India has proposed zero taxes for foreign cloud service providers until 2047 on services sold outside the country. The mandatory condition is to perform workloads from Indian data centers.
On February 1st, Finance Minister Nirmala Sitharaman proposed tax holidays—effectively zero taxes—on income from cloud services that firms earn abroad. Sales to Indian clients will be taxed at standard rates.
The announcement comes as American giants like Amazon, Google, and Microsoft strive to expand their capacities globally to support the growth of AI workloads.
Meanwhile, India is becoming an attractive destination for new investments. The country offers a large talent pool and growing demand for cloud services. It positions itself as an alternative to the US, Europe, and parts of Asia.
In October, Google announced a $15 billion investment to establish an AI hub in the country. In December, Microsoft followed suit with an even larger sum of $17.5 billion. Amazon plans to invest $35 billion by 2030.
Domestic firms are also ramping up capacities. In November, Digital Connexion announced an $11 billion investment by 2030 to develop AI-focused data centers with a capacity of 1 GW. Adani Group, in collaboration with Google, has planned its own $5 billion project.
Tech giants and startups may face challenges, as India has issues with stable power supply and water shortages.
The Infrastructure Race
Other countries and regions are also taking active steps in the foundational work supporting artificial intelligence.
In Texas, a regulator approved energy infrastructure developer Pacifico Energy to build a facility to support a data center with a capacity of 7.65 GW. It will become the “largest gas project” in the US.
GW Ranch is designed to serve hyperscale data centers. Unlike traditional power plants, it is being developed without connecting to the general power grid. This allows clients to receive energy directly from local sources, bypassing the Texas grid.
Meanwhile, British Columbia will require most new AI projects and data centers to participate in a competition for access to clean energy. The Canadian province is taking measures to manage the sharp increase in electricity demand.
The new competitive process is designed to prevent overloading the power system and ensure availability and reliability for existing customers.
Back in November, HSBC CEO Georges Elhedery stated that current revenues of AI companies may not justify the enormous computing expenses.