Budget 2026 needs to reboot IT growth and build tech sovereignty

The Union Budget 2026 is being presented at a time of heightened global uncertainty. From harsh US tariffs under Trump regime to ongoing wars, geopolitical rivalries among major powers, and rapidly shifting alliances, the global economic environment remains unpredictable. While India’s growth story remains largely intact, it must increasingly navigate a complex web of challenges. Against this backdrop, this year’s Union Budget assumes special significance.

The Information Technology (IT) sector, in particular, will be keenly watching for strategic announcements from the Finance Minister. In 2025, growth rates for most IT companies slipped to mid-single digits amid a subdued global demand environment.

At the same time, the US has made the movement of technology professionals more difficult through increasingly restrictive H-1B visa policies. Last year also saw net hiring in the Indian IT industry slow to a crawl, despite the sector traditionally being one of the largest job creators in services.

The Union Budget should therefore provide fresh impetus to the growth of India’s IT industry. Although Indian IT companies continue to depend heavily on clients in the US and Europe for the bulk of their revenues, India itself can play a decisive role in shaping the sector’s next phase of growth.

First, India is now home to nearly 2,000 Global Capability Centres (GCCs), a number expected to rise to around 3,000 by 2030. As more multinational companies recognise India as a global technology powerhouse and establish captive centres here, the central government should actively support this trend.

A clear policy framework for GCCs should be introduced at the earliest. Further, the setting up of GCCs in smaller urban centres, including Tier-III cities, should be actively encouraged. This would not only generate employment in smaller towns but also promote more balanced regional development.

Second, the Budget should take decisive steps towards strengthening India’s technology sovereignty. At present, Indian users and businesses are heavily dependent on global technology firms such as Google, Microsoft, Meta and Amazon for a wide range of digital services.

Given the protectionist measures increasingly adopted by the US and the coercive leverage exercised by some countries over technology access, reducing such dependency would be a prudent strategic move.

This dependence is becoming even more pronounced in the age of artificial intelligence. Indian users are rapidly adopting global AI chatbots such as ChatGPT, Grok and Gemini for a growing range of applications.

However, India currently lacks a home-grown Large Language Model (LLM) of global scale, leaving users reliant largely on American and Chinese models. In this context, the Union Budget should outline a clear roadmap to reduce excessive dependence on foreign technology platforms, especially in strategic digital domains.

Finally, the Budget must provide strong incentives for IT companies, startups and academic institutions to invest more aggressively in cutting-edge research and development. India’s R&D spending, both public and private, continues to lag significantly behind that of the US and China. This gap places India at a structural disadvantage in critical technologies of the future.

As geopolitics undergoes a major realignment, the Union Budget 2026 presents an opportunity for India to take meaningful steps towards reducing dependence on foreign companies in strategic technology areas and securing long-term digital self-reliance.