India has announced a 20-year tax exemption for foreign technology companies that locate data centers in the country to serve overseas customers. The break excludes services provided to Indian clients, which will continue to be taxed at existing rates.
The move is part of a wider effort by New Delhi to lure investment into digital infrastructure and position India as a global hub for cloud computing and artificial intelligence. Policymakers have already given data centers infrastructure status and some states have relaxed land-use rules to speed development.
Last month’s global AI summit hosted in India underlined the government’s ambition to influence AI’s development and represent developing countries’ interests in how the technology is built and governed.
Ambitious investment pledges back that strategy. The Asia-Pacific region is projected to draw roughly $800 billion in data center investment by 2030, and major Indian conglomerates — including Reliance Industries, Adani Enterprises and the Tata Group — have announced multibillion-dollar commitments to AI-related infrastructure, sometimes in partnership with U.S. tech firms. These projects are expected to create thousands of jobs and expand India’s presence in cloud and AI services.
But experts warn infrastructure incentives alone will not guarantee leadership in AI. “Data centers add servers and storage, not the ability to build and control advanced AI,” said Apar Gupta, founding director of the Internet Freedom Foundation. He cautioned that without parallel investment in research, skilled personnel and Indian datasets, India risks mainly hosting infrastructure for global companies rather than shaping technology or setting the rules.
Divij Joshi, a research fellow at the Overseas Development Institute, echoed that concern: “Hosting servers does not mean controlling what runs on them.” Joshi said India would need infrastructure at a scale that makes global AI supply chains dependent on it — a difficult task given the current leads held by the U.S. and China. He urged priorities such as reliable power grids, clear regulations, technology transfer and stronger R&D funding.
Environmental and resource constraints add further complexity. AI data centers consume large amounts of electricity and water to cool high-performance chips like GPUs, which can run very hot. Those demands are especially problematic for India’s water-stressed cities.
Joshi warned that continuous needs for electricity, water and steady materials supplies could clash with local resource realities. He also noted that relatively lax environmental rules and rapid land availability may be additional draws for investors beyond tax incentives.
Jyoti Panday, Asia regional director of the Internet Governance Project, pointed to rising local opposition worldwide to data centers over power and resource use. While India’s cheaper electricity, centralized decision-making and comparatively limited resistance make it attractive to investors, she said infrastructure constraints in cities such as Mumbai and Chennai are real and could intensify.
Edited by: Srinivas Mazumdaru