Budget 2026: Where India’s Tech Industry Wants the Government to Act Next

As India approaches Union Budget 2026, the technology sector’s expectations are converging around a familiar but unresolved challenge: execution. While India’s IT and digital economy continues to expand—crossing US$ 282.6 billion in FY25 and nearing the US$ 300 billion milestone—the next phase of growth will depend less on ambition-setting and more on structural fixes that determine how innovation is funded, retained, and scaled.

From startup equity ownership and government procurement to data centres, AI infrastructure, and cybersecurity, industry leaders are urging policymakers to address friction points that quietly shape competitiveness.

ESOPs and Procurement: Where Startup Scale Still Breaks

For India’s startup ecosystem, access to talent and early customers remains decisive. Yet policy gaps in both areas continue to create drag.

Dr. Ajai Chowdhry, Founder, HCL and Chairman, EPIC Foundation, flags ESOP taxation and procurement access as two structural constraints that Budget 2026 must confront.

"India stands at a critical juncture in its journey to become a global innovation hub and ESOPs (Employee Stock Option Plans) framework of a country plays a critical role in supporting the growth of the startup ecosystem. In sharp contrast to other mature startup ecosystems , India's dual taxation model on ESOPs—taxing employees at exercise and again at sale—creates significant friction that is actively pushing Indian startups and founders toward offshore relocation. I am hoping to see a simplified ESOP taxation for startups during this budget that will be critical for the country's growing startup ecosystem.

Also government procurement is the strongest catalyst for startup growth. India's ₹37 lakh crore annual government spend reaches less than 1% of innovative startups. By engaging with 400 plus strat ups and with 74 active projects with Indian Army alone, IDEX has demonstrated that structured government procurement plus funding can scale start ups 10x faster. Other ministries operate fragmented schemes without direct startup engagement. A Cross-Ministry Startup Procurement Framework is urgently needed to unlock promising ventures serving critical national demands. I strongly feel that It's time to replicate IDEX's success across ministeries for sustained start up growth and would urge the government to consider this during this budget.”

The emphasis here is not on subsidies but on predictable ownership outcomes and repeatable demand, both essential for retaining founders and skilled employees in India.

Enterprise Digital Adoption: From Pilots to Policy Clarity

As enterprises deploy AI and blockchain beyond experimentation, budget alignment with real-world use cases is becoming increasingly important.

Dr. Sujata Seshadrinathan, co-founder and director of digital transformation at Basiz, highlights the gap between technological maturity and policy readiness.

“As digital technologies mature, the Union Budget FY27 should focus on enabling enterprise-grade adoption of AI and blockchain. In areas such as fund administration, accounting, and cross-border financial operations, these technologies are already improving data integrity, automation, and decision-making. What is now required is sustained investment in digital infrastructure, advanced skilling, and frameworks that support scalable, real-world implementation. Aligning budgetary priorities with how enterprises actually deploy AI and blockchain will be key to translating innovation into long-term efficiency, transparency, and economic value. Digital currency based transaction processing framework and crypto currency policy have been in the works for some years now. Clear directions for these are the need of the hour if India needs to be on par with the rest of the world in the digital currency domain.”

The message from enterprise operators is consistent: policy uncertainty slows adoption, even when technology capability exists.

Data Centers and Power: The Invisible Backbone of AI Growth

Behind AI, cloud, and digital public infrastructure lie physical constraints, power, land, and approvals.

Bimal Khandelwal, CEO, STT GDC India, frames digital infrastructure as a national competitiveness issue rather than a sectoral one.

"As India accelerates its digital and AI ambitions, we are expecting the upcoming Union Budget to focus on three critical enablers: (1) Elevating data centres from infrastructure status to actually treating them as an End-to-End National Digital Infrastructure with coherent policies on power access, renewable integration, land availability and faster time-bound approvals across central, state and local authorities (2) Strengthening the country’s power transmission backbone, and (3) Providing policy certainty for renewable energy adoption at scale. Given the central role of digital infrastructure in India’s economic and strategic ambitions, these enablers will be critical to sustaining long-term growth and strengthening India’s global competitiveness.”

As AI workloads surge, industry leaders see energy reliability and approval timelines as limiting factors for future capacity.

A Sector at an Inflection Point

India’s tech and ITES industry added approximately 126,000 jobs in FY25, taking its talent base to around 5.8 million. Growth is increasingly driven by cloud computing, engineering R&D, AI-led transformation, and data centre infrastructure—signalling a transition away from legacy outsourcing toward product-led and infrastructure-backed innovation.

Raja Lahiri, Partner and Technology Industry Leader, Grant Thornton Bharat, sees Budget 2026 as a lever to accelerate this shift.

“As the industry transitions from traditional outsourcing to an innovation-first model, Budget 2026 offers an opportunity to accelerate India’s position in deep-tech, cloud infrastructure and AI-enabled services. With tech exports already at US$ 224 billion and domestic demand expanding steadily, there is a need for sharper policy focus on commercialising R&D, funding next-generation digital capabilities, and building a resilient cloud and data-centre backbone. Investment-linked incentives for high-performance computing, renewable-powered data centres, and AI engineering will be crucial as workloads surge. Equally important is a national skilling architecture aligned with emerging roles in cloud, cybersecurity, and product engineering. A forward-looking budget that simplifies tax rules for digital exports, strengthens innovation financing, and supports infrastructure readiness will set the foundation for India’s next US$ 300-billion technology milestone.”

Cybersecurity: A Budget Priority After 2025

The sharp rise in cyberattacks during 2025 has pushed cybersecurity from an IT concern to a national risk issue.

Govind Rammurthy, CEO & Managing Director, eScan, links Budget 2026 expectations directly to resilience and indigenous capability.

"As we approach India's Union Budget 2026, we hope the Government will prioritize measures that strengthen both our technology ecosystem and our cyber resilience - especially critical after the surge in cyberattacks India experienced in 2025. We look forward to enhanced incentives for homegrown tech innovators through expanded PLI schemes covering emerging sectors like secure AI and cybersecurity infrastructure, alongside continued support for R&D in areas vital to national security. The introduction of India's DPDP Act has underscored the urgency of data protection. Budget 2026 presents an opportunity to support indigenous software product companies like eScan with improved ease of doing business, tax certainty, and targeted fiscal support. Strategic investments in cybersecurity infrastructure, data centers, and AI governance frameworks will empower Indian software brands to scale globally while contributing meaningfully to India's digital economy and national security."

The focus is shifting from reactive defense to sovereign software capability.

What the Industry Is Really Watching

Taken together, these perspectives suggest that Budget 2026 will be judged less on new schemes and more on structural coherence, simpler ESOP rules, predictable procurement, infrastructure readiness, policy clarity for digital assets, and sustained cybersecurity investment.

For India’s technology ecosystem, the next chapter is not about announcing intent. It is about whether the systems that support innovation, from ownership to infrastructure, are finally aligned to let it scale.