India is strengthening its digital infrastructure with an ambitious proposal to provide data centre developers tax exemptions of up to 20 years, provided they achieve specific targets related to capacity expansion, energy efficiency, and employment generation. This is outlined in the draft National Data Centre Policy 2025, currently under consultation with stakeholders. The draft policy aims to position India as a global hub for cloud infrastructure, artificial intelligence (AI) modelling, and digital services at a time when demand for data storage and computing power is accelerating rapidly.
India Drafts Incentives to Boost Data Centres and AI Ecosystem
The proposed policy offers a range of incentives. A long-term tax holiday is at its core, with benefits linked to measurable outcomes. Developers may also gain access to input tax credits on capital assets, including construction materials, HVAC systems, cooling equipment, and electrical infrastructure. Foreign companies operating or leasing at least 100 megawatts of capacity could qualify for permanent establishment status in India, strengthening international investment flows. Additionally, eligible firms may be encouraged to set up AI research centres or global capability hubs in the same city as their data facilities, promoting advanced technology ecosystems. Officials say this strategy will generate jobs and bolster domestic capacity in fields like AI, cloud computing, and cybersecurity, extending beyond metros into Tier-II and Tier-III cities.
India’s data centre industry is already expanding at a 24% compound annual growth rate since 2019. According to JLL, 795 megawatts of new capacity will be added by 2027, taking the total to 1,825 megawatts, with occupancy rates already running at 75–80 percent. Analysts predict demand will only intensify as the digital economy scales, underlining the urgent need for next-generation infrastructure.
Government Draft Proposes Sustainable Solutions for Data Centre Infrastructure
The draft also addresses two critical challenges: land and power. States will be urged to allocate land banks near industrial hubs for data centre parks, while the IT ministry will coordinate with power authorities to guarantee reliable energy access. Developers will also be nudged towards renewable sources, with proposals for uniform rules on storage and even modular nuclear reactors near large hubs. Officials stress that sustainable power is essential to the sector’s long-term growth.
Summary:
India’s Draft National Data Centre Policy 2025 proposes tax exemptions of up to 20 years, GST credits, and incentives for AI hubs to boost cloud and digital infrastructure. With rapid industry growth, it tackles land and power challenges, urging renewable energy adoption, positioning India as a global data centre hub.
