Budget 2026-27 sets stage for India’s global data ambitions

The Union Budget 2026–27 has marked a decisive shift in India’s technology and digital infrastructure strategy, positioning the country as a long-term hub for global cloud services, data centres, and semiconductor manufacturing. With extended tax incentives, large-scale public investment, and regulatory simplification, the government has signalled its intent to move beyond software services and towards ownership of core digital infrastructure.

Long-Term Tax Incentives to Attract Global Cloud Players

At the centre of the Budget’s technology push is a landmark tax holiday for foreign companies providing global cloud services from Indian data centres, extended until 2047. The move is aimed at attracting hyperscalers and large global cloud providers to establish and expand operations in India. To further ease operations, the government has also introduced a 15 per cent safe harbour on costs for related-party data centre services, simplifying compliance and reducing regulatory friction.

In parallel, the Budget has allocated Rs 40,000 crore for Industrial Scientific and Medical (ISM) 2.0 under the semiconductor mission, with a focus on strengthening India’s AI hardware and chip manufacturing ecosystem. Together, these measures seek to address longstanding gaps in capacity, capital, and supply chains that have constrained the sector’s growth.

Industry Sees Boost for Data Centres and Investment Flows

Vinish Bawa, Leader Telecom at PwC India, said the Budget lays the foundation for India’s emergence as a global data capital.

“Union Budget 2026 positions India as a global data capital,” Bawa said. “The tax holiday until 2047, the 15 per cent safe harbour for compliance, and the Rs 40,000 crore allocation for ISM 2.0 will help bridge the capacity gap and accelerate capital-intensive investments. The net impact will be faster capacity addition, stronger global capital inflows, and sharper positioning for India as a scalable and cost-competitive data centre hub.”

Enabling Cross-Border Digital Operations

Industry leaders say the measures also reflect the government’s growing focus on enabling cross-border digital operations and cloud-driven business models.

Harishanker Kannan, CEO and Co-founder of Scalefusion, noted that the Budget reinforces India’s ambition to become a global digital powerhouse.

“With a strong focus on IT services, data centre expansion, cloud adoption, and cross-border digital operations, the Budget clearly reinforces India’s ambition to emerge as a leading global technology hub,” Kannan said. “Policies encouraging cloud innovation and strategic infrastructure will lay the foundation for faster adoption of secure and scalable digital solutions by enterprises worldwide.”

He added that the evolving policy environment creates opportunities for organisations managing distributed teams and devices to build resilient and compliant IT systems at scale.

From Services to Sovereignty: A Strategic Pivot

Beyond infrastructure and investment, analysts view the Budget as part of a broader strategic repositioning of India’s technology sector.

Jaideep Ghosh, management consultant and former partner at KPMG in India, described the Budget as a turning point in India’s digital journey.

“Union Budget 2026–27 is a definitive ‘Maturity Budget’ that pivots Indian technology from a narrative of service to one of sovereignty,” Ghosh said. “We are moving beyond writing code for the world to owning the compute, silicon, and energy that powers it.”

Ghosh called the data centre tax holiday a “geopolitical masterstroke”, arguing that it would encourage global hyperscalers to host data locally and strengthen India’s push for sovereign artificial intelligence.

“By incentivising global players to host data in India, the government has laid the bedrock for true Sovereign AI,” he said.

He also highlighted the Budget’s emphasis on managing structural constraints rather than announcing short-term initiatives.

Focus on Supply Chains, Skills, and Long-Term Certainty

“The Rs 40,000 crore outlay for Semiconductor Mission 2.0, the creation of rare earth corridors, and the Education to Enterprise and Employment Committee reflect a focus on securing supply chains, building talent, and expanding AI applications,” Ghosh said. “Technology is being treated as the economy’s horizontal spine, not just another sector.”

By locking in long-term fiscal certainty and combining infrastructure investment with regulatory reform, the government aims to reduce India’s dependence on foreign digital infrastructure while improving its attractiveness to global capital.

Execution Will Be the Next Test

Taken together, the Budget’s proposals reflect a long-term vision aimed at strengthening India’s position in cloud, AI, and semiconductor manufacturing. However, industry experts caution that timely execution, policy stability, and coordination between central and state governments will be critical.

While challenges remain, Budget 2026–27 is widely seen as one of the most comprehensive efforts so far to place India at the centre of the global digital economy.