On 29 January, the 2026 Economic Survey flagged the need for India to take a cautious approach in developing artificial intelligence. On Sunday, the outlay proposed for the India AI Mission in the Union Budget was halved. This comes days before the Centre hosts the who’s-who of AI at a summit this month.
With these mixed signals, the question that arises is whether India is no longer bullish on AI. Mint answers.
What did the Union Budget say on AI?
Finance minister Nirmala Sitharaman mentioned AI in her speech 11 times in total, which is decidedly more than before. AI was mentioned in connection with offering public services, assessing its impact on jobs and skills, a multilingual tool for agricultural information-based services, use by customs agencies for scanning, embedding in school curricula, and the creation of a job portal for the masses. Yet there was no sweeping AI investment directive akin to moves by the US and China—making it a measured, pragmatic announcement of AI.
Has the Centre changed its stance on AI?
Last January, India took note of China’s DeepSeek—an AI model that forced the US to innovate on the use of low-cost compute and efficient data centres. India said at the time that the country would see its own ‘DeepSeek moment’ by end-2025. Since then, India’s stance has changed: the Economic Survey said India must not scale AI blindly, but instead focus on sector-wise, business-specific AI development. On 30 January, union IT minister Ashwini Vaishnaw said most AI use-cases can be served by small language models and not compute- and cost-intensive large ones, reflecting a change in spirit.
Is government spending on AI slowing?
In the FY26 budget announced on 1 February last year, the finance ministry earmarked ₹2,000 crore for the India AI Mission. This year, the proposed allocation has been halved, with the AI Mission getting ₹1,000 crore. However, the ministry of electronics and IT had spent only ₹800 crore out of its FY26 allocation. While Vaishnaw mentioned India AI Mission 2.0 last Friday, the budget made no allusion to it.
Why are data centres suddenly in focus instead?
From October to January, India attracted investments of over $75 billion in data centres by both foreign and Indian companies. Ahead of the budget, Vaishnaw said that in February alone, data centre investments may even double over the past year. Experts said India’s two-decade tax holiday on foreign cloud services is designed to increase data centre spending in India, making the country a hub for international data transfers based on AI use-cases. However, it's not clear the plan would work, given that most top nations now have data sovereignty and cross-border restrictions.
Are concerns of an AI bust worrying the Centre?
India hasn’t stopped spending on AI entirely, and word on expanding the current AI Mission is encouraging for domestic startups. However, instead of chasing capital-intensive AI model development, India is targeting leadership in business- and application-specific AI projects. The goal is to see if work on AI, mostly generative in nature, will amount to any business revenue. The Centre, at least for now, sees more profitability in incentivizing electronics and chipmaking—while waiting to see if concerns of AI going bust could be real or not.