As 2025 drew to a close, India's artificial intelligence landscape witnessed a significant acceleration, setting the stage for what experts predict could be a transformative 2026. The year ended with a dual surge: a push for homegrown foundational AI models and an unprecedented expansion of data centre infrastructure by global technology giants. This confluence of events has raised expectations across innovation, investment, and the future of work, positioning the coming year as a potential turning point for the nation's AI journey.
The Drive for Sovereign AI and the Language Challenge
A major focus for 2026 is the development and deployment of India's own foundational AI models. The government is backing a dozen startups in this endeavour, with one already securing over $100 million in funding. A critical milestone is the upcoming global AI summit in New Delhi on 15 February 2026. The IT ministry aims to have at least one government-backed entity showcase a foundational model by then, demonstrating that AI trained primarily on non-English datasets can match global performance standards.
Government insiders indicate at least one such model is nearly ready, marking the start of 'sovereign AI'—algorithms fully trained, built, and optimised within India. This effort is closely tied to the push for Indian language data. Initiatives like Google's Project Vaani and Meity's Bhashini have opened access to datasets for 22 Indian languages. Furthermore, a new breed of data brokers is emerging, licensing content in obscure languages from publishers, annotating it, and creating machine-readable datasets, which is expected to significantly shift AI data availability in 2026.
Infrastructure Boom and the Regulatory Landscape
Parallel to the software push is a massive hardware expansion. Announcements worth over $50 billion were made in 2025 to establish data centres in India, with on-ground implementations set to begin in the coming year. This boom is driven by Big Tech's commitment and the anticipated demand from India-born AI models. However, the regulatory path remains a point of discussion. Proposed measures, such as Meity's labelling of AI content on social media and DPIIT's proposal for copyright royalties from AI developers, are key points of contention being debated for their viability.
Despite regulatory uncertainties, enterprise confidence is growing. Deals like Coforge's acquisition of Encora exemplify this rising trust in AI's potential, suggesting more such consolidations could be on the horizon as the regulatory framework becomes clearer.
Impact on Jobs and the Promise of an AI-Led Boom
The human impact of this AI surge presents a mixed picture. While data centres will flourish, creating infrastructure jobs, the effect on traditional IT roles is uncertain. Automation is beginning to displace certain functions, as evidenced by Infosys's decision to cut back on hiring freshers from engineering colleges. This highlights a transitional phase where automation may impact existing jobs before new, AI-centric roles are created in scale.
Nevertheless, the long-term outlook is overwhelmingly positive. Top tech firms, including Google, Microsoft, and OpenAI, have identified India as one of AI's biggest future markets globally. With surging enterprise adoption and growing consumer discovery of AI apps, experts foresee a boom reminiscent of the IT services explosion 25 years ago. EY India projects generative AI could yield $438 billion in revenue by 2030, potentially surpassing the IT services sector's $400 billion target. 2026, therefore, is not just another year—it is poised to be the foundational chapter in India's multi-trillion-dollar AI story.
