India Wants to Be a Global AI Infrastructure Hub. Three Gaps Need Fixing First.
India has positioned itself as an aspirant global hub for AI infrastructure. The headline instrument is a 21-year tax holiday for foreign companies that establish data centres in India under an approved scheme.
Kartavya News Desk
India's Data Centre Tax Holiday: The Stakes
A 21-year tax holiday for foreign data centre operators attracted $240 billion in pledges at the February AI Summit. But three structural gaps could limit the programme's value for India.
The Environmental Deficit: Water Stress
Fifty existing Indian data centres are in high water stress zones. Without mandatory environmental standards on water use, expanding data centre infrastructure risks deepening India's existing freshwater crisis.
The Domestic Innovation Deficit: No Tech Transfer Requirement
The tax holiday has no technology transfer condition. Indian-operated data centres will likely import US equipment rather than build domestic capacity, keeping India at the infrastructure tier rather than the capability tier.
The Data Sovereignty Deficit: Sanctions Exposure
Minority foreign stakes leave Indian-operated data centres potentially vulnerable to international sanctions, as the Nayara v. SAP case illustrates. Indian ownership alone does not guarantee operational independence.
The DPDP Ambiguity
Section 17 of the DPDP Act 2023 may exempt foreign data stored in Indian-operated data centres from breach notification requirements. The law needs to clarify its scope explicitly.