Budget 2026-27: Five signals for India’s digital infrastructure shift

Delivering her 85-minute-long Budget 2026–27 speech on Sunday, Finance Minister Nirmala Sitharaman did not mention “telecom” for once, even though she placed digital infrastructure at the centre of India’s investment-led growth strategy.

At first glance, the budget appears restrained on technology announcements. There is no single flagship telecom scheme, no dramatic artificial intelligence (AI) outlay, and no reform package for networks. However, a closer look reveals five important signals about how India plans to develop its digital, telecom, and computing backbone over the next decade.

Like the rest of the budget—focused on three kartavyas or key duties—the announcements for the technology and digital infrastructure sector are less about specifics and more about setting direction, priorities, and structure.

For telecom operators and network vendors, however, the implications are substantial, even in areas where the budget does not specifically address industry concerns.

AI: From Pilots to Population-Scale Platform

If the world is gravitating towards AI, can India be behind? In fact, it is the one technology thread that quietly runs through the budget—not as a headline-grabbing sector, and certainly not as a big-ticket allocation, but as an enabling layer that can drive everything from governance to service delivery.

Reflecting the Economic Survey 2025–26, the budget adopts a “bottom-up, application-focused” approach, focusing on solving real-world problems in sectors such as health, agriculture, and education, rather than attempting to build massive, capital-intensive frontier models.

The launch of Bharat-VISTAAR, a multilingual AI system meant for integrating AgriStack and ICAR data, is a case in point. This demonstrates the government’s intent to implement AI directly in public service delivery, especially in rural and agricultural sectors where reach and reliability are as important as sophistication.

This is also evident from the proposed Education-to-Employment and Enterprise Standing Committee, which will assess how emerging technologies, including AI, will reshape jobs, skills, and curricula. The mandate links AI adoption to workforce transformation and employability, both of which rely on connectivity, cloud access, and robust digital infrastructure.

From a telecom sector perspective, this suggests increasing demand for low-latency networks, rural broadband, and edge-capable infrastructure, even if these needs are not explicitly stated in the budget.

Data Centre: The New Strategic National Asset

One of the most consequential technology signals in the budget relates to data centres, with the Finance Minister referring to them seven times during her speech. However, the emphasis is reflected more in the tax proposals aimed at attracting investment than in direct technology announcements.

The government’s proposal to offer a tax holiday until 2047 for foreign companies providing global cloud services using data centres located in India marks a strategic repositioning of data centres as sovereign digital infrastructure.

This approach is reinforced by a 15% safe-harbour provision for resident entities providing data centre services to related foreign companies offering cloud services outside India. Together, these measures aim to make India a competitive base for global cloud and AI workloads.

For telecom operators, the opportunity may be indirect, but it is significant, as large-scale data centres and AI compute facilities depend heavily on dense fibre networks, resilient backhaul, high-capacity transport layers, and edge connectivity.

Interestingly, while the budget proposes incentives for investment in data centres, it stops short of formally positioning telecom operators as strategic partners in this ecosystem. Their role is assumed rather than defined, leaving open questions about how network investments will be incentivised alongside compute infrastructure.

Semiconductor: From Policy Shifts to Ecosystem Depth

After years of focusing on fabs and manufacturing incentives, Budget 2026–27 suggests that India’s semiconductor policy is entering a more mature phase.

With the announcement of India Semiconductor Mission 2.0, the government has signalled a shift from a narrow manufacturing lens to a broader ecosystem approach. The focus now extends beyond fabrication to include equipment and materials manufacturing, full-stack Indian intellectual property, and industry-led research and skilling centres.

This ecosystem-oriented thinking is reinforced by the expanded outlay for electronics components manufacturing and the proposal to establish rare-earth corridors across mineral-rich states.

For telecom networks and data centres, the implications are long-term and structural, as network equipment, optical systems, and compute infrastructure are becoming increasingly chip-intensive.

Supply-chain resilience and cost competitiveness will therefore depend not just on final assembly, but on access to domestic design capabilities, materials, and specialised components. As indicated in the Finance Minister’s speech, this reflects an understanding that digital infrastructure sovereignty cannot be separated from semiconductor depth.

Infrastructure: Spending Turns Digital-First Model

On paper, the budget’s push for infrastructure looks familiar—higher capital expenditure and continued investment in transport, logistics, and urban development. However, a significant shift is underway.

The budget proposes raising public capital expenditure to Rs 12.2 lakh crore for 2026–27, maintaining momentum across transport, logistics, urban development, and connectivity. What is changing, however, is the character of infrastructure itself. Initiatives such as City Economic Regions, AI-enabled customs scanning, integrated digital clearance systems, and software-driven logistics platforms point towards data-centric, network-dependent infrastructure.

Traditionally physical projects such as freight corridors, waterways, and urban transport are increasingly being designed with stronger digital coordination, platform-led oversight, and intelligent control systems. This highlights a structural shift in demand.

Future infrastructure investment will therefore require deep fibre penetration, edge computing, secure networks, and high-capacity telecom backbones, even if these needs are not always explicitly stated in the budget.

The Convergence: Services, Telecom, Tech Exports

The budget consolidates IT services, IT-enabled services, knowledge process outsourcing, and software R&D into a single category with a higher safe-harbour threshold, formally recognising the convergence of software, services, and deep technology.

Similarly, incentives for bonded warehousing, toll manufacturing, and global cloud services reflect a clear effort to align electronics manufacturing, digital services, and data-centre-led exports.

This convergence presents telecom operators and network vendors with a strategic opportunity. As enterprises and governments shift towards platform-based delivery models, connectivity alone will not be sufficient.

Success will depend on evolving towards infrastructure-as-a-service and platform-adjacent roles, supported by policy frameworks that recognise this transition.

What Budget 2026-27 Means for Telecom Operators?

Although the budget places AI, data centres, and semiconductors at the centre of India’s digital strategy, telecom is positioned more as an enabler than as a vertical receiving targeted policy attention.

The government has proposed increasing the outlay for the telecom sector to Rs 73,990 crore, nearly 40% higher than last year’s revised estimates. Most of this increase, however, is allocated to BSNL for spectrum costs, network rollout, BharatNet implementation, and internal capital requirements.

According to PTI, Telecom Minister Jyotiraditya Scindia described this allocation as an effort to strengthen BSNL’s operational and financial position, particularly in rural broadband and domestic network deployment. This emphasis on the public-sector operator is notable as the broader industry continues to face structural challenges.

The government projects telecom sector revenues of Rs 1.17 trillion in 2026–27, lower than the revised estimates for 2025–26. This reflects continued financial pressure on operators, including the impact of converting Vodafone Idea’s spectrum dues into equity, which limits adjusted gross revenue-linked inflows for the next decade.

Licence fees and spectrum usage charges, set at 8% of AGR for telecom operators, remain the government’s primary revenue streams from the sector.

For private operators, the budget offers growth opportunities through rising demand but provides no balance-sheet relief. There are no explicit concessions on levies, no clarity on spectrum pricing reform, and no targeted incentives for 5G expansion or fibre rollout.

Instead, private-sector telecom operators are expected to benefit indirectly from demand generated by data centres, AI platforms, and digital infrastructure, while direct public investment is focused on BSNL.

Execution Gaps to Decide Telecom’s Role in Growth

The budget does not announce any major telecom-specific growth sops, but it prepares the ground for future expansion. It signals a focus on AI-native platforms, data-centre-driven growth, a deeper semiconductor ecosystem, and digitally integrated infrastructure.

For telecom operators and network vendors, the budget also highlights what remains unresolved. While AI platforms, cloud infrastructure, and electronics manufacturing receive clear policy direction, telecom networks are treated as an assumed layer rather than explicitly addressed. There is limited clarity on network modernisation, fibre expansion, or how telcos are expected to participate in AI, cloud, and edge-compute ecosystems.

This lack of detail does not diminish the budget’s digital ambition. Instead, it shifts the burden of execution to policy follow-through. For India’s AI-driven and data-centre-focused vision to scale, telecom networks cannot remain implicit. They must become an explicit pillar of the country’s digital infrastructure strategy.

For telecom operators, the most important signals are likely to emerge after the budget. These include the structure and timing of spectrum auctions in 2026, deployment priorities under the Digital Bharat Nidhi, execution models for BharatNet, and any recalibration of AGR-linked levies.

Equally important will be whether telecom networks are formally integrated into India’s AI, cloud, and data-centre roadmap. Without this alignment, telcos risk remaining essential yet economically constrained enablers of India’s next technology cycle.

The image accompanying this story was created using AI. The article was written and reviewed by the author, with limited use of AI-based editing tool.

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