How seriously Indian states are funding artificial intelligence ambitions

A review of FY26 state Budget speeches shows wide variation in how Indian states plan to adopt AI and how little most are willing to spend on it

As artificial intelligence becomes central to how economies govern, educate and deliver public services, the question is no longer whether governments should engage with the technology, but how seriously they are willing to back it. In India’s federal structure, that responsibility rests as much with the states as with the Centre. With state Budget sessions beginning just days after the Union Budget, a close reading of their finance ministers’ speeches offers an early indicator of how far AI features in state priorities and whether ambition is being matched by money.

 

A study of the speeches of the finance ministers of the state governments from 2025-26 shows, predictably, that it is mostly the southern states which have instituted long-term ideas to use AI along with financial spending. Karnataka leads the pack, while Andhra Pradesh and Tamil Nadu have plans to integrate AI into their education streams. Telangana’s budget speech is filled the most with references to AI. This is not surprising since Hyderabad hosted the AI Global Summit in 2024, which, as the Budget document notes, “reinforces the state’s commitment to becoming a global leader in Artificial Intelligence (AI)”.

 

The report card from the western and northern states spans a wide spectrum. Odisha leads the lot with a clear policy. Other states, from Rajasthan to Assam, are only happy to name some of their initiatives as AI. The Rajasthan Budget says there will be a Centre of Excellence of Artificial Intelligence in Agriculture. At the end of the scale, Bihar, Jharkhand and West Bengal do not even give the subject a nod in their respective budget speeches.

 

“The race to lead in Artificial Intelligence is being defined by states that have institutionalised their vision through formal policies,” said Rameesh Kailasam, president and CEO of IndiaTech.Org. Karnataka, Telangana and Andhra Pradesh have emerged as the definitive leaders. Their dominance is driven by a proactive political will to lead the “AI build-up”, successfully attracting massive investments across data centres, infrastructure and application development, Kailasam added.

 

However, even among those planning to spend money, the sums are paltry. While the Centre too has made only a modest commitment of ₹10,371.92 crore ($1.2 billion) to be spent over five years for financing the IndiaAI Mission, the corresponding spending plan by all the states is less than ₹150 crore. Uttar Pradesh has announced plans for an AI city in the speech. A closer examination shows it will be a building within Lucknow, for which just ₹5 crore has been allotted to buy land. Telangana, in spite of the promises, has a flatline Budget for information technology.

 

Quite a few of them, like Maharashtra, Assam and even Andhra Pradesh, have left the entire cost to the private sector. Since AI is one of the key infrastructure pillars that governments of the future must build on, the weak funding shows a lack of vision among them (see box).

The most committed to the possibility of AI is Karnataka, going by the respective Budget documents. Chief Minister Siddaramaiah noted in his speech: “To make Karnataka a leader in the field of Artificial Intelligence (AI), a Centre for Applied AI for Tech Solutions (CATS) will be established with an investment of ₹50 crore over the next five years.” He also claimed that a Karnataka AI Cell has been established to develop a Government Order Summary and Information Extraction Tool that will “facilitate officials and citizens to easily access information on government orders, policies and schemes”.

 

Andhra Pradesh, in contrast, has no money to spend on AI. It plans reforms to bring “futuristic technologies like Artificial Intelligence into the mainstream curriculum”. The state hopes the MoUs it has entered with Google, TCS, Meta and others “will accelerate adoption of artificial intelligence in various fields including healthcare and also give support to the startup ecosystem in the state”.

 

On similar lines, Tamil Nadu hopes to push AI training in engineering colleges, where “new degree courses in emerging fields such as Artificial Intelligence, Cyber Security, Advanced Manufacturing Technology, Robotics, Electric Vehicles Technology and Environmental Engineering will be introduced”. Supplementing these efforts, the Tamil Nadu Skill Development Corporation will provide free online training, but again there is no extra money to finance these initiatives.

 

Kerala has made an allocation of ₹10 crore to what it claims will be a “world-class GPU cluster” at Thiruvananthapuram to make the state “an important hub of AI and AVGC (animation, visual effects, gaming and comics) sectors. This will help in attracting investment and create employment opportunities for the youth”. However, the Budget also has a novel idea. “Studies have shown that, with the advent of new technologies like Artificial Intelligence, there has been a decrease in the average working hours of people. This increase in available leisure time, which allows people to travel more, will give a fillip to the tourism sector.”

 

The Odisha government has promised to spend ₹50 crore, the same as Karnataka, to encourage “DeepTech and frontier technology efforts”. “We are supporting an ecosystem that fosters innovation in sectors like AI, blockchain, robotics and quantum computing,” the Budget speech notes.

 

In contrast, Maharashtra, despite having much larger resources, has “outsourced” AI. Deputy chief minister Ajit Pawar announced that the Ratan Tata Maharashtra State Skill University, in collaboration with Microsoft, will provide training to 10,000 women in skills and artificial intelligence. Besides this, “a strategy is being developed to use AI in the agriculture sector”, but without any details. On the same note, Rajasthan has promised a “Centre of Excellence of Artificial Intelligence in Agriculture”. Assam follows similar lines. “In partnership with TATA-NELCO, we will upgrade secondary schools into state vocational training centres with a focus on STEM education. Through this collaboration, our schools will offer courses such as Artificial Intelligence, Robotics, Design Innovation, Additive Manufacturing and Internet of Things.”