Data centres are the factories of the digital economy. They are capital-intensive, long-gestation assets with operating lives of 20–30 years, where investment decisions hinge on long-term certainty. By extending incentives over more than two decades, the government is signalling that it understands the sector’s fundamentals and is willing to provide stability at scale—something global investors value more than short-term fiscal concessions.
This announcement is particularly relevant given the recent wave of large-scale investments which have already been announced in India. Global hyperscalers have committed billions of dollars towards cloud regions, subsea cable connectivity and data centre capacity. Co-location and infrastructure players re expanding hyperscale campuses across Mumbai, Chennai, Hyderabad, and the NCR. These investments are not speculative but are responses to India’s growing role in global digital workloads, AI development, and enterprise cloud adoption.
The proposed tax holiday strengthens the economics of these commitments and, more importantly, encourages the next phase of expansion. It allows global cloud providers to move beyond serving domestic demand and use India as a base to serve customers worldwide. This reframes India’s role from a local market to a supplier of global compute and storage capacity, in sync with other developed economies.
The requirement that Indian customers should be served through an Indian reseller entity strikes a pragmatic balance. It ensures domestic value creation and regulatory oversight while allowing global firms to retain technological and operational control. This design avoids excessive protectionism and aligns foreign investment with the development of a strong local cloud and IT services ecosystem.
Another critical yet less visible feature is the 15% safe harbour on cost for related-party data centre services. Transfer pricing uncertainty has long deterred multinational digital infrastructure investments in emerging markets. By providing clarity upfront, the proposal reduces litigation risk, improves predictability of cash flows, and simplifies internal approvals which is often a decisive factor in global location decisions.
The spillover effects of this could be significant. Large data centre investments drive demand for reliable power, renewable energy, grid upgrades, fibre networks, and subsea cable landing stations. They create high-skill jobs and anchor adjacent ecosystems in semiconductors, electronics manufacturing and AI. At a strategic level, they deepen India’s integration into global digital value chains at a time of increasing geopolitical fragmentation.However, budget announcements alone will not be enough and power reliability, land availability, faster approvals, and clarity on data governance will determine whether this vision translates into sustained leadership. However, as a statement of intent—backed by visible private-sector momentum—the proposal is bold and timely. A tax holiday till 2047 is not merely a fiscal incentive. It is a declaration that India intends to be a long-term pillar of the global digital economy.
The author is Partner and Leader CP&I and Industrial Development, PwC India