Telangana's information technology sector is an economic anomaly. The industry generates roughly 66 percent of the state's Gross State Value Added and drives exports that grew from Rs 1.45 lakh crore in 2020-21 to over Rs 3.13 lakh crore by 2024-25. Yet the state government's direct budget allocation to its IT department in 2024-25 stood at just Rs 774 crore: less than 0.28 percent of the total Rs 2.91 lakh crore budget.

That gap between economic contribution and budgetary attention is not an oversight. It is a deliberate model. And understanding it is the key to understanding how Hyderabad became India's second-largest technology hub.

Five Years of Budgets: The Numbers

Before analysing what the government spent, it helps to understand the scale of what it was working with. Telangana's total state budget grew steadily across the period, even as political leadership changed in December 2023 when the Congress party replaced the Bharat Rashtra Samithi (BRS) government.

  • 2020-21: Rs 1,82,914 crore (Budget Estimate): Finance Minister T. Harish Rao
  • 2021-22: Rs 2,30,826 crore: growth of 26 percent year-on-year
  • 2022-23: Rs 2,45,257 crore: moderate growth amid fiscal consolidation pressures
  • 2023-24: Rs 2,90,396 crore: the last full BRS budget, and the most ambitious
  • 2024-25: Rs 2,91,159 crore: Congress government's first full budget, presented by Deputy CM Bhatti Vikramarka

The state's GSDP grew in parallel, from approximately Rs 11.05 lakh crore in 2020-21 to an estimated Rs 16.5 lakh crore in 2024-25. The fiscal deficit remained a persistent concern, ranging from 3 percent of GSDP in 2020-21 to 3.94 percent in 2021-22, before the Congress government brought it to 3.0 percent in 2024-25 (Rs 49,255 crore in absolute terms).

The IT Budget Paradox

Finding granular IT department allocations in Telangana's published budget summaries is surprisingly difficult. For the years 2020-21 through 2023-24, the Department of Information Technology, Electronics and Communications (ITE&C) did not feature prominently as a standalone line item in publicly available analyses. The only confirmed figure with precision is Rs 774 crore for 2024-25.

This is not because the government ignored the sector. It is because Telangana chose a fundamentally different strategy from most Indian states: instead of large public capital expenditure in IT infrastructure, the government invested in policy architecture, land allocation, talent pipelines, and institutional frameworks. The private sector was expected to bring the capital.

"The state contributes through enablement, not endowment. Every rupee of direct IT budget spend has been structured to unlock ten times that in private investment."

Framework behind Telangana's ICT Policy 2021-26

The results validate this approach. Telangana's IT export growth of 26 percent in 2021-22 and 31 percent in 2022-23 outpaced Karnataka, Maharashtra, and Tamil Nadu by a significant margin. Even in 2023-24, when the national IT sector grew at just 3.3 percent, Telangana posted 11.28 percent growth.

The Ecosystem Institutions and What They Actually Cost

The government's real IT investment is visible not in the consolidated budget but in the capital behind specific institutions. These numbers reveal both the ambition and the restraint of the approach.

T-Hub

India's largest startup incubator launched its Phase 2 campus in June 2022 under Chief Minister K. Chandrashekhar Rao. The 5,82,689 square foot building is the world's largest tech incubator by floor space. The government's direct cash outlay for T-Hub's operations, however, was modest: Rs 15 crore was allocated as T-Fund in the 2021-22 budget, used to write early-stage cheques of Rs 25 lakh to Rs 1 crore to tech startups. The 2,000-plus startups that have passed through T-Hub have collectively raised approximately Rs 16,000 crore in private capital. The leverage ratio on that Rs 15 crore is extraordinary.

T-Works

Launched in March 2023, T-Works is India's largest prototyping centre. The government committed Rs 70 crore of the Rs 110 crore total investment, with the private sector contributing Rs 40 crore. The 78,000 square foot facility hosts over 200 industry-grade tools and is designed specifically to bridge the gap between software idea and physical product: a gap that had historically pushed hardware startups out of Hyderabad toward Shenzhen or Bengaluru.

WE Hub

India's first state-led incubator exclusively for women entrepreneurs received Rs 15 crore in initial government allocation plus a Rs 5 crore Startup India Seed Fund disbursement. It now supports over 700 women entrepreneurs. Again, the multiplier on direct state spending is high: the program has unlocked Rs 4.25 crore in equity and Rs 90 lakh in grants, with significantly more in pipeline deals.

The pattern across all three institutions is consistent. Small, precisely targeted state capital is used to de-risk institutional formation. Private capital, industry partnerships, and fee revenue are expected to sustain operations from that point forward.

The AI Investment Story: No Line Item, But Real Infrastructure

Of all the analytical gaps in Telangana's five-year budget record, the most striking is the absence of a dedicated AI budget line. At no point between 2020-21 and 2024-25 did any published budget document contain a standalone AI allocation. Yet Telangana was simultaneously positioning itself as India's AI capital.

The gap between rhetoric and budget reflects a structural choice. The government's AI investment came in three forms that do not show up in IT department allocations.

Phase 1 (2020-2022): Policy as Infrastructure

In June 2020, Telangana became the first Indian state to release a formal AI policy framework. In July 2020, the Telangana AI Mission (T-AIM) was launched in partnership with NASSCOM, with a governing council that included the heads of NASSCOM, NVIDIA South Asia, Intel India, IIT Hyderabad, and the World Economic Forum's Centre for the Fourth Industrial Revolution. The mission was designed to support AI startups, develop sector-specific use cases in agriculture and healthcare, and build public-sector AI capability.

The cost to the state: near zero in direct budget terms. The mission was staffed through partnerships and operated through NASSCOM's institutional infrastructure. This is either a triumph of resource efficiency or an underinvestment in India's most promising technology frontier, depending on your vantage point.

Phase 2 (2022-2024): Compute as Commitment

The most concrete AI investment of the five-year period was the decision to build 410 petaflops of AI compute capacity in partnership with C-DAC, India's national computing infrastructure agency. This compute: equivalent to a mid-tier national AI supercomputing facility: was made accessible to startups and SMEs at subsidised rates. This represented a genuine public good investment in AI infrastructure, even if the capital came from the central government through C-DAC rather than from the state budget directly.

Phase 3 (2024-2025): The Global AI Summit and the 25-Program Roadmap

The political transition in December 2023 brought a new government but maintained continuity in AI ambition. In September 2024, Hyderabad hosted what was billed as India's first Global AI Summit. Chief Minister A. Revanth Reddy unveiled a 25-program "AI-powered Telangana" roadmap at the event. The programs were notably specific and measurable:

  • AI for All: Citizen AI literacy campaign targeting people aged 15-60 via WhatsApp and YouTube
  • Earn While You Learn: 5 lakh students receiving Rs 5,000 per month stipends for data annotation work
  • Telangana Vaibhavam AI Program: 10 lakh citizens contributing to 10 billion tokens of localised Telugu AI training data
  • TGDex (Telangana Data Exchange Platform): Anonymised government data shared with the private sector for AI model development
  • AI curriculum in schools: Full rollout across senior secondary schools by 2027
  • AI nodal officers: One AI-appointed official in each of 33 state departments

At the same event, IT Minister D. Sridhar Babu announced the AI City project: 200 acres near Hyderabad to be developed as a dedicated AI cluster under a public-private partnership, with expected private investment of Rs 2,125 crore and 5,020 direct jobs.

The Employment Contradiction

Set against the export growth numbers, one data point in the 2026-27 budget speech was quietly alarming. IT sector employment in Telangana fell from 9.46 lakh employees in 2023-24 to approximately 9.33-9.39 lakh by 2025-26. This decline happened even as exports grew from Rs 2.68 lakh crore to Rs 3.13 lakh crore.

The arithmetic tells the story of the AI transition in microcosm. The industry is producing more output with fewer people. Automation, AI-assisted development, and the shift toward higher-margin GCC (Global Capability Centre) work are compressing the entry-level job pipeline that historically absorbed engineering graduates from Telangana and neighbouring states.

By March 2026, Hyderabad hosted over 706 active GCCs: approximately 20 percent of all GCCs in India. GCC work is high-value and skill-intensive, but it does not generate the same volume of employment per rupee of output as traditional IT services. The state's IT minister had set a target of 11 lakh employees and Rs 3.5 lakh crore in exports by March 2025. The export target was nearly met. The employment target was missed.

The BRS to Congress Transition: Continuity and Divergence

Political analysis of the budget period requires understanding what changed and what did not when the Congress government took power in December 2023.

What continued: the commitment to Hyderabad as an AI hub, the support for T-Hub and the startup ecosystem, the Global AI Summit as a flagship event, and the core ICT policy framework developed under KTR (K.T. Rama Rao) as IT Minister between 2014 and 2023.

What changed: the framing. The BRS government had positioned IT and AI as economic development tools tied closely to KTR's personal brand and the "Hyderabad Inc." narrative. The Congress government reframed the AI agenda around citizen services and governance transformation: "making AI work for everyone" rather than making Hyderabad attractive for global capital.

The Rs 1,000 crore Fund of Funds announced in December 2025, targeting 100 unicorns by 2034, suggested that the new government had not abandoned the economic ambition. But the emphasis on programs like "Earn While You Learn" and AI literacy for citizens represented a different political calculation about where the AI dividend should land first.

How Telangana Compares

The context of other Indian states matters here. Karnataka, home to Bengaluru, remains India's dominant IT state with approximately 43 percent of national software exports and a significantly larger absolute IT budget. Maharashtra accounts for roughly 19 percent. Telangana accounts for approximately 16 percent and growing.

What distinguishes Telangana's position is not size but trajectory and efficiency. The state consistently outgrew the national IT sector average during 2021-2023. It achieved this with a fraction of the direct public capital that Bengaluru's infrastructure has received over three decades. The HITEC City-to-Outer Ring Road corridor was developed through a combination of HMDA planning, Cyberabad Development Authority policy, and private developer capital: not through large state budget outlays.

The counterargument is that this efficiency model is approaching its limits. HITEC City and Gachibowli are saturated. The workforce pipeline is constrained. The Rs 774 crore IT budget is visibly inadequate to fund the next generation of digital public infrastructure that AI-era governance requires. The 2026-27 budget's CURE framework and Bharat Future City announcements suggest the government recognises this.

What the Next Five Years Require

Reading across the five budget years, a coherent critique emerges. Telangana built a world-class IT ecosystem using policy ingenuity and minimal public capital. It worked spectacularly for software exports and startup formation. It is now being asked to deliver something qualitatively different: AI infrastructure that benefits citizens, not just companies; employment that is sustainable, not just aggregate; and governance transformation that uses the technology the state helped build.

That next phase requires different inputs. The Rs 5,000 crore AI data centre investment secured for Future City, the Rs 1,000 crore startup Fund of Funds, and the 30,000-acre Bharat Future City project are signals that the state understands this. But they are announcements, not budget lines.

The most important number from the five-year analysis is not the Rs 774 crore IT allocation. It is the 115 percent growth in IT exports achieved on the back of that allocation model. The question for Telangana's next chapter is whether the same leverage ratio is achievable when the goal is not export growth but equitable AI adoption across 33 districts, 9.33 lakh IT workers, and 3.5 crore citizens who have not yet benefited from the industry that defines their state's identity.

Data sources include PRS India state budget analyses (2020-21 through 2024-25), Telangana IT department annual export reports, NASSCOM state-level data, and official government announcements from the ITE&C Department.