A Budget For The Deep Tech Ecosystem

Syllabus: GS3/Science & Technology

Context

• The Union Budget 2026-27 signals a strategic shift from allocating funds for technology growth to building complete technology ecosystems, with equal emphasis on infrastructure, manufacturing, and human capital for India’s deep tech ecosystem.

Union Budget 2026-27 & Deep Tech Ecosystem

• Semiconductor Mission 2.0 (Full-Stack Thinking): It focuses on the entire semiconductor value chain i.e. equipment, fabrication, and skilled workforce, unlike earlier schemes that focused narrowly on equipment or subsidies.
  • It promotes balanced investments in both hardware and talent.
    • Hardware creation (equipment and facilities);
    • Skill development (technicians, engineers, operational know-how);
  • Such ‘full-stack’ thinking indicates a government focus on long-term supply chain resilience and capability building.
• Advanced Manufacturing: The budget maintains the same dual emphasis in advanced manufacturing:
  • Duty exemptions for aviation components incentivize hardware creation.
  • Hi-tech tool rooms set up as digitally enabled service bureaus focus on skill and operational readiness.
• AI and Data Centers (India as a Global Node): The government has extended tax holidays for AI and foreign data centers, a clear signal to attract global investments.
  • It aims to benefit data center operators, thermal engineers, and AI compute engineers.
  • The budget aims to make the country a hub for technology and data-driven innovation, by enabling global-grade infrastructure rooted in India.
• Corporate Mitras (Easing Compliance for Founders): A key founder-focused initiative is the introduction of Corporate Mitras, designed to reduce compliance bottlenecks for tech firms.
  • It provides affordable, structured governance support, and demonstrates empathy toward deep tech founders, beyond mere financial incentives.
  • Additionally, changes in share buyback taxation encourage promoters to reinvest in their businesses rather than focusing solely on personal capital gains.
• AI and Workforce: The budget forms a formal committee to assess AI’s impact on the workforce for the first time. It demonstrates a proactive approach toward talent planning, skill development aligned with emerging technologies.

Related Issues & Concerns

• Implementation Complexity: Full-stack initiatives like Semiconductor Mission 2.0 require coordinated execution across multiple ministries and private stakeholders.
  • Risk of delays or misalignment between infrastructure rollout and skill development.
• Skill Gap Challenges: Training programs and workforce readiness may lag behind the rapid technological advancements in AI, semiconductors, and advanced manufacturing.
  • Scaling technicians, engineers, and AI specialists will require sustained investment in education and reskilling.
• Compliance & Governance: Corporate Mitras aim to reduce compliance friction, but their effectiveness will depend on awareness, accessibility, and adoption by smaller deep tech startups.
  • Over-regulation or ambiguity in tax and governance rules could still deter early-stage founders.
• Fiscal Sustainability: Duty exemptions, tax holidays, and manufacturing incentives are fiscally generous, but may put pressure on government revenues.
  • Long-term impact will depend on private sector uptake and economic returns from these incentives.
• Equity & Inclusion: High-tech focus risks favoring large firms or metropolitan startups, potentially leaving tier-II / III cities or smaller founders behind.
  • Ensuring inclusive ecosystem growth will require additional targeted support.
• AI & Workforce Transition: AI committee formation is positive, but policies to reskill workers and protect employment will be critical.
  • Risk of job displacement in routine roles if AI adoption outpaces workforce readiness.
• Global Competition: Attracting foreign AI/data center investments is promising, but India competes with Singapore, UAE, and Europe for talent and investment.
  • Ensuring global competitiveness will require speed, clarity, and ease of doing business.

Conclusion

• Overall, the Union Budget 2026 reflects a builder-centric vision:
  • Incentivizing manufacturing and infrastructure;
  • Supporting skill development and governance for founders;
  • Encouraging reinvestment in technology firms;
• It is a clear signal that India is aiming to build comprehensive technology ecosystems where hardware, human capital, and innovation coexist and thrive.

Source: BL