Budget 2026–27: Tax Holiday Could Drive $200 Billion in Data Centre Investments, Says Vaishnaw

The Finance Minister’s proposal for a tax holiday until 2047 for foreign companies providing global cloud services through India-based data centres could attract up to $200 billion in investment and bolster the country’s AI ecosystem, said Ashwini Vaishnaw, Minister of Electronics & Information Technology, on Sunday.

“This is a very significant development. It will bring in investment up to $200 billion and create demand for many related activities connected with data centers. As I mentioned earlier, AI server manufacturers now want to set up plants in India. Chip manufacturers want to add value in India, and in the future, even chip fabrication can happen here,” said Vaishnaw.

The Union Minister described data centres as a critical infrastructure for developing a globally competitive AI ecosystem in India.

“That is why we are focusing on building a robust AI infrastructure layer as part of the overall AI ecosystem. This is the key reason behind these major announcements on AI data centres,” he said.

When asked about the high consumption of land, water, and natural resources by data centres and the rationale behind granting them long-term tax benefits, Vaishnaw said that several innovations are helping reduce energy and resource usage.

“Recently, I met a startup that has reduced energy consumption by 35%. Another startup is working on a micro nuclear power generator that can fit on a rack. Each rack could potentially have its own micro nuclear generator,” he said.

The Ministry of Electronics and Information Technology has been focusing on building a multi-layered AI ecosystem in India, ranging from infrastructure to advanced and smaller chips. Under the India Semiconductor Mission, the government is prioritising chip design and manufacturing, while also encouraging domestic and global companies to set up data centres to support the training of AI models and applications.

Several Indian states, including Karnataka, Uttar Pradesh, and Tamil Nadu, have introduced dedicated data centre policies, while the Mumbai and Chennai markets together account for over 70 per cent of India’s total data centre capacity.

“Once AI data centers are established, they create a manufacturing ecosystem for chips, AI servers, and other components, leading to a multiplier effect. India has the second-largest talent pool in the world. This talent can be best utilized only if the necessary infrastructure is available,” added Vaishnaw.

Union IT Minister Ashwini Vaishnaw described the Budget 2026–27 as historic, saying that its announcements on manufacturing and infrastructure will attract significant investment and generate a strong multiplier effect.