In a significant move to bolster Karnataka’s image as the tech capital, the state government, on Friday, announced the Budget 2025-26, allocating a significant amount for AI initiatives.
The state allocated ₹300 crore for a Fund-of-Funds and a corpus fund of ₹100 crore for deep tech development, while also setting aside ₹50 crore over five years for the Centre for Applied AI for Tech Solutions (CATS).
The government pushed the startup ecosystem to expand further in cities like Mysuru, Mangaluru, Hubballi-Dharwad, and Kalburgi, with 10,000 job creations.
Presenting the estimated ₹4,09,549 crore budget, Karnataka Chief Minister Siddaramaiah announced development initiatives, positioning the state as a leader in technological innovation.
Additionally, under the ‘Brand Bengaluru’ concept (to improve infrastructure, service delivery, and traffic management), ₹1,800 crore was allotted for 21 schemes during the financial year 2025-26.
AI in Governance and Education
The Karnataka AI cell is developing AI-based solutions using technologies like computer vision and Natural Language Processing (NLP) and LLMs to enhance governance.
“An AI-based Government Order Summary and Information Extraction Tool will facilitate easy access to government information for officials and citizens, the CM said. Additionally, the AI-driven IPGRS 2.0 was announced to improve public grievance resolution, placing Karnataka ahead in the digital administration game.
Focusing on the education sector, the government initiated the Kalika Deepa Programme in collaboration with Ek-Step Foundation, extending AI-based learning tools to 2,000 schools. The aim is to enhance students’ English and Kannada language skills and mathematical competencies.
Karnataka also launched an advanced attendance management system in all government departments using the latest technologies, such as AI and Geographic Information System (GIS). In addition, a ₹2 crore smart system is to be implemented using AI to provide transcriptions of court proceedings, translations of judicial documents, and other information.
As part of the ₹667 crore Bengaluru Safe City project, cameras have been installed across Bengaluru, out of which 10 drones have been implemented.
To monitor and control vehicular traffic, AI-enabled electronic cameras will be installed at 60 places in Davanagere, Dharwad, Kalaburagi, Belagavi, Chitradurga, Haveri, Hospet, Bellari, Vijayapura, and Dakshina Kannada districts at the cost of ₹50 crore.
GCCs, IT and New Tech Get a Monetary Boost
Aiming to stimulate innovation and entrepreneurship in cities other than Bengaluru, a Local Economy Accelerator Program (LEAP) will be launched in the current year with a grant of Rs. 1,000 crore.
The state’s IT policy targets investments of $300 billion and job creation of 1.5 lakh, emphasising cloud computing and emerging technologies.
Karnataka will develop Global Innovation Districts in Mysuru, Belagavi, Dharwad, and Bengaluru to strengthen its leadership in GCCs as well. The GCC Policy 2020-25 also aims for an investment of ₹5,000 crore, with an ambition of creating 3.5 lakh jobs.
Additionally, Karnataka State Electronics Development Corporation Limited (KEONICS) will establish three new Global Technology Centres in Mangaluru, Hubli, and Belagavi as plug-and-play facilities.
The budget announcement also included Quantum Research Park Phase-2, to be set up with a grant of ₹48 crore over three years in collaboration with the Indian Institute of Science, Bengaluru.
Semiconductors and Electronics
The budget announced the building of a state-of-the-art PCB Park will be developed in Mysuru on 150 acres, creating a dedicated ecosystem for electronics manufacturing, with an addition of ₹99 crore SensorTech Innovation Hub to encourage sensor research and development.
In the broader context, Karnataka’s semiconductor ambitions are gaining momentum, with companies like Microsoft, Intel, Accenture, and IBM committing significant investments.
The state’s Industrial Policy 2025-30, unveiled at Invest Karnataka 2025, aims to create 2 million jobs and attract substantial investments in sectors like semiconductors and renewable energy. The Union budget for 2025–26 also supports these efforts with an increased allocation for semiconductors and electronics manufacturing.
To encourage electronic vehicle (EV) manufacturing and usage, a testing track of international standards and a state-of-the-art EV cluster with common infrastructure will be established around Bengaluru at a cost of ₹25 crore.
The Karnataka Biotechnology Policy also aims to attract ₹1,500 crore investments through incentives, while the data centre policy aims for an investment of ₹10,000 crore with a total capacity of 200MW.
Additionally, Karnataka’s AVGC-XR Policy 2024-29 also sees an investment of ₹150 crore with 30,000 jobs to be created.
The state signed MoUs totalling ₹10.27 lakh crore at the Global Investors’ Meet 2025, held in February this year, expecting to create over 600,000 job opportunities. The government envisions positioning itself as a hub for Artificial Intelligence (AI), AI-driven governance, education, electronic manufacturing, deep tech, Global Capability Centres (GCCs), biotechnology, and IT.
