Budget 2026 is being seen as a potential inflection point for India’s technology and manufacturing ambitions. The country wants to emerge as a global hub for artificial intelligence, data centres, and digital infrastructure. But industry voices are clear: capital is available—the bottlenecks now are power, approvals, and policy clarity. Here’s what the tech ecosystem is looking for this year.

AI and data centres: India’s digital backbone

India’s push toward AI, cloud, and digital public infrastructure has made data centres mission-critical. Large global players like Microsoft, Amazon, and Google have already announced multi-billion-dollar investments across AI and data-centre projects.

What Budget 2026 may address:

• Targeted incentives for AI compute and hyperscale data centres

• Faster approvals for land, power, and connectivity

• Support for domestic AI startups and compute access

Power is the biggest challenge

AI workloads are extremely power-hungry—an AI rack can consume 5–6x the power of a traditional cloud rack. This raises concerns around grid reliability, costs, and timelines.

Industry expectations:

• Affordable, reliable green power allocations

• Separate tariff categories for data centres

• Time-bound, single-window approvals for power connections

Without predictable power, long-term investments simply don’t scale.

Sustainability: no longer optional

Global customers now demand low-carbon, water-efficient, energy-optimised infrastructure. Sustainability is becoming a prerequisite, not a bonus.

Likely Budget asks:

• Tax incentives for green data centres

• Faster depreciation for energy-efficient equipment

• Support for advanced cooling technologies like liquid cooling

Miss this window, and India risks locking itself into carbon-heavy infrastructure for decades.

Data sovereignty and regulatory clarity

With stricter data localisation norms, demand for domestic data centres has surged—especially across banking, payments, and messaging. However, ambiguity around compliance and cross-border data flows slows decision-making.

What the sector wants:

• Clear, time-bound guidelines on localisation

• Predictable rules for cross-border data transfers

• Regulatory certainty to reassure global investors

Manufacturing, MSMEs, and resilient supply chains

Budget 2026 isn’t just about tech platforms—it’s also about reducing import dependence, particularly on China. Nearly 100 high-import products have been identified where domestic capacity is weak.

Key expectations:

• Cheaper credit and stronger guarantees for MSMEs

• Protection from sudden tariff shocks

• Incentives to integrate MSMEs into global supply chains

Given that MSMEs account for ~46% of India’s exports, this is a critical pressure point.

Semiconductors and rare earths: the future battle

India has made progress under its semiconductor push, but chipmaking remains capital-intensive and time-consuming. Meanwhile, despite having the world’s third-largest rare-earth reserves, domestic processing is minimal.

What Budget 2026 could deliver:

• A clearer roadmap for chip fabrication and packaging

• Incentives for rare-earth processing and magnet manufacturing

• A long-term strategy for critical minerals and supply security