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India's Data Centers Booming: Budget Fuels $90B AI Investment
9 Feb
Summary
- Union Budget 2026 offers tax holidays for foreign cloud firms using Indian data centers.
- Investments in Indian data centers are projected to reach $90 billion.
- Major companies like RIL, L&T, Google, and AWS are significantly investing in new facilities.
Union Budget 2026 is set to invigorate India's booming data center sector with tax incentives and a projected $90 billion in investments. Foreign companies providing cloud services in India will benefit from a tax holiday until 2047 if they utilize local data center services. This move aims to solidify India's position in the global AI infrastructure landscape.
Significant investments are already underway, with Reliance Industries and Larsen & Toubro announcing multi-billion dollar projects. Reliance's Digital Connexion plans to invest $11 billion over five years for a 1 GW data center in Visakhapatnam. L&T will invest $2.5 billion to establish five data centers, including one in Visakhapatnam, with expansion into Chennai, Mumbai, and Bengaluru.
These developments align with a broader trend of increasing demand for data center capacity, fueled by digital transformation, AI advancements, and the proliferation of 5G technology. Major tech players like Google, Amazon, and Microsoft are also expanding their presence. Google committed $15 billion for an AI data center hub in Visakhapatnam, while AWS is investing around Rs 60,000 crore in Hyderabad.
Despite the rapid growth, managing the immense power requirements of data centers is a critical concern. There is a growing emphasis on ensuring robust transmission planning and increasing the share of renewable energy sources to meet carbon emission commitments. The industry is expected to undertake substantial capital expenditure to meet the surging demand.
