Finance Minister Nirmala Sitharaman has positioned data centres as the next big business opportunity for India, drawing a clear parallel with the way the country capitalised on the global IT services boom. In her Budget speech for FY27, she laid out a sweeping incentive framework aimed at making India a global hub for cloud and AI-driven data infrastructure.

“Recognising the need to enable critical infrastructure and boost investment in data centres, I propose to provide tax holiday till 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India. It will, however, need to provide services to Indian customers through an Indian reseller entity,” she said.

The timing of the announcement is significant. Globally, artificial intelligence is no longer just a technology story but a geopolitical and economic one, with energy costs emerging as a key pressure point. In the US, the Trump administration has begun closely scrutinising the rapid expansion of AI data centres and their impact on electricity prices. Senior adviser Peter Navarro has publicly signalled that data centres serving global AI demand, including users in India and China, could become targets of policy action, arguing that their power-intensive nature is driving up costs for American consumers.

Protests against large data centre clusters in the US are already gathering momentum, fuelled by concerns over electricity tariffs, water consumption and environmental stress, creating bipartisan resistance.

India, by contrast, is positioning itself as a welcoming destination for this capital and capacity. Large domestic conglomerates have moved quickly to stake their claims. Reliance Industries, along with its joint venture partners, plans to invest $11 billion over five years to develop 1 gigawatt of AI data capacity in Andhra Pradesh. The Tata Group has proposed a similar $11 billion investment for its planned “Innovation City”, which includes a major data centre component near the upcoming Navi Mumbai International Airport. Adani Enterprises, meanwhile, has signed a memorandum of understanding with the Maharashtra government to set up 1 GW of hyperscale data infrastructure in the state, involving an investment of ₹50,000 crore over the next decade.

Sitharaman reinforced the policy thrust by spelling out the tax architecture in detail. “Recognising the need to enable critical infrastructure and boost investment in data centres, it is proposed to provide a tax holiday up to 2047 to any foreign company who provides services to any part of the world outside India by procuring data centre services in India,” she said.

Sales to Indian users, she clarified, would have to be routed through an Indian reseller entity and taxed accordingly. To further ease structuring concerns, the Budget also proposes a safe harbour margin of 15% for resident entities providing data centre services to related foreign companies that deliver cloud services globally.

Data infrastructure ecosystem in India

These measures come at a time when India’s data centre ecosystem is undergoing a structural shift. For years, data infrastructure in the country was limited to modest, enterprise-owned server rooms designed primarily for internal use. That era is over. Data centres have now become a strategic national priority, driven by the convergence of massive digital scale, policy clarity and rapid advances in technology. India hosts one of the world’s largest and most data-intensive mobile user bases across Reliance Jio, Bharti Airtel and Vodafone Idea, is rolling out ubiquitous 5G networks, has enforced data sovereignty norms, and is witnessing an explosion in AI adoption.

Industry estimates underline the scale of the opportunity. India’s installed data centre power capacity is expected to cross 2 GW by 2026, up from just over 1 GW today. By 2030, capacity could grow more than fivefold to over 8 GW, implying capital expenditure in excess of $30 billion. The government’s own AI push adds further momentum. The Cabinet-approved AI Mission 2.0, cleared in March 2024 with an outlay of ₹10,371.92 crore over five years, focuses on infrastructure, skilling, dataset development, indigenous models and access to GPUs. From an initial target of 10,000 GPUs, the country has already scaled up to 38,000 GPUs, improving access to affordable AI compute.

The confidence within government is visibly rising. “We have about $70 billion invested already in the execution phase. The way we see the enthusiasm, we shouldn't be surprised if this number doubles by the time the AI Impact Summit is over,” Union Minister for Electronics and IT Ashwini Vaishnaw said recently.

With global AI demand colliding with energy and regulatory constraints in mature markets, India’s Budget has made a clear pitch. If execution keeps pace with ambition, data centres could well become the backbone of India’s next trillion-dollar digital leap.