India’s Adani Group will invest $100 billion by 2035 into building AI-ready data centres in India, powered largely by renewable energy. This is to dramatically expand the country’s computing infrastructure, to forge partnerships with global tech players like Google and Microsoft. This soon after the foreign tax breaks…coincidence? Not so much.
The Modi government announced a 21-year tax holiday to big tech companies like Google, Amazon, Microsoft if they provide cloud services globally from Indian data centres. Less than two weeks after that, the Adani group just said it will drop a cool billion dollars to build data centers in India. These are AI-ready data centres designed to support high-performance computing and cloud services.
The Modi government and the Adani group are so hand-in-glove that this looks like the tax holiday was perfectly set up for this to follow.
But Adani has bold ambitions for this project: It starts with a $55 billion towards energy generation and storage capacity, all powered by renewable energy. And by “increasing capacity,” it means expanding the national capacity from 2 GW to 5 GW, potentially making it one of the world’s largest integrated data centre platforms. It will throw in another $150 billion on manufacturing and building out the cloud-ecosystem infrastructure.
The Adani group is a business powerhouse. At its peak in 2022, the combined market cap of the Adani Group’s listed companies was about $288 billion. It has both the resources and the force to transform India into a global competitor in AI infrastructure… just as Modi imagines it.
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Data centres and cloud infrastructure are extremely capital-heavy. Building multiple gigawatts of computing capacity and energy infrastructure requires decades to run optimally.
With the tax holiday, New Delhi is lowering expected tax drag over long horizons, which otherwise is an impediment for global investors considering projects with payback periods well beyond typical corporate planning cycles. It also provides predictability for companies that their operating profits from foreign sales won’t be taxed unpredictably in India.
When a policy like that meets the private capital of Adani’s scale, India is well-positioned and looks like a great alternative to locations in Southeast Asia, Europe, or even North America.
But throwing money at some problems doesn’t make them go away. On last count, data centres still consume vast amounts of power and water, especially to cool servers and maintain uptime. India’s electrical grid and water systems will face stress as capacity scales up, potentially challenging reliability targets required by global tech firms. Long tax holidays hinge on policy stability. Past experiences in emerging markets show that retrospective tax changes or regulatory shifts can undermine investor trust. This could temper the enthusiasm of foreign players unless guarantees or legal frameworks reinforce the credibility of the tax benefits. But New Delhi is hoping the safe harbor margins and the two-decade tax holiday should do the trick.
