India's AI Budget Halved in FY26 Despite Strategic Importance

• Finance Minister Nirmala Sitharaman proposed ₹1,000 crore for AI via IndiaAI Mission in Union Budget 2026, less than half of the previous year's proposed outlay.
• The revised estimate for FY25 AI allocation was significantly cut from ₹2,000 crore to ₹800 crore, highlighting a gap between proposed and actual spending.
• A tax holiday until 2047 is proposed for companies using data centers in India, aiming to boost domestic AI infrastructure.
• The allocation follows India's adoption of its first AI governance framework in November 2025, aligning with global efforts in AI dominance.
• Industry experts like Aditya Khemka view the budget as a shift from AI experimentation to practical, mission-critical deployment, especially in public safety and smart infrastructure.

Why It Matters: India's AI budget for FY26 is significantly reduced, yet aims to foster practical AI deployment and infrastructure.