The Union Budget 2026–27 has placed the digital economy and technology sector at the forefront of India’s long-term growth strategy, signalling a decisive shift towards innovation-led development. With increased funding, policy clarity and targeted reforms, the government aims to position India as a global technology powerhouse in areas such as artificial intelligence, semiconductors, cloud computing and digital public infrastructure.

Stronger Budget Support for Digital India

For FY 2026–27, the Ministry of Electronics and Information Technology (MeitY) has been allocated ₹21,632 crore, marking a steady rise over previous years. This allocation focuses on strengthening digital governance, electronics manufacturing, cybersecurity, and next-generation technologies.

The government views digital infrastructure as a core pillar of economic expansion, capable of boosting productivity across sectors ranging from agriculture to healthcare.

Artificial Intelligence Gets a Dedicated Push

Artificial Intelligence has emerged as one of the biggest focus areas in Budget 2026–27. Under the IndiaAI Mission, the government has earmarked ₹1,000 crore to develop AI compute capacity, research ecosystems, startups and real-world applications.

The objective is to integrate AI into public services, improve efficiency in sectors such as education and healthcare, and generate high-skill employment opportunities for India’s growing digital workforce.

Semiconductors and Electronics Manufacturing in Focus

Recognising the strategic importance of chip manufacturing, the budget announced India Semiconductor Mission 2.0, reinforcing India’s ambition to become a reliable player in the global semiconductor supply chain.

An outlay of nearly ₹40,000 crore has been linked to electronics components and manufacturing support schemes, aimed at reducing import dependence and encouraging domestic production of critical components.

Cloud, Data Centres and Digital Infrastructure Expansion

To support India’s fast-growing digital economy, the budget introduced incentives for data centres and cloud service providers. A proposed tax holiday up to the year 2047 for eligible cloud and data centre operations is expected to attract long-term global investments and strengthen data localisation.

In addition, simplified regulatory and tax compliance norms for IT and IT-enabled services are expected to enhance ease of doing business and improve India’s competitiveness in global technology services.

Unified Framework for IT Services

A major structural reform announced in the budget is the consolidation of IT and IT-enabled services into a single category. Software services, KPOs and contract R&D will now fall under a unified framework with a safe harbour margin of 15.5 per cent, reducing disputes and providing greater tax certainty for the IT industry.

Digital Public Infrastructure and Emerging Technologies

The government continues to invest in Digital Public Infrastructure (DPI) platforms that extend beyond payments and identity. These platforms are being expanded to sectors such as logistics, agriculture and healthcare, improving transparency and service delivery.

Emerging areas like AVGC (Animation, Visual Effects, Gaming and Comics) and creative technologies have also received policy support, recognising their potential to create jobs and drive exports in the digital economy.

Digital Economy at a Glance