The Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman, sets a forward-looking framework to drive transformative growth in India’s electronics, information technology, and artificial intelligence sectors. The Budget introduces measures to strengthen AI data centres, semiconductor manufacturing, and IT services, positioning India as a global hub for digital infrastructure, innovation, and high-tech investments.
AI data centres are a central focus of the Budget, with investments of around US$70 billion already underway and announcements totalling US$90 billion. To encourage long-term investment, a tax holiday until 2047 has been proposed for foreign companies providing global cloud services via Indian data centres, with services offered to Indian customers routed through local reseller entities and a 15% safe harbour on costs for related entities. These measures aim to boost India’s AI research capabilities, attract top global talent, and establish the country as a leading destination for AI and cloud infrastructure.
The Budget also launches India Semiconductor Mission (ISM) 2.0, building on the foundation laid by ISM 1.0. ISM 2.0 focuses on producing semiconductor equipment and materials, developing Indian intellectual property, and strengthening supply chains. It emphasizes industry-led research, training centres, and talent development, with an allocation of Rs.1,000 crore for FY 2026-27. By fostering innovation clusters and encouraging partnerships with global semiconductor leaders, ISM 2.0 aims to deepen India’s semiconductor capabilities and enhance its competitiveness in advanced technology.
The Electronics Components Manufacturing Scheme (ECMS), which began in April 2025, has already attracted double the initial investment target. The Budget increases the scheme’s outlay from Rs.22,000 crore to Rs.40,000 crore, supporting domestic electronics manufacturing and strengthening India’s broader technology ecosystem. This enhanced allocation is expected to accelerate the production of critical components and attract further domestic and foreign investment.
India’s IT services sector, the country’s largest export segment with over US$220 billion in exports, will also benefit from the Budget’s reforms. New safe harbour provisions group all IT and IT-enabled services under a single category with a 15.5% common margin. The eligibility threshold has been raised to Rs.2,000 crore, with approvals processed automatically, and the safe harbour extended for up to five years. Additionally, the Unilateral Advance Pricing Agreement process will be expedited, simplifying compliance and enhancing global competitiveness for IT enterprises.
Overall, Budget 2026-27 aims to strengthen India as a global hub for AI, data centres, semiconductor manufacturing, and IT services. By fostering innovation, skill development, and investment, the Budget supports a sustainable digital economy and reinforces India’s vision of combining technology, talent, and investment to drive long-term economic growth and global competitiveness.
