“For the AI and venture ecosystem, Budget 2026 should be about execution,” said Rahul Agarwalla, Managing Partner at SenseAI Ventures.
“With the Research Development Innovation Fund framework already in place and the Anusandhan National Research Foundation as the implementing agency, the key expectation is timely capital deployment into applied AI research and commercially viable use cases,” he said.
Agarwalla also called for long-term capability building through “the establishment of a dedicated AI university on the lines of the IITs with a strong research mandate.”
“In parallel, the Budget must recognise Indian data as strategic infrastructure and support sovereign AI applications in healthcare, agriculture and education,” he added.
Skilling, Education And GST Relief
Education and skilling companies are pushing for tax relief to improve affordability of AI education and accelerate adoption.
“AI and digital are no longer peripheral skills; they are the core gateway to jobs and competitiveness,” said Pankaj Jathar, CEO at NIIT Limited.
“Today, most online courses fall under the 18 per cent GST bracket, which impacts price accessibility at scale,” he said, calling for GST on verified digital learning programmes to be rationalised to 5 per cent.
Jathar also urged the government to set “a clear target of 6 per cent of GDP for education,” prioritising digital infrastructure, public–private skilling partnerships and underserved geographies.
Online learning platform Udemy said workforce upskilling would be central to India’s AI ambitions. “India has placed AI capability building firmly on its national growth agenda,” said Vinay Pradhan, country manager for India and South Asia at Udemy, citing previous budget announcements on centres of excellence for skilling and AI in education.
“With AI integration across sectors expected to contribute nearly USD 500 billion to India’s GDP by 2035, investments in this area are likely to rise further this year,” Pradhan said, adding that AI demand in job postings had risen sharply over the past two years.
Jobs And Labour Reforms
Staffing firms say AI adoption is already reshaping workforce structures. “AI adoption is fundamentally changing workforce capability and composition across industries,” said Neeti Sharma, CEO at TeamLease Digital. “This budget should prioritise large-scale reskilling programs, forward-looking labour frameworks recognising emerging job families, and EPFO reforms enhancing skilled worker retention.”
“The true employment impact will depend on how effectively skills transformation keeps pace with AI deployment velocity,” she added. |
