India's Budget Eyes AI and Tech Investment to Propel $3.7 Trillion Economy Toward Self-Reliance

Ahead of the Union Budget, one number is already shaping the conversation about India's technology ambitions: ₹10,371.92 crore. That is the outlay for the government's IndiaAI Mission, and analysts note it looks small beside China's plans and beside a $500 billion joint venture in the United States between the government and tech companies to build AI infrastructure and data centres over the next four years.

The backdrop is a $3.7 trillion economy that finance minister Nirmala Sitharaman is expected to steer toward what commentators call an AI-first footing. India's AI market is currently pegged at $7-8 billion. Experts expect the budget to respond with measures on research and development, tax incentives and public-private partnerships. The hope is that investment in AI, semiconductors, quantum computing, 5G and blockchain, along with support for deeptech startups, will push Viksit Bharat, the goal of a developed India, toward technological leadership and self-reliance, or Atmanirbhar status. Spending on semiconductor manufacturing, high-performance computing and green technologies is described as a way to strengthen India's position as a technology hub while cutting dependence on imports.

Defence and aerospace, central to the Atmanirbhar Bharat initiative, are also expected to receive strategic support. With sector growth projected at 15-20%, analysts anticipate steps to widen private participation, streamline procurement and reward R&D in unmanned aerial vehicles, space technology and cyber security. The aim is to modernise the armed forces, with openings for large companies as well as medium, small and micro-enterprises.

Other sectors have their own requests. Fintech leaders want GST waivers on services at Business Correspondent outlets and lower GST rates for startups serving underserved communities, arguing that this would help close financial inclusion gaps in rural areas. In education, online services carry an 18% GST rate, which the sector calls a barrier; reducing it and exempting upskilling course fees could make learning more accessible.

Rural India is another focus. Bharat, which accounts for over 65% of the population, could benefit from GST relief and targeted infrastructure investment to improve last-mile delivery of financial and digital services. Sitharaman is also expected to advance agritech, meaning drones, AI, IoT and satellite data, alongside policies on irrigation, storage and farm-to-market supply chains.

Manufacturing is expected to stay at the centre of the government's agenda, especially mobile and electronics production. Strengthening the Production Linked Incentive scheme to raise local value-addition and component manufacturing could help build a sturdier supply chain and deepen India's manufacturing base.

The workforce question runs underneath all of it. Projections point to a workforce expansion of 33.89 million and 2.73 million new tech jobs by 2028, which makes the digital skills gap a pressing concern. Policies backing training frameworks, digital healthcare education and public-private collaboration are seen as the route to a stronger tech ecosystem.

Everything above is expectation rather than announcement. The thing to watch is whether the budget turns these hopes into concrete tax incentives and a strengthened PLI scheme, and whether the AI funding gap with China and the US draws a response.