Welcome to The AI Shift by Inc42, our all-new newsletter that delves deep into the world of artificial intelligence, LLMs, big tech giants and the major trends sweeping the Indian startup and tech ecosystem. Here’s the fifth edition; do send us your feedback and suggestions so we can improve as we go along!

When the finance minister, Nirmala Sitharaman, presented the Union Budget on Sunday (February 1, 2026), there was a lot of emphasis on AI as an enabling layer embedded in governance systems, sectoral platforms, and public infrastructure.

AI is being seen as a force multiplier for better governance, positioning AI as a tool to improve outcomes for farmers, youth, women in science, technology, engineering, and mathematics (STEM) as well as everyday life.

The impact has been such that AI is being seen less as a venture theme and more as national infrastructure, with startup upside expected to emerge indirectly rather than through explicit incentives. The budget also carried subtle but significant signals for investors, with one of the strongest ones being the emphasis on data centres, compute capacity, and long-horizon AI infrastructure.

So, what exactly do these signals mean for AI stakeholders, especially investors? And what’s in store for tech startups?

India’s AI Push Unfazed By Resource Limits

India’s data centre demand could exceed 10 GW, requiring 45-50 Mn sq ft of real estate and 40-45 terawatt (TW) hours of incremental power.

According to Debasish Mishra, the chief growth officer at Deloitte South Asia, the demand could attract nearly $100 Bn of immediate investment, positioning India as a regional data centre and AI infrastructure hub. The expectation, however, is not near-term AI monetisation, but the creation of compute gravity and capital certainty over decades, and there is no dearth of funds.

The confidence is echoed by the government officials directly overseeing the rollout of AI in the country. Abhishek Singh, the CEO of the IndiaAI Mission, told Inc42 that he does not see any funding challenges arising from the budget provisions for the mission.

“Our allocation is around 25% more than what we spent in FY25, and we have assurances that in case we exhaust the current year’s allocation, we will get more funds,” Singh said.

He added that the Union Budget’s data centre tax exemption until 2047 and the introduction of safe harbour provisions are expected to further catalyse investments across the data centre and AI ecosystem in India.

Mahesh Makhija, leader for technology consulting at EY India, is of the opinion that the government is laying the foundation for sustainable AI adoption by prioritising talent development, research, compute infrastructure, data readiness, and mission-mode innovation together.

A Step Forward, But Startups Feel Stuck

The AI push is most visible across government platforms. Bharat VISTAAR integrates AgriStack portals with ICAR data to offer multilingual, AI-driven advisory to farmers. AI-backed tools in logistics and customs are positioned as compliance and efficiency enablers, while assistive technologies under the Divyang Sahara Yojana frame AI as social infrastructure. Workforce disruption is acknowledged through a high-powered ‘education to employment and........

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