Financial minister Nirmala Sitharaman in her Budget speech proposed that foreign cloud service provider companies will be given a tax holiday till 2047. She noted the services to Indian customers must be provided through an Indian reseller entity.
Reseller entities are Indian-incorporated companies that deliver cloud, AI, or digital infrastructure services to global customers from infrastructure located in India.
Sitharaman also proposed a 15% safe harbour on costs for companies providing data centre services from India through related entities.
These announcements are expected to enable critical infrastructure and boost investment in data centres, a booming sector in India. The sector’s growth is being driven by a combination of factors like the increased demand for digital services, a government mandate for data sovereignty, and the rapidly evolving artificial intelligence domain.
Industry experts forecast that the total installed power of India’s data centres will surpass 2GW by 2026 from a current level of over 1GW. Industry analysts peg India’s data center capacity to grow fivefold by 2030 to over 8GW.
India’s Global Cloud Backbone Bet
The new announcement is expected to move India up the value chain from consuming global cloud services to exporting trusted digital infrastructure. The long-term impact is compounding — jobs, innovation, resilience, and global competitiveness — making this one of the most consequential technology policy signals in recent years, experts say.
“By anchoring global cloud infrastructure within the country, India positions itself as a digital backbone for the world. This accelerates investment into data centres, strengthens sovereign digital capacity, and catalyses the domestic technology ecosystem — from startups and SaaS firms to AI and life sciences,” said Abhinav Johri, partner, EY.
India has traditionally been a tech-consuming country. With this policy, India can become the lowest-cost, highest-scale destination for cloud and AI services serving the world, experts say.
“This will allow India not just to export cloud services, but to become one of the largest exporters of AI-driven services and solutions globally. Over time, this will create a strong ecosystem of infrastructure providers, hyperscalers, startups, and enterprises building together,” Raju Vegesna, chairman & MD, Sify Technologies.
This proposal could also relieve data centre operators from concerns in terms of investment in capital-intensive infrastructure.
Data Sovereignty And Localisation Take Centre Stage
The proposal should also be seen in the light of growing concerns around data localisation and sovereignty, which have intensified amid today’s volatile geopolitical climate.
Persistent anxieties remain that extraterritorial regulations, such as the US CLOUD Act, could conflict with India’s own data protection and sovereignty frameworks.
By incentivising global cloud providers to park and process data within Indian borders, the policy could meaningfully mitigate these risks, strengthening India’s control over critical digital infrastructure while enhancing regulatory certainty for global enterprises.
Industry responses, however, remain nuanced.
For sovereign Indian platforms like Yotta Data Services, this evolution creates strong complementarity rather than competition, according to cofounder and CEO Sunil Gupta.
“As hyperscalers localise through Indian entities and expand their India footprint, demand for hyperscale data centres combined with GPU-dense, AI-optimised infrastructure will rise sharply. These are the areas where Indian operators with deep local execution capabilities, regulatory alignment, and energy-backed capacity are uniquely positioned,” he said.
On the contrary, AS Rajgopal, who leads data centre and sovereign cloud provider NxtGen Technologies, believes that the proposal does not impact the sovereignty push.
“It may be an aspiration to serve global markets from India. Europe has strong regulations and will expect global cloud providers to serve locally from within Europe. Singapore, Malaysia, Indonesia, and Hong Kong have already matured data centre roll-outs. Perhaps the government wants the global south to be served from India.”
India’s Data Centre Boom
The year 2025 was a breakout year for data centres in India, with capacity growing to an estimated 1.6 GW.
Mega announcements included Reliance Industries unveiling ‘world’s largest’ data centre in Jamnagar, along with a 1 GW AI facility built with Nvidia. Microsoft pledged a $17.5 Bn investment to build secure, sovereign-ready, and hyperscale data centres. Tata Consultancy Services, in partnership with TPG, announced HyperVault, targeting 1–1.2 GW over five years. ChatGPT-maker OpenAI committed 1 GW of capacity as well.
Notably, several media publications reported in September 2025 that the Ministry of Electronics and IT (MeitY) proposed a tax exemption of up to 20 years for data centre developers who meet targets on capacity addition, power usage effectiveness, and employment generation. These incentives were outlined in a new draft of the National Data Centre Policy.
