Representational image. (Getty Images)
New Delhi: As the Union Budget 2026–27 approaches, expectations are mounting across India’s startup, technology and artificial intelligence (AI) ecosystem. With India now the world’s third-largest startup hub and emerging as a key player in global digital transformation, economists, policy experts and industry bodies say the coming Budget must move decisively from broad intent to targeted execution.
Commonality is a key element underlying all of the ambitions expressed by expert commentators in relation to Budget 2026-27, all of whom are advocating for the promotion of innovation as a primary growth driver while at the same time eliminating any impediments created by bureaucracy, taxation and/or funding limitations.
Cleaning Up Capital Markets and Enabling Fair Taxation
Professor Charru Malhotra, a doctorate scholar and prominent expert in e-governance and information and communication technology (ICT) at the Indian Institute of Public Administration (IIPA), points to the need for restoring trust and balance in India’s capital markets.
“One of the urgent priorities is market integrity,” Malhotra told ETV Bharat. She flagged the growing concern around inflated startup valuations during initial public offerings (IPOs), calling for a systemic “IPO clean-up” to prevent speculative excesses from destabilising the broader economy.
On taxation, Malhotra stressed the importance of parity between listed and unlisted shares. “There is a strong need for a level playing field for Indian capital,” she said, arguing that unequal tax treatment discourages domestic investors and founders alike.
Commentators believe that rationalising the taxation of capital gains and simplifying compliance for start-up companies would facilitate the free flow of more domestic capital into start-up companies within India, as well as support the objective of reducing India’s reliance on foreign venture capital to finance new ventures.
AI, Digital Sovereignty & Strategic Technology Investments
AI is expected to emerge as a significant focus area in the Budget for the 2026-27 fiscal year, and many commentators are calling for the government to take a more comprehensive approach to developing and implementing AI initiatives, rather than relying on a piecemeal approach that currently exists.
Malhotra suggested establishing a National AI Centre similar to that of Singapore, and referred to the need for a “Digital Iron Dome” around India’s digital assets to protect India’s data sovereignty.
She also called for a Sovereign Deeptech Fund to support long-gestation technologies such as AI, quantum computing, space tech and advanced materials.
“Technology strategy today is inseparable from national strategy,” she noted, also pointing to the need for rare earth diplomacy and space-sector monetisation as part of a long-term technological roadmap.
Echoing this sentiment, AI expert Anil Dubey said Budget support for emerging technologies must focus on execution and scale. “The priority should be creating a low-friction ecosystem where innovation scales faster than compliance, and capital flows faster than paperwork,” he told ETV Bharat.
Dubey highlighted high compliance costs, complex GST structures and lingering angel tax issues as “silent growth killers” for startups. He argued that longer tax holidays for deep-tech and AI startups, along with regulatory sandboxes and sovereign data access, are critical if India wants to build original intellectual property rather than merely adopting global technologies.
“India does not lack ideas; it lacks patient capital,” Dubey said, adding that pension funds, insurance companies and government-backed venture vehicles must be incentivised to invest long-term in innovation-led enterprises.
Manufacturing, Electronics and the Scale Imperative
While India’s tech startup ecosystem has grown rapidly, economists say the next phase must focus on manufacturing-led innovation.
Sharad Kohli, an economist, noted that while tech startups are abundant, India urgently needs startups in manufacturing to strengthen the real economy. “Technology and AI are definitely going to feature prominently in the Budget,” he said, adding that allocations for science and technology, from space to fintech, are likely to rise further.
Industry body FICCI has urged the government to establish a Mega Electronics Industrial Park to create a world-class manufacturing ecosystem. The proposed park will provide an environment that supports the establishment of original equipment manufacturers (OEMs), electronics manufacturing services (EMS) companies, and suppliers of components, thus enabling participants to strengthen their position within the value chain and compete more effectively on a global scale. The FICCI recommends that the park’s business models replicate the supplier ecosystems that exist in hubs like Shenzhen (China) and Bac Ninh (Vietnam).
The park would also support MSMEs through shared infrastructure, testing labs and logistics facilities, while ensuring sustainability through green energy, water reuse and safe worker housing. Such a move, experts say, would align well with the government’s production-linked incentive (PLI) schemes and help India capture a larger share of global electronics manufacturing.
AI in Agriculture and Digital Public Infrastructure
Technology-driven agriculture is another area where stakeholders expect a major Budget push. The PHD Chamber of Commerce and Industry (PHDCCI) has called for ₹12,000 crore in budgetary support for the Digital Agriculture Mission and AgriStack.
According to PHDCCI, AI-driven tools such as predictive analytics, disease forecasting systems, drones, IoT sensors and blockchain-based traceability can significantly improve crop yields, reduce input costs and cut post-harvest losses. These technologies can also help Indian agricultural exports meet stringent global quality standards.
Experts believe stronger digital public infrastructure for agriculture would not only boost farmer incomes but also create new opportunities for agri-tech startups operating in rural India.
Funding, Education and the Startup Pipeline
Economist Seema Sharma, an IIT professor, said the government’s Startup India initiative has already positioned India among the world’s fastest-growing startup ecosystems. However, she expects Budget 2026–27 to shift towards deeper support for tech-based priority sectors such as AI, agri-tech, healthcare, space technology and sustainability.
“These startups should be promoted through full funding instead of just seed funding, higher tax incentives, and structured mentorship from centres of excellence,” Sharma told ETV Bharat. She also suggested that consolidated corporate social responsibility (CSR) funds could be channelled into startup financing.
Beyond funding, Sharma emphasised the importance of startup literacy at the school level to nurture entrepreneurial thinking early. “This can foster an innovative mindset across the country, not just in urban clusters,” she said.
Taken together, expert expectations suggest that Union Budget 2026–27 will be judged not by headline announcements but by how effectively it removes barriers to innovation, channels patient capital, and builds strategic technological capacity. With AI reshaping economies and startups driving job creation, the coming Budget presents a critical opportunity to position India not just as a global technology consumer, but as a creator of future-defining innovations.