– By S Anjani Kumar
Union Budget 2025-26 comes at a crucial juncture as India seeks to position itself as a global technology and AI powerhouse. With technologies like AI/Gen AI, ML, Space Tech, Blockchain etc. poised to disrupt industries, the government has a unique opportunity to solidify India’s leadership in the global tech landscape. Robust budgetary provisions are essential to maintain India’s competitiveness and capitalize on its startup ecosystem, vast talent pool and growing digital infrastructure demand.
AI’s transformative potential is undeniable and it is projected to contribute USD 15.7 trillion to the global economy by 2030. Government’s investments across IndiaAI mission pillars – Compute Capacity, Innovation Centre, Datasets Platform, Application Development, Future Skills, Startup Financing, and Safe & Trusted AI is commendable and needs to be further strengthened. India should focus on creating a conducive environment for AI adoption to compete effectively with other economies.
Compute Capacity
India’s digital infrastructure remains a cornerstone for technological growth. Initial investment in 10,000 GPUs under IndiaAI Mission is a good start, and the industry expects an increase in allocation towards IndiaAI Mission, reflecting the growing demand for AI.
Taxation framework for technology investments can be incentivized with reduction in import duties on essential AI hardware (GPUs and high-performance computing equipment) to optimize the cost of AI infrastructure and providing weighted deduction on tech related expenditure and no / low tax rate for non-resident collaborators.
Creating AI industrial zones, R&D hubs and long-term incentive programs for investment by enterprises/ cloud providers for setting up GPU infrastructure with at least Exaflop AI capacity and high-performance GPUs will be key.
The budget could consider shared infrastructure models for specialized AI hardware and high-performance computing resources to democratize access to essential AI resources.
Initiatives like streamlined land allocation and fiscal incentives in addition to policies like interest subvention, dedicated land zones and recognizing data centers under Essential Services Act can attract investments and enable hyperscale ecosystems. Central policies for Data Centre Economic Zones and state-level initiatives for integrated parks will be critical.
Further, investments in green energy and power distribution infrastructure will ensure sustainable growth and efficient absorption of renewable power for data centers.
Similarly, promotion of investments in high-speed connectivity, public digital platforms and rural broadband to foster inclusivity will be key.
Insulation of overseas digital service providers using data hosting services in India from business connection/permanent establishment risks through appropriate explanation under Section 9(1)(i) of Income Tax Act, 1961 also needs to be considered.
Innovation Center
As AI takes center stage, every major company is unveiling their own LLM / Private LLMs. However, this swift adoption raises concerns about the need for regulation.
The government could adopt a balanced approach to govern AI-generated work, ensuring rights of copyright owners/authors are upheld while fostering continued advancement in emerging technologies in a responsible manner.
The government should also promote development of self-training of AI models through enabling framework for access to high-quality data for developers.
Datasets Platform
Underlining this robust computer infrastructure and self-training AI models, is the need for access to high-quality, non-personal datasets. India needs a cohesive strategy to securely access data for training AI models based on proper data classification and standardization.
Provisions under Public Records Act must allow developers to leverage public datasets from government agencies for developing robust and functional AI models. Establishing an organizational consent framework for accessing non-personal data will need to be facilitated.
Budget should address the interplay between AI and the Digital Personal Data Protection Act 2023 while providing clarity on issues regarding personal data – who is responsible for data breach, who would take charge in case of consent withdrawal and data localization issues.
Application Development
Expanding incentives for AI-driven solutions across sectors such as education, healthcare and financial inclusion could further accelerate digital transformation and solidify India’s AI leadership. Tax incentives for companies willing to invest in AI solutions, access to research grants and public-private partnerships will help make long-term AI applications commercially viable in these sectors
Future Skills
For India to retain its status as the global digital talent powerhouse, workforce upskilling should be a priority. Budget should allocate funding towards upskilling programs in emerging technologies, AI Centers of Excellence, encourage public-private collaboration for AI research, scholarships and incentives for women in tech.
Startup Financing
India’s startup ecosystem is a critical driver of economic growth and innovation. Budgetary provisions can provide relaxed compliance norms, targeted tax reliefs, increased funding opportunities and startup-focused loan programs to support tech startups.
Safe and Trusted AI
As digital adoption accelerates, safeguarding critical infrastructure and personal data is paramount. Budget is expected to strengthen cybersecurity frameworks, provide clear norms and ethical guidelines for using AI, incentivize research in cybersecurity technologies to bolster resilience against cyber threats.
(S Anjani Kumar, Partner, Deloitte India.)
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