‘Budget makes digital infra a national priority’: What are experts saying on India’s semiconductor, data centre push?

With the Union Budget 2026, Union Finance Minister Nirmala Sitharaman made it clear that digital infrastructure remains a national priority, according to experts.

Even as the markets fell to their lowest in seven years, stocks of the digital ecosystem —data centres, artificial intelligence (AI), and technology companies— soared on the Budget Day and in subsequent days as Sitharaman proposed incentives and regulatory clarity.

Firstly, Sitharaman proposed that foreign companies setting up data centres in India for services to customers abroad would not pay any income tax till 2047.

Secondly, Sitharaman proposed a ‘safe harbour of 15 per cent’ on cost in case the company providing data centre services from India would be a related party.

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The Budget's proposals strengthened India's goal of becoming a global center for cloud, AI, and data-led services and makes digital infrastructure a national priority, marking a significant step toward expanding the digital economy, drawing in international investment, and producing skilled jobs, according to Sachin Tayal, Managing Director, Protiviti India.

Investors responded positively and data centre, AI, and tech-related stocks rose on the Budget Day — and have continued to be in the green since.

AI, data centre, and tech stocks have risen since the Budget Day

(Source: Perplexity Finance)

Experts said the investors' confidence has increased as Sitharaman's proposals incentivised the setting up of data centres in India, provided regulatory and compliance clarity, and conveyed the government’s push for India to be the global back end for cloud and AI services — and not remain a consumption market.

The budget recognises that AI leadership is built on infrastructure and investments that the Budget encourages in data centers and digital foundations will help Indian enterprises move from AI pilots to large-scale, production-grade adoption, according to Dhrubobrata Ghosh Dastidar, MD at Protiviti India.

'Policy intent now needs to be matched with execution'

Now that the Union government has rolled out proposals, the industry needs to match the policy intent with execution, according to Tayal.

"Companies must strengthen their operating models, manage risks better, use technology responsibly, and also invest in cybersecurity and compliance. Companies that will combine growth with resilience and strong governance will be best equipped to compete on a global scale and make a significant contribution to establishing India's long-term economic leadership," Tayal told Firstpost.

In the Budget, the focus also remained on citizen-centric approach on AI.

India's AI strategy prioritises diffusion of AI for the common person, focusing on use cases in healthcare, agriculture, education and government services, including multilingual and multimodal interfaces for citizens, Bharath Reddy, an Associate Fellow with the High-Tech Geopolitics Programme at Takshashila Programme, noted in an analysis.

All 11 mentions of AI in the budget speech refer to use cases across governance, agriculture, accessibility, education, and skilling, noted Reddy.

Dastidar said that the Budget showed that India’s semiconductor ambition is now matured. He added the focus is no longer just on attracting fabs, but on building a complete ecosystem spanning design, advanced packaging, and resilient supply chains.

But experts also flagged areas where progress has been slow and budgetary spending has not matched allocation.

In her Technopolitik newsletter, Takshashila's Anwesha Sen noted that while chip assembly and testing have been proceeding well in India's semiconductor ecosystem, and the steady rise in disbursements in absolute terms indicates on-ground progress, the budgeted outlay for a fab shows a muted picture.

Despite the budgeted allocations for the Dholera fab in financial year 2024 and '25, nothing was disbursed, and the revised estimate in FY 26 are also substantially lower than the budgeted allocations.

Thus, it indicates that the project is progressing much more slowly than the government’s own projections, according to Sen.

Similarly, efforts to modernise the government-owned research and development fabrication unit in Mohali did not see much success as virtually nothing has been spent yet despite allocating money for it in several budget, according to the analysis.