For companies weighing whether to commit capital to semiconductor, chip fabrication, defence electronics or large-scale data centres in India, the Union Budget 2026 offered a clearer sense of where policy support is likely to persist and where it may thin out.
The budget 2026, presented against the backdrop of global supply chain uncertainty and rising geopolitical competition in technology, places renewed emphasis on reducing India’s dependence on imports for critical components such as chips, defence electronics and data infrastructure.
According to industry leaders, it also links industrial policy more closely with artificial intelligence and digital governance, reflecting the Prime Minister Narendra Modi government’s view of technology as both an economic and administrative lever.
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Public policy specialist Rohit Kumar, founding partner, The Quantum Hub, said the budget “clearly prioritises building domestic capability and reducing strategic dependencies, while positioning AI as a governance and productivity multiplier”.
He pointed to a cluster of fiscal and regulatory measures that he said were “directionally right”, including tax holidays for investments in data centres, customs duty exemptions for capital goods used in nuclear power and critical minerals, and expanded safe harbour provisions.
“Together, these signal a shift towards a more trust-based regulatory regime, where the government places greater faith in businesses rather than defaulting to bad faith assumptions,” Kumar said, adding that effective implementation could help reduce litigation and improve investor confidence.
A central pillar of the budget is defence and strategic manufacturing. The government has earmarked ₹7.84 lakh crore for the defence sector, including a capital outlay of more than ₹2.19 lakh crore, underlining its continued focus on modernisation and indigenisation.
Amit Mahajan, director, Paras Defence & Space Technologies, described the budget as “a strategic and forward-looking blueprint for India’s technological and defence renaissance”.
He said the scale of allocations strengthened long-term demand visibility for domestic manufacturers and supported India’s transition “from a buyer to a builder of advanced defence systems”.
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Union Budget 2026 offers more support to defence and semiconductor
The defence push is closely tied to semiconductor policy. The budget expands funding under the India Semiconductor Mission, with an outlay of ₹40,000 crore aimed at building end-to-end capabilities across fabrication, components and supply chains.
Mahajan said the enhanced semiconductor support was critical for defence platforms that are “increasingly semiconductor-intensive” and, when combined with import-substitution policies, could lay the foundation for a multi-year upcycle in indigenous defence production.
Venture capital investors echoed the view that policy continuity matters as much as headline allocations. Anil Joshi, managing partner at Unicorn India Ventures, said India’s semiconductor ecosystem remained “at a very nascent stage and needs a lot of hand holding and policy support”.
He said the next phase of the India Semiconductor Mission, often referred to as ISM 2.0, would help in “mushrooming genuine Semicon use cases and will make India self reliant”. Joshi added that the ₹40,000 crore earmarked for electronic components could help ease supply bottlenecks for product development.
Beyond manufacturing, the budget also outlined technology-led initiatives in agriculture and space. Joshi emphasised the launch of Bharat Vistaar, which aims to combine satellite data and AI applications to help farmers make more informed decisions on productivity and crop mix.
He also pointed to the announcement of four telescope centres, which he said would support astrophysics research and help India develop more self-reliant space science capabilities.
For technology-focused investors, the semiconductor mission was among the most consequential announcements. Manu Iyer, general partner and co-founder, Bluehill.VC, described ISM 2.0 as “a watershed moment for India’s technology and manufacturing landscape”.
He said the expansion of support to semiconductor equipment, materials, design and supply chains would accelerate India’s journey towards self-reliance in advanced chips and position the country as a competitive global hub.
Iyer also drew attention to plans for dedicated rare earth corridors across mineral-rich states, aimed at strengthening mining, processing and manufacturing of critical minerals. He said these measures would enhance supply-chain resilience across sectors including electronics, defence and clean energy.
The budget’s regional focus on critical minerals was also emphasised by Tejesh Kodali, group chairman of Blue Cloud Softech Solutions. He said targeted development in states such as Odisha, Kerala, Andhra Pradesh and Tamil Nadu addressed “foundational gaps across manufacturing, supply chains, and technology infrastructure”.
Kodali said the proposed tax holiday until 2047 for foreign cloud service providers setting up data centres in India, supported by a 15% safe harbour framework for related-party data services, would improve policy certainty for global investors.
By aligning capital investment, fiscal stability and regional strengths, he said the budget positioned India as “a credible global hub for advanced manufacturing and digital infrastructure”.
Industry executives also stressed the shift in emphasis from capacity to capability. Nikita Kumawat, co-founder and executive director at Brandworks Technologies, said the budget marked “a significant change in India’s electronics and semiconductor journey”.
She said initiatives such as the Indian Semiconductor Mission 2.0 and the Shakti programme, backed by higher financial outlays, strengthened the ecosystem across equipment, materials, intellectual property and resilient supply chains.
“The focus on domestic component manufacturing, R&D, and workforce upskilling is a critical step towards strengthening India’s position in the global electronics value chain,” Kumawat said.
Industry leaders are of the view that the Union Budget 2026 measures suggest a calibrated approach rather than a dramatic policy shift.
The government has doubled down on existing priorities such as semiconductors, defence manufacturing, digital infrastructure and AI, while seeking to ease regulatory friction through tax certainty and trust-based compliance.
For investors and manufacturers, the real test will lie in execution, coordination between central and state governments and the ability to translate allocations into operational capacity. “If those elements align, the budget could help anchor India more firmly in global technology supply chains over the coming decade,” said a top technology executive.
