India’s technology landscape is entering a new phase, moving from pure software services toward semiconductors, AI, and physical manufacturing. Supported by government policies like the PLI schemes and robust digital adoption, this shift expands the Indian tech opportunity beyond traditional exports. For investors, this marks a pivot from focusing solely on software to monitoring long-term growth in complex hardware and digital ecosystems.
India’s 79-year technological journey since independence has reached a turning point. Historically, the nation focused on establishing scientific foundations through institutions like the IITs and DRDO, followed by a post-1991 surge in IT services that positioned India as the world's leading back office. Today, the focus is shifting from simply providing software services to owning, building, and exporting core technologies like semiconductors and AI hardware.
This evolution is evident in the numbers. The technology industry in India is projected to exceed $315 billion in revenue by FY26, according to NASSCOM estimates. While software exports remain a pillar of the economy, the current growth phase is increasingly driven by a push toward physical manufacturing. Government initiatives, particularly the Production Linked Incentive (PLI) schemes, have attracted significant investment, with electronics exports reaching Rs 6.53 lakh crore by March 2026. This indicates a clear strategic move to capture more value within the global supply chain.
The rapid adoption of Digital Public Infrastructure (DPI) has also changed the market landscape. The widespread use of UPI, which processed 23.66 billion transactions worth Rs 29.88 lakh crore in July 2026, has created a massive, data-rich ecosystem. This digital rail allows companies to reach millions of users, providing a testing ground for fintech and AI-driven services that are difficult to replicate in other markets.
The Move Toward Hardware and AI
Investors are now observing a distinct pivot toward 'deep tech.' The government's Semicon 2.0 policy, with a massive outlay of Rs 1,27,500 crore, aims to build a domestic semiconductor design and fabrication ecosystem. This is vital for reducing reliance on imports for telecom, defense, and automotive electronics. Complementing this is the IndiaAI Mission, which has already onboarded over 38,000 GPUs by early 2026, signaling an intent to compete in the global AI infrastructure race.
Furthermore, Global Capability Centres (GCCs) in India are maturing. With over 1,700 centers employing 1.9 million professionals, these hubs are no longer just support offices. They are increasingly functioning as centers for engineering and research in cybersecurity, AI, and chip design. This shift helps the sector move up the value chain, potentially improving margins over time by providing more complex, high-value engineering solutions.
Risks and Monitorables
While the macro trend is positive, it brings new challenges. Unlike the software services model, which is asset-light, building a semiconductor and manufacturing ecosystem is capital-intensive and subject to long gestation periods. Success depends heavily on the execution of government policies, consistent availability of raw materials, and the ability to attract global talent.
Investors should track the progress of these large-scale manufacturing projects. Delays in infrastructure, global supply chain bottlenecks, or fluctuations in raw material costs could impact the projected timelines for domestic production. Additionally, the ability of Indian companies to compete with global manufacturing hubs remains a key factor in determining long-term profitability. The next important update for the market will be the commissioning of semiconductor facilities and the scaling of AI-infrastructure deployment across domestic industries.