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As the worldwide race to construct AI infrastructure accelerates, India has provided international cloud suppliers zero taxes by way of 2047 on providers bought exterior the nation in the event that they run these workloads from Indian knowledge facilities — a bid to draw the subsequent wave of AI computing funding, at the same time as energy shortages and water stress threaten enlargement within the South Asian nation.
On Sunday, India’s finance minister Nirmala Sitharaman introduced (PDF) the proposal within the nation’s annual funds, providing a tax vacation — successfully zero taxes — on revenues from cloud providers bought exterior India if these providers are run from knowledge facilities within the nation. Gross sales to Indian clients must be routed by way of regionally included resellers and taxed domestically, she instructed parliament. The funds additionally proposes a 15% cost-plus secure harbour for Indian data-center operators offering providers to associated international entities.
The announcement comes as U.S. cloud giants together with Amazon, Google, and Microsoft race so as to add data-center capability worldwide to assist the surge in artificial-intelligence workloads, with India rising as an more and more engaging location for brand spanking new funding. The nation affords a big pool of engineering expertise and rising demand for cloud providers, and has positioned itself as a key different to the U.S., Europe, and elements of Asia for increasing compute infrastructure.
In October, Google mentioned it might make investments $15 billion to construct an AI hub and increase data-center infrastructure in India, its largest dedication within the nation so far, following a $10 billion dedication in 2020. Microsoft adopted in December with plans to speculate $17.5 billion by 2029 to increase its AI and cloud footprint, funding new knowledge facilities, infrastructure, and coaching packages. Amazon has additionally stepped up its spending in December, saying it might make investments a further $35 billion in India by 2030, taking its complete deliberate dedication to about $75 billion because it expands its retail and cloud operations.
India’s home data-center sector can also be ramping as much as meet world demand. In November, Digital Connexion, a three way partnership backed by Reliance Industries, Brookfield Asset Administration, and Digital Realty Belief, mentioned it might make investments $11 billion by 2030 to develop a 1-gigawatt, AI-focused knowledge heart campus within the southern state of Andhra Pradesh. The mission, spanning about 400 acres in Visakhapatnam, is among the many largest introduced in India and underscores rising curiosity from each home and world traders in constructing AI-ready infrastructure within the nation. Individually, Adani Group mentioned in December it plans to speculate as much as $5 billion alongside Google in its AI knowledge heart mission within the nation.
Nonetheless, scaling up knowledge heart capability in India might show tough, as patchy energy availability, excessive electrical energy prices, and water shortage pose key constraints for energy-intensive AI workloads. These challenges might gradual development and lift working prices for cloud suppliers.
“The bulletins on knowledge facilities sign that they’re being handled as a strategic enterprise sector reasonably than simply back-end infrastructure,” mentioned Rohit Kumar, founding associate of New Delhi-based The Quantum Hub, a public coverage and tech consulting agency. The push is more likely to appeal to extra non-public funding and strengthen India’s place as a regional knowledge and compute hub, although execution challenges round energy availability, land entry, and state-level clearances stay, he added.
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Sagar Vishnoi, co-founder and director of Noida-based suppose tank Future Shift Labs, mentioned India’s data-center energy capability is projected to surpass 2 gigawatts by 2026, up from simply over 1 gigawatt at present, and will increase greater than fivefold to exceed 8 gigawatts by 2030, pushed by capital investments of greater than $30 billion. Whereas the funds indicators clear intent to speed up digital infrastructure and cloud computing, Vishnoi mentioned permitting international cloud companies to earn income tax-free till 2047 displays a “strategic guess on world Huge Tech,” at the same time as India might produce its personal know-how champions over the subsequent twenty years.
He added that routing providers to Indian customers by way of reseller entities might depart smaller home gamers competing for skinny margins, reasonably than receiving comparable upstream incentives.
The federal funds additionally stepped up incentives to deepen India’s function in electronics and semiconductor manufacturing, because the nation seeks to maneuver past meeting and seize extra worth in world provide chains. The federal authorities would launch a second section of the India Semiconductor Mission, the finance minister mentioned, targeted on producing gear and supplies, creating full-stack home chip mental property, and strengthening provide chains, whereas backing industry-led analysis and coaching facilities to construct a talented workforce.
Moreover, the Indian authorities has raised the outlay for the Electronics Elements Manufacturing Scheme to ₹400 billion (round $4.36 billion), from ₹229.19 billion (about $2.50 billion), after this system — launched in April 2025 — attracted funding commitments at greater than double its unique goal, Sitharaman mentioned.
This scheme affords incentives tied to incremental manufacturing and funding, reimbursing a portion of prices for corporations that manufacture key parts resembling printed circuit boards, digicam modules, connectors, and different elements utilized in smartphones, servers, and data-center {hardware}. By linking payouts to precise output reasonably than upfront subsidies, this system is designed to attract world suppliers deeper into India’s electronics provide chain and cut back reliance on imported parts — a long-standing criticism of the nation’s manufacturing push.
Alongside rising the spending allocation for the electronics parts scheme, the federal funds additionally proposed a five-year tax exemption beginning in April for international corporations supplying gear and tooling to electronics toll producers working in bonded zones. The change is more likely to profit corporations together with Apple, which depends closely on contract manufacturing in India and has beforehand been reported to have sought readability from New Delhi on the tax remedy of high-end iPhone manufacturing gear equipped to its companions.
The funds additionally sought to deal with vulnerabilities in vital minerals, as India grapples with tightening world provides of uncommon earth supplies utilized in electrical autos, electronics units, and protection techniques. The finance minister mentioned the federal authorities would assist mineral-rich states together with Odisha, Kerala, Andhra Pradesh, and Tamil Nadu in establishing devoted rare-earth corridors to advertise mining, processing, analysis, and manufacturing. The transfer builds on a seven-year incentive program authorised in late 2025 to spice up home manufacturing of rare-earth magnets, as entry to provides from China — which dominates world output — has change into extra constrained.
Past AI infrastructure and electronics manufacturing, the Indian authorities additionally moved to spice up cross-border e-commerce, aiming to assist smaller companies faucet world demand. The finance minister mentioned the present ₹1 million (round $11,000) worth cap per consignment on courier exports could be eliminated, a transfer anticipated to profit small producers, artisans, and startups promoting abroad by way of on-line platforms. The federal authorities would streamline the dealing with of rejected and returned shipments utilizing know-how, addressing a long-standing bottleneck for exporters, Sitharaman mentioned.
Total, the most recent measures emphasize India’s ambition to place itself as a long-term hub for world know-how infrastructure, spanning cloud computing, electronics manufacturing, and demanding minerals. The technique goals to capitalize on surging AI demand and shifting provide chains. Nonetheless, its success will hinge on execution — from dependable energy and water for knowledge facilities to sustained assist for home innovation — as world corporations and traders weigh whether or not India can translate coverage incentives into sturdy management within the AI period.
