India has unveiled a package of incentives to turn itself into a global hub for AI computing and advanced manufacturing, led by a zero-tax offer for foreign cloud providers through 2047. Under the budget proposal announced by Finance Minister Nirmala Sitharaman, overseas cloud firms will pay no tax on revenue from services sold outside India if those AI and cloud workloads run from data centers in the country. Services for Indian customers must go through locally incorporated resellers and be taxed domestically, while Indian data-center operators serving related foreign entities get a 15% cost-plus safe harbour regime.
The move targets growing investment from Amazon, Google, and Microsoft, which are already adding AI-ready data centers in India. Google plans to invest $15 billion to build an AI hub, Microsoft has pledged $17.5 billion by 2029, and Amazon aims to spend an additional $35 billion by 2030 as part of a roughly $75 billion commitment. Local projects are scaling too, including an $11 billion, 1-gigawatt AI data center campus in Andhra Pradesh from Digital Connexion, backed by Reliance, Brookfiel,d and Digital Realty, and a planned $5 billion AI data center project by Adani Group with Google.
Policy experts say the tax holiday shows data centers are being treated as a strategic sector and could strengthen India’s position as a regional data and computing hub. But patchy power supply, high electricity prices, land hurdles, and water scarcity threaten to slow expansion and raise costs. Analysts also warn that routing services to Indian users through reseller entities could leave smaller firms with thin margins while global tech giants capture most of the profit.
Beyond cloud and AI, the budget steps up support for electronics, semiconductors, and critical minerals. New Delhi will launch a second phase of the India Semiconductor Mission to develop chip designs, equipment,t and materials, and has raised funding for the Electronics Components Manufacturing Scheme to ₹400 billion, with output-linked incentives to bring more suppliers into the supply chain. The government will also back rare-earth corridors in mineral-rich states and scrap the value cap on courier exports to boost cross-border e-commerce, while simplifying returns for exporters. Together, the measures are meant to move India up the tech value chain as AI demand and supply chains shift globally.
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