From Foundation to Action: India’s Shifting AI Budget

Prompt engineering, deep learning and GenAI are no longer futuristic buzzwords but a central pillar to every nation’s economic strategy. The Government of India’s last few Union Budgets reveal a calculated, multi-year roadmap designed to democratise AI, build sovereign compute capacity, and bridge the digital divide. India is no longer just a consumer of technology but positioning itself as a global domain architect. This policy shift is expected to reflect more conspicuously in the upcoming Union Budget 2026-27, moving on from policy signalling and ‘preparations’ for AI boom.

2024 to 2026: Infrastructure and Capacity Building

The Union Budget 2024-25 marked a watershed moment for the sector with the formalisation of the IndiaAI Mission, backed by a massive five-year outlay of ₹10,372 crore. The 2024-25 budget laid the "hardware" foundation by focusing on the IndiaAI Compute Pillar. This initiative aimed to establish a high-end computing facility equipped with over 10,000 GPUs (later scaled to a target of 38,000), providing startups and researchers with subsidised access to the raw processing power required to build Large Language Models (LLMs).

In the 2025–26 Union Budget, AI commitment escalated significantly. To begin with, the IndiaAI Mission’s allocation increased sharply to ₹2,000 crore, more than a tenfold rise. Further, the funding expanded to AI-linked programmes, taking the overall AI-related spending to reportedly exceed ₹4,300 crore. The Government further deepened its commitment by expanding the IndiaAI Mission’s scope into essential social sectors, most notably through the announcement of a new Centre of Excellence for AI in Education with a dedicated ₹500 crore allocation. This marked a clear policy progression from building infrastructure in 2024–25 to actively supporting AI research, sectoral expansion, and public-private innovation ecosystems in 2025–26.

Budget 2026–27: Expectations and Realities

Looking ahead to Budget 2026–27, the general sentiment is that the Government will now take the AI vision to its next phase, shifting from digital public infrastructure like UPI and Aadhaar to specialised AI systems. Indian businesses have reportedly argued this is essential for competitiveness and economic growth.

While continued emphasis is expected on integrating AI more deeply into public service delivery and economic platforms, increasing support for AI-led financial and compliance systems, healthcare, education, and governance at scale.

However, each year, the Budget just about falls short of an execution-centric support, such as regulatory clarity, incentives for enterprise AI adoption, and real-world deployment. This year’s Budget is a chance for the Government to finally go that extra mile.

Awaiting the AI Breakthrough Moment

Despite the "right direction" momentum, certain gaps remain. First, while the government has been successful in creating DPIs, the private sector's investment in fundamental R&D is still behind global peers like the US and China. The ₹1 lakh crore Anusandhan National Research Foundation announced in 2024 is a start, but its translation into private-sector AI breakthroughs is yet to be seen.

Second, hardware sovereignty remains a challenge. While the budget encourages domestic semiconductor manufacturing, India remains heavily reliant on imported GPUs for its AI missions. Accelerating the "Indigenous GPU" project is critical to avoiding future supply chain vulnerabilities.

While the Union Budget has successfully transitioned AI from a peripheral tech topic to a headline economic priority, incentivising private R&D and reducing hardware dependency will remain key, to keep up with the global AI race. Even if the allocation trends align with India’s broader digital transformation goals, the true test for 2026–27 will be whether policy and budgets translate into measurable public and private value, underpinned by responsible, secure, deployable and scalable AI systems.