Union Budget 2026 accommodates US demands amid trade talks

The Union Budget 2026-27 has tilted towards accommodating several US-focused demands raised during ongoing bilateral trade negotiations, signalling India’s intent to ease friction points even as talks for a broader trade agreement continue.

From a tax holiday for foreign data centre operators to customs duty exemptions in aviation and nuclear power, the Budget reflects a calibrated policy shift aimed at addressing long-standing concerns flagged by Washington.

Tax holiday for foreign data centres

The most prominent concession is a tax holiday until 2047 for foreign companies that provide cloud services globally using data centre infrastructure located in India. The move directly benefits large American technology firms that have been seeking fiscal incentives and regulatory clarity to scale up operations in India.

As part of trade discussions, the US had pushed for greater market access for its data centre companies, including tax relief, affordable access to land and utilities, and rationalisation of duties on imports.

While the concession comes with the condition that services to Indian customers be routed through an Indian reseller entity, the broader framework aligns with Washington’s push to secure favourable operating conditions for its tech giants in one of the world’s fastest-growing digital markets.

Duty elimination in aviation

In another significant step, the Budget proposes elimination of customs duty on aircraft components and Maintenance, Repair and Operations (MRO) inputs. The US is a global leader in aerospace manufacturing and home to major aircraft and engine makers.

American firms have consistently sought lower duties and a more competitive MRO ecosystem in India to tap into the country’s rapidly expanding aviation market. The duty waiver effectively addresses this concern, reducing costs for US suppliers and strengthening their access to Indian carriers and service providers.

The move also complements India’s ambition to become a global MRO hub, a space where US companies are expected to play a pivotal role.

Nuclear sector opening deepens

The concessions extend to the strategic nuclear energy sector. The Budget proposes zero customs duty on nuclear-generation equipment, absorber rods and project imports for all registered nuclear plants until 2035.

This follows the passage of the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act, 2025, which opened the operations side of the tightly governed nuclear power sector to private players, another long-standing US ask.

Signalling in the backdrop of tariff tensions

These measures come at a time when trade relations have been strained by US tariff actions under President Donald Trump, including steep reciprocal duties on several Indian export categories.

While the Budget also includes support for sectors vulnerable to US tariffs, the thrust of policy announcements particularly in data services, aviation and nuclear power underscores an effort to address American priorities as negotiations continue.