Budget 2026: Big AI Talk, Smaller Spend — Inside IndiaAI Mission’s FY26 Reality

In recent years, artificial intelligence has steadily moved from buzzword to backbone of policy conversations in India. From startups building large language models to government departments experimenting with automation and predictive analytics, AI is increasingly seen as the technology that could define India’s next growth phase. That belief was on full display during Finance Minister Nirmala Sitharaman’s Budget 2026 speech, where “AI” featured repeatedly as a force multiplier for governance, productivity and inclusion.

But a closer look at the fine print of the Union Budget tells a more nuanced story—one where ambition remains high, but spending has lagged behind plans.

Budget 2026: Only 40% Of FY26 Outlay Utilised

According to the Budget documents tabled in Parliament on February 1, less than half of the allocated funds for the government’s flagship IndiaAI Mission were actually spent in FY26.

While the Centre had earmarked INR 2,000 Cr for the mission in the ongoing fiscal year, revised estimates show that only INR 800 Cr—about 40% of the planned outlay—was utilised. For FY27, the government has now allocated INR 1,000 Cr for the initiative.

The numbers stand out because IndiaAI Mission is not a small pilot programme. Approved by the Union Cabinet in March 2024, the mission carries a total outlay of INR 10,372 Cr over five years. Its mandate is expansive: position India as a global AI hub, provide subsidised high-end compute access to startups and researchers, and build AI solutions tailored to Indian needs.

What IndiaAI Mission Has Built So Far

Despite the underutilisation of funds in FY26, groundwork under the mission has been progressing.

The Ministry of Electronics and Information Technology (MeitY) has already deployed over 38,000 GPUs as part of the national compute infrastructure. These GPUs have been sourced from private players including Yotta Data Services, part of the Hiranandani Group, and NxtGen Cloud Technologies.

In parallel, the government empanelled 11 startups and companies last year to work on developing an indigenous foundational AI model—an important step in reducing dependence on foreign models and infrastructure.

Still, the gap between allocation and actual spend has raised quiet questions across the startup and policy ecosystem: is execution struggling to keep pace with vision?

AI As A Governance Multiplier

In her Budget speech, Sitharaman framed AI as central to India’s development strategy in the 21st century.

“The twenty-first century is technology driven. Adoption of technology is for the benefit of all people… to access newer opportunities,” she said, highlighting government support through initiatives such as the AI Mission, the National Quantum Mission, the Anusandhan National Research Fund, and the Research, Development and Innovation Fund.

Among the headline announcements was the launch of Bharat-VISTAAR, a multilingual AI tool aimed squarely at the agriculture sector. The platform is expected to help enhance farm productivity, improve decision-making, and reduce risk by offering customised advisory support to farmers in their local languages.

The FM also announced the creation of a high-level Education-to-Employment and Enterprise Standing Committee. Its task: assess AI’s impact on jobs and skills, recommend ways to embed AI into school curricula, and outline strategies to upskill technology professionals in emerging fields. The committee will also explore AI-enabled systems for matching workers with jobs and training opportunities.

Beyond Software: Ports, Assistive Tech And Imaging

The Budget also expanded the scope of AI adoption beyond software and services. Sitharaman proposed further investments to drive AI-led production of assistive devices for persons with disabilities. Additionally, the government plans to deploy advanced imaging and AI technologies to scan containers at major ports—an initiative aimed at improving efficiency and security in logistics and trade.

Ambition Intact, Execution In Focus

Budget 2026 makes one thing clear: AI remains firmly embedded in the government’s development narrative. From agriculture and education to ports and assistive technologies, the list of use cases continues to grow.

At the same time, the underutilisation of funds in FY26 highlights a familiar challenge—turning policy ambition into on-ground execution. For startups and researchers watching closely, the coming year will be crucial. With a fresh allocation for FY27 and foundational infrastructure already in place, the real test for IndiaAI Mission will be whether spending, implementation and outcomes finally start moving in sync.

For now, India’s AI story remains one of bold vision—still waiting for its full financial momentum to catch up.