Industry Experts Want Budget 2026 to De-Risk India’s Tech Growth

Ahead of the Union Budget on February 1, technology-driven sectors have outlined their expectations around regulations, tax concessions, and R&D incentives, calling for structural reforms rather than piecemeal schemes that offer limited uplift to the ecosystem.

While domestic AI growth has remained relatively resilient, it continues to be shaped by global economic volatility and geopolitical tensions. As the Economic Survey notes, “fragility, uncertainty and episodic shocks are increasingly structural features of the system.” The surge in leveraged AI infrastructure investments has further exposed fragile business models, raising concerns about tighter financial conditions, heightened risk aversion, and constrained capital flows if global sentiment turns sour.

Despite these headwinds, industry stakeholders argue that Budget 2026 must prioritise long-term competitiveness and innovation capacity over short-term insulation. Here is what the different technology sectors expect from the Budget.

Startups

Entrepreneurs and investors say that while personal tax relief and consumption-led measures may dominate popular attention, the real test of Budget 2026 lies in how it treats technology, manufacturing, and innovation as economic infrastructure. Founders are calling for the restoration of the 200% weighted tax deduction for R&D, particularly for deep-tech startups with long development cycles and delayed revenue realisation. Without such support, they warn, India risks remaining an AI consumer rather than an AI creator.

Access to computing is another major concern. Startups have urged the government to introduce a national compute credit scheme and offer a three- to five-year customs duty holiday on critical AI hardware, such as GPUs and TPUs. Without affordable access to the physical backbone of AI, founders argue, Indian startups will remain structurally disadvantaged despite strong talent availability.

Regulatory coordination is also under scrutiny. Founders believe that aligned frameworks across SEBI, RBI, and IFSCA could unlock long-term capital from global pension funds and sovereign wealth funds, while allowing Indian startups to retain intellectual property and strategic control. Without predictable regulatory pathways, investors warn that India risks generating innovation domestically while exporting economic value abroad.

Agritech founders echo similar concerns around execution. They point to near-farm infrastructure, such as micro-warehousing and scientific storage, as interventions that have already improved farmers' incomes and reduced distress sales. Data access remains sensitive but critical, with calls for structured, anonymised data-sharing frameworks that balance privacy with legitimate innovation needs.

Fintech

Fintech leaders expect Budget 2026 to reflect the sector’s expanding role in credit delivery, financial inclusion, and digital public infrastructure. Industry stakeholders see an opportunity to deepen capital access for startups and MSMEs while strengthening responsible lending practices and trust in digital finance.

Founders advocate for regulatory sandboxes in collaboration with SEBI and targeted tax incentives for wealth-tech startups to encourage experimentation under regulatory oversight. Investors, however, argue that India’s funding needs have moved beyond a purely equity-led model. While venture capital played a critical role in the early stages, they say the focus must now shift to blended capital structures and cash-flow-aligned credit.

Policy emphasis, investors add, should be on execution rather than announcements. Stronger risk-sharing mechanisms could help MSMEs and growth-stage startups access flexible, non-dilutive capital that supports sustainable scaling instead of short-term growth. Industry leaders have also called for a dedicated Budget allocation towards cybersecurity for digital finance platforms, including shared threat intelligence frameworks and stronger safeguards.

Digital Infrastructure

Industry leaders want Budget 2026 to treat data centres and AI infrastructure as strategic national assets rather than just physical facilities. With India’s data centre capacity projected to reach 1.7 GW this year, they say the focus must shift from “housing hardware” to “powering intelligence”.

Key demands include a production-linked incentive for compute, with priority for indigenous cloud platforms, complete GST input tax credit for data centre capital assets, and customs duty waivers for critical imported equipment. Compute-credit schemes for startups, universities, and research institutions are also seen as essential to accelerating domestic AI innovation.

The sector is hopeful that the government will expand centres of excellence, building on last year’s Budget, which allocated ₹500 crore to establish an AI centre of excellence for education. Leaders argue that sustained infrastructure investment is necessary if India wants to move up the AI value chain rather than remain dependent on foreign platforms.

IT Services

IT industry players argue that tax frameworks have failed to keep pace with cloud computing, remote software delivery, and globally distributed workforces. This disconnect, they say, is increasing litigation risk, complicating cross-border operations, and distorting contract pricing.

One key area of concern is the Significant Economic Presence framework. Industry bodies such as Nasscom have sought clearer attribution parameters, exclusions for payments already classified as royalties or fees for technical services, and a nominal withholding tax when income becomes taxable solely due to SEP. Nasscom has also recommended expanding SEZ reinvestment reserves to include cloud infrastructure, software subscriptions, leased technology assets, and training expenditure.

Additional asks include clarity that hosting or colocation services do not automatically create a permanent establishment for foreign cloud providers, a safe harbour regime for AI exports, and greater flexibility in foreign tax credit rules to prevent double taxation as Indian firms expand overseas.

Deep tech/Semiconductors

Semiconductor leaders stress that India must move beyond capacity creation to sustained manufacturing outcomes. Incremental funding alone, they argue, will not suffice without sharper procurement rules, tax reform, and ecosystem support spanning talent, infrastructure, and early demand.

A key proposal is positioning the government as an anchor customer by mandating public procurement from startups with significant indigenous content. Founders also point to unresolved concerns around ESOP taxation, procurement access, and indirect taxes. Aligning quality standards and recognising certifications across markets could also help Indian-made products meet global requirements more quickly and cut qualification timelines.

GCCs

Global capability centre (GCC) leaders are calling for a unified national framework that brings together manufacturing, startups, GCCs, outsourcing, and services. Instead of fragmented policies, they propose a dedicated central body to ensure coordination and continuity across central and state governments.

They argue that lessons from STPI, SEZs, and manufacturing-led zones should converge into a digital economic zone where research, manufacturing, services, AI, power, and infrastructure coexist. Tax neutrality for global R&D conducted in India remains a key expectation.

Edtech

Edtech leaders are seeking measures to improve affordability as AI skilling becomes central to employability. One of the sector’s biggest pain points remains taxation, with most online courses attracting 18% GST. Industry players argue that reducing GST on skilling programmes to zero, or at least to 5%, is essential to scaling access, particularly for early-career learners, gig workers, and tier-2 and tier-3 markets.

They also urge higher public investment in education, reiterating the long-standing demand to raise education spending to 6% of GDP. Increased allocations, they say, should prioritise digital infrastructure, public-private skilling partnerships, teacher training, and underserved geographies, while allowing private and hybrid education players to scale responsibly and deliver outcomes.