Budget 2026: Software firms, cloud players seek AI industrialisation, push for sovereign infra

• Industry urges Budget 2026 to scale AI, resolve cloud tax, and boost tech exports
• Leaders seek more funding, incentives for AI, data centers, next-gen tech
• Startups seek affordable compute, quicker approvals, and outcome-based procurement.

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As the Union Budget 2026 approaches, India’s software and technology industry is sharpening its demands, calling on the government to move AI from pilot projects to industrial-scale deployment, resolve tax and policy bottlenecks around cloud and data centres, and enable a shift toward higher-value technology exports.

These demand, the industry said are critical to sustaining growth as global tech spending tightens and competition intensifies.

Industry leaders Moneycontrol spoke to also said the last few Budgets have laid the groundwork through production-linked incentives (PLIs), startup funding, and flagship programmes such as IndiaAI and the Anusandhan National Research Foundation (ANRF). Budget 2026, they argue, must focus on execution at scale.

The demands come in as Moneycontrol also reported that the budget for the financial year 2026-27 is likely to prioritise artificial intelligence and data centres, as the government is keen to attract "far more" global investment in the AI-ecosystem.

Also Read: Budget 2026 may offer incentives to attract more global investment in AI

From signalling to scale

“The last few Union Budgets have seen the Government of India move decisively from signalling a technology-led growth agenda to deploying concrete instruments for on-ground execution,” Siddharth Tipnis, partner and technology sector leader at Deloitte India, told Moneycontrol.

Tipnis said the industry now expects larger, multi-year allocations and sharper execution.

“There is a clear need for enlarged funding envelopes for on-shore component manufacturing, increased allocations for EMC 2.0, and continued operational funding for the Startup India Seed Fund. Public procurement quotas for Indian startups can meaningfully improve demand certainty,” he said.

He added that programmes such as ANRF and IndiaAI require “larger, multi-year allocations with a sharper focus on activating spends on the ground,” alongside a stronger push for the National Data Centre Policy, including long-term tax exemptions and incentives for green, AI-ready data centres.

AI industrialisation, not demos

A key industry ask is to shift AI from experimentation to industrialisation.

Sameer Dhanrajani, CEO of 3AI, said Budget 2026 must reflect that transition.

“India’s AI focus needs to move from experimentation to industrialisation across business sectors,” Dhanrajani told Moneycontrol. “This requires significant government investment in sovereign AI cloud and large language models, data and computing centres, AI R&D, and new-age talent development, alongside clear AI regulations and guardrails.”

He added that AI spending should be tied directly to productivity. “AI’s contribution needs to be linked with productivity enhancement and tied to GDP output through rapid-scale agentic AI deployments,” he said.

Cloud, data centres and tax clarity

Tax certainty around cloud and data infrastructure has emerged as another major demand, echoed in the pre-Budget memorandum of Nasscom.

India’s data centre industry is attracting large domestic and foreign investments, but industry executives flag uncertainty around international taxation.

Foreign cloud providers often rely on Indian data centres owned and operated by Indian companies, which already pay tax on arm’s length margins.

However, Nasscom has flagged instances where standard hosting or colocation services are being viewed as creating a taxable presence for foreign providers.

Clear guidance distinguishing ordinary hosting from cases where infrastructure is at the disposal of non-residents would align practice with Supreme Court principles and give confidence to future investments in AI and data infrastructure, the industry body has said.

Exports and next-gen capabilities

Raja Lahiri, partner and technology industry leader at Grant Thornton Bharat, said Budget 2026 can accelerate India’s shift from traditional outsourcing to innovation-led growth.

“With tech exports already at $224 billion and domestic demand expanding steadily, we need a sharper policy focus on commercialising R&D, funding next-generation digital capabilities, and building a resilient cloud and data-centre backbone,” Lahiri told Moneycontrol.

He said investment-linked incentives for high-performance computing, renewable-powered data centres, and AI engineering will be critical as workloads surge. “Equally important is a national skilling architecture aligned with emerging roles in cloud, cybersecurity, and product engineering,” he added.

What AI startups need most

From a startup perspective, access to infrastructure matters more than headline announcements. Anand Mahurkar, CEO of Findability Sciences, said affordable compute and data remain the biggest bottlenecks.

“The most effective thing the Budget can do is make compute and high-quality datasets easily accessible,” Mahurkar told Moneycontrol. “Talent already exists. Innovation already exists. What slows teams down is access to affordable, reliable compute and usable data.”

Mahurkar said the Budget should incentivise applied AI—solutions that improve productivity, reduce costs, or enhance public services—rather than focusing only on research demos. He also called for faster and more predictable approvals for data centres and AI infrastructure to unlock private investment.

On funding, Mahurkar said non-dilutive support such as grants or compute credits, long-term tax incentives, and government procurement that converts pilots into scaled deployments would have the biggest impact. “AI startups don’t just need funding. They need customers and reference wins,” he said.

He added that public-sector procurement needs redesign.

“Applied AI solutions are outcome-driven systems embedded in real workflows. If the Budget introduces outcome-based procurement with clear pilot-to-scale pathways, government AI adoption will accelerate dramatically.”