GLOSSARY: The Unsung AI of Budget 2026

AI models, data centres, semiconductors, tax relief and healthcare get funded.‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

The Unsung AI of Budget 2026

THE BELAMY

Weekly Newsletter of AIM

Monday, Feb 2, 2026 | By Mohit Pandey

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AI models, data centres, semiconductors, tax relief and healthcare get funded. Startups get signals. The big bang announcements stay conspicuously absent.

The Union Budget 2026 did not try to sound futuristic. It tried to look practical.

There were no grand promises of India becoming the world's AI capital overnight. No dramatic semiconductor mic-drop. No startup SOPs masquerading as reform. Instead, the government placed a series of small, structural bets across AI infrastructure, cloud, healthcare manufacturing, electronics supply chains, IT taxation, skills and education.

On their own, each looks fairly modest. Together, they quietly redraw the operating environment for Indian tech and manufacturing for the next 10 to 20 years.

The IndiaAI Mission Stays Steady, Not Flashy

The headline number is ₹1,000 crore for 2026-27.

Last year, the allocation was ₹2,000 crore, but actual spending was revised down to ₹800 crore. This year's message is discipline over expansion.

The mission still targets compute infrastructure, datasets, startups and 12 foundational models sized between 50 and 120 billion parameters. The goal is still affordable domestic AI services.

What's notable is the pacing. The government is matching spending to execution. It does not want another under-utilised corpus. For startups, this likely means slower cheques but projects that are better thought through.

Data centres get the longest tax runway in the Budget

The boldest fiscal lever this year is in cloud infrastructure.

Foreign cloud companies using Indian data centres to serve global clients are handed a tax holiday all the way till 2047. That is more than two decades of visibility.

If they want to serve Indian customers, there's a catch. They must do so through an Indian reseller.

A 15% safe harbour on cost is provided for related party data centre services. Electronics component warehousing in bonded zones is taxed at a thin 2% margin, translating to an effective tax of roughly 0.7%.

Non-residents supplying capital goods or tooling to toll manufacturers get a five-year income tax exemption. Foreign experts are exempt from tax on non-India-sourced income for five years as well.

The message is clear: Bring capex. Bring skills. Park infrastructure here.

Semiconductors Move From Fabs to Ecosystem Depth

Phase one of the India Semiconductor Mission (ISM) was about attracting fabs. Phase two is about everything around them.

ISM 2.0 will focus on equipment, materials, design IP, research centres and workforce.

The electronics components scheme outlay jumps from ₹22,919 crore to ₹40,000 crore. Rare earth corridors will come up in Odisha, Kerala, Andhra Pradesh and Tamil Nadu. Three chemical parks will run on a plug-and-play model. Two high-tech tool rooms will locally design and manufacture precision parts.

None of this is glamorous in the way a new fab announcement is. But it is far more durable. Without these layers, fabs struggle to survive.

The only soft spot is funding clarity. The ecosystem logic is sound. The money, for now, still looks cautious.

AIM Network>>

AIM was live through Budget day, tracking announcements focusing on AI, data centres, semiconductors, and healthcare. We hosted a steady stream of voices, including partners from Deloitte, startup founders from the IndiaAI Mission ecosystem, and economic experts, to analyse the Budget and what it really means for the country going forward.

The AI Foundry by Tredence in Chennai: A Workshop for Builders of Real-World AI

The AI Foundry hosted by Tredence, in association with AIM, is heading to Chennai. On February 7, senior AI and data science professionals will gather for an invite-only developer workshop focused on one question that matters right now: How to move from experimenting with AI to actually building systems that work in the real world? Click here to register now.

Healthcare Becomes Manufacturing Policy

Healthcare arrived with a blueprint this year. Biopharma Shakti gets ₹10,000 crore over five years to build domestic capacity in biologics and biosimilars. Three new pharma research institutes will be created, while seven existing ones will be upgraded. Moreover, a thousand clinical trial sites will be accredited nationwide.

The country plans to train 1.5 lakh caregivers in one year. Allied health institutions will add one lakh professionals across fields like radiology, anaesthesia, behavioural health, and operation theatre technology.

Five regional medical value tourism hubs will bundle hospitals, research, AYUSH, diagnostics and rehabilitation into integrated clusters.

As many as 17 cancer drugs get customs duty exemption, while seven rare diseases get import duty relief. Assistive technology also gets a boost through support to the Artificial Limbs Manufacturing Corporation of India with AI integration and retail-style assistive marts.

Agritech AI goes local with Bharat VISTAAR

The government will launch Bharat VISTAAR, a multilingual AI advisory system that integrates Agri Stack databases with crop science packages and delivers region-specific guidance directly to farmers. The aim is to improve yields, reduce risk, and make advice local.

Farmers receive crop-specific suggestions, weather inputs and production decisions in their language. Alongside this, the Budget pushes livestock, dairy and poultry modernisation, and strengthens value chains led by farmer-producer organisations.

Indian IT finally gets what it asked for: certainty.

The compliance maze for software exporters has been simplified.

All software development, IT-enabled services, KPO and contract R&D now fall under one category: Information Technology Services. One safe harbour margin of 15.5% applies across the board.

The eligibility threshold jumps from ₹300 crore to ₹2,000 crore. Approvals move to automation. The same safe harbour can run uninterrupted for five years. Unilateral APAs are targeted to close within two years, with a six-month extension.

For IT firms, this is a major win. Less litigation, less officer interaction, more predictability. In a sector that thrives on thin margins and global contracts, certainty is often more valuable than incentives.

MSMEs, Design, and Skills Get Spread Bets

Two hundred legacy industrial clusters will be upgraded. A ₹10,000 crore SME Growth Fund is set to back future champions. The Self Reliant India Fund gets another ₹2,000 crore.

The animation and gaming industry gets formal backing through the Indian Institute of Creative Technologies labs in 15,000 schools and 500 colleges. A new design institute will come up in eastern India.

Add that to five university townships near industrial corridors, one girls' hostel per district, a national hospitality institute, and a tourism skills push complete the talent pipeline. This is long-cycle capacity building.

This Budget avoids theatrics. Instead of announcing the next trillion-dollar dream, it funds pipes, parks, corridors, clinics, clusters, data halls and classrooms.

Nothing screams. Everything stacks.

Budget 2026 didn't just attract global AI players, it expanded the AI and cloud market without picking winners—making India globally competitive while strengthening sovereign Indian cloud, AI/GPU compute and data-centre operators at the core of this ecosystem.

Simulated Reality Podcast >>

Join us for an exclusive interview with Andy Logani, executive vice president and chief digital and AI officer at EXL, a global data and AI company. Andy details EXL's 25-year journey from a business process operations company to a data and AI powerhouse, with 55% of its revenue now stemming from data and AI.