Finance Minister Nirmala Sitharaman, in Union Budget 2026, has proposed a corpus of ₹1,000 towards Artificial Intelligence (AI) through IndiaAI Mission
for FY 2026-27, which is half the proposed outlay of the previous year but up ₹200 crore crore from revised estimates.
In the Budget, the finance minister revised last year's ₹2,000 crore allocation to ₹800 crore (RE) not withstanding the strategic importance AI has come to command across businesses, defence, and national security. .
The budget will be funneled through the IndiaAI Mission, the country's flagship initiative aimed at positioning India as a global leader in the AI.
However, the Finance Minister has proposed that companies using services of data centres based in India be given tax holiday till 2047.
Also Read: India AI Impact Summit 2026 gets global response, over 200 AI models to be launched: Ashwini Vaishnaw
Finance Minister Sitharaman’s allocation to the AI this year also reflects the government’s strategic focus. This comes just months after India adopted its first AI governance framework in November 2025 with the India AI Governance Guidelines as did the US and China over the past year with the global race for AI dominance heating up.
In the Economic Survey released on January 29, the Chief Economic Advisor V Anantha Nageswaran flagged concerns of AI power lying with concentrated few but said bridging the gap with public funding would be too costly.
Also Read: Economic Survey 2026 warns of uncertainties as India attempts to solve AI-labour puzzle
The AI found its first mention in a Union Budget speech in 2018. To be sure, AI was mentioned exactly three times and although the government did not have a dedicated allocation to AI, then-Finance Minister Arun Jaitley had signalled India’s intent to lead in AI and mandated NITI Aayog to establish a national programme to carry out research on AI and its applications.
The major shift from AI research and slogans calling on making the AI work in India to real and practical focus came in July 2024 when the AI got a dedicated budget under the IndiaAI mission with an allocation of ₹551.75 crore. All funding prior to that was integrated in larger buckets for technology.
Aditya Khemka, Managing Director, Aditya Infotech Ltd (CP PLUS), said, "The government’s emphasis on artificial intelligence reflects a move from experimentation to real-world, mission-critical deployment."
"As AI becomes central to public safety, surveillance, and smart infrastructure, this Budget lays the foundation for scalable, secure, and responsible adoption across the country," Kemka added.
