The $11.2B Advantage: Why Budget 2026 Just Made India the World’s AI Hard Drive

For years, the narrative around India’s datacenter growth centered on immense demand and a burgeoning digital economy. The numbers tell the story: India’s internet user base has exploded from 137 million in 2012 to over 950 million in 2024, representing a 520% growth in just over a decade. With internet penetration reaching 60% and smartphone users crossing 750 million, India’s digital economy is projected to reach $1 trillion by 2028. Data consumption has skyrocketed to over 36 GB per user per month, among the highest globally, driven by affordable data plans and digital-first initiatives.

While this growth narrative is undeniably true, a quiet revolution has just taken place within the Union Budget 2026-27, transforming India from a high-potential market into the most fiscally certain jurisdiction for global AI infrastructure. This isn’t just a budget; it’s a long-term commitment to AI capital.

The Tax Holiday That Changes Everything

The cornerstone of this shift is a profound commitment to attracting global hyperscalers. Budget 2026 introduces tax incentives designed to provide near-zero or zero taxation on qualifying global income for foreign companies providing cloud services to their international clientele through India-based datacenters. This isn’t a temporary waiver; it’s a strategic legislative move designed to make India the world’s preferred hub for processing global AI workloads, with provisions extending into the long term.

The numbers speak for themselves. Compared to a 17% corporate tax in Singapore or 12.5% in Ireland, the Budget 2026 framework represents a potential 12-17 percentage point boost to effective margins, a transformational advantage for long-term infrastructure investors. 

Eliminating the “Litigation Tax”

Beyond the tax holiday, Budget 2026 introduces a crucial mechanism to eliminate transfer pricing ambiguities that have historically plagued cross-border operations. Transfer pricing disputes in India have historically taken 4-8 years to resolve, with legal and compliance costs often exceeding ₹50-100 crore per case for large multinational operations.

For related-party datacenter operators, the framework establishes a 15% safe harbor margin on costs. This simple yet powerful provision largely removes the specter of “litigation tax”, the years of costly disputes and uncertainty that have deterred investment. For any long-term infrastructure investor, this certainty is invaluable. As Revenue Secretary Arvind Shrivastava has emphasized, India is creating not just incentives, but predictability.

The India Advantage: By the Numbers

Let’s examine the concrete advantages for global hyperscalers planning a 100MW AI cluster:

CAPEX Certainty
Building a 100MW facility in India costs approximately $664 million (at ~$6.6M/MW). The equivalent in Singapore would be around $1.45 billion (at ~$13-14M/MW). That’s an upfront $786 million CAPEX saving, capital that can be redeployed into additional capacity or R&D.

To put this in perspective: $786 million could fund an additional 118MW of AI-ready capacity in India, effectively allowing hyperscalers to build nearly double the infrastructure for the same capital outlay.

OPEX Efficiency
Power is the single largest operational cost for AI infrastructure, typically representing 60-70% of total OPEX. With an average industrial tariff of ~₹5.5/kWh (~6.7 cents/kWh) in India versus ~₹15.6/kWh (~19 cents/kWh) in Singapore, operators stand to save approximately 65% on annual power bills.

For a 100MW facility running at 80% utilization:

• India annual power cost: ~$47 million
• Singapore annual power cost: ~$133 million
• Annual savings: ~$86 million

Over a 10-year period, the combined CAPEX and OPEX advantages exceed $1.64 billion per 100MW facility, enough to fund an entirely new campus of 247MW capacity in India.

Land and Real Estate
Land acquisition costs in tier-2 Indian cities range from $12-25 per square foot, compared to $80-150 per square foot in Singapore’s industrial zones. For a typical 100MW campus requiring 15-20 acres, this represents land cost savings of $35-50 million.

Cooling Efficiency
India’s strategic locations offer natural cooling advantages. Cities like Raipur, with average ambient temperatures of 26-28°C and lower humidity compared to tropical Singapore (27-31°C with 80%+ humidity), can reduce cooling energy consumption by 15-20%, translating to an additional $7-10 million in annual savings for a 100MW facility.

Market Opportunity: The AI Infrastructure Gap

The global AI infrastructure market is experiencing unprecedented growth:

• Global GPU demand projected to grow at 35% CAGR through 2030
• Enterprise AI spending expected to reach $300 billion by 2026
• AI training compute requirements doubling every 6-10 months

India currently hosts approximately 1,000-1,200MW of total datacenter capacity, representing less than 10% of the Asia-Pacific market, despite having 18% of the global population. This supply-demand mismatch creates an immediate opportunity for 500-700MW of new AI-optimized capacity by 2028.

With Budget 2026’s incentives, India can realistically target 15-20% of global AI infrastructure deployment by 2030, translating to $25-30 billion in infrastructure investment and positioning itself as the third-largest AI infrastructure hub globally after the US and China.

The Framework: Incentives Meet Accountability

To ensure compliance and capture domestic economic activity, the framework mandates an “Indian Reseller Entity” for services provided to local consumers. This balanced approach ensures that while global income is exempt, India’s own digital economy, projected by industry analysts to contribute a significant share of GDP in coming years, generates its fair share of tax revenue.

Furthermore, being designated as a “Notified Data Center” under the Ministry of Electronics and Information Technology (MeitY) is emerging as the gold standard. This certification remains highly selective, with only a limited number of facilities nationwide having achieved this designation. This designation unlocks these incentives for hyperscalers who meet stringent infrastructure and service delivery requirements, ensuring that India attracts serious, long-term infrastructure investors, not opportunistic players.

Beyond Cost Arbitrage: A Strategic Inflection Point

This isn’t merely about cost advantages anymore. India has achieved something rare in global infrastructure: the combination of legislative clarity, fiscal certainty, and strategic positioning.

The country has laid out a clear, de-risked pathway for global AI, cloud and data infrastructure, backed by specific provisions in the Union Budget, safe harbor mechanisms, and certification frameworks. The message is unambiguous: India is ready to be the world’s most reliable and cost-effective engine for the future of AI.

For hyperscalers evaluating multi-billion dollar infrastructure commitments with 20+ year horizons, this certainty matters as much as the cost savings. Budget 2026 doesn’t just make India competitive, it makes India strategic.

Consider this: a hyperscaler deploying 500MW across India over the next 5 years could realize:

• $3.93 billion in CAPEX savings vs. Singapore
• $430 million in annual OPEX savings (power alone)
• Substantial tax optimization advantages (based on the 12-17 percentage point differential on qualifying income)
• Total 10-year advantage: ~$11.2 billion

That’s enough capital to fund India’s entire current datacenter capacity twice over.

Conclusion

The numbers don’t lie. Budget 2026 has fundamentally rewritten the economics of global AI infrastructure, delivering an $11.2 billion advantage over competing jurisdictions for a 500MW deployment. This isn’t incremental improvement, it’s structural transformation. India has achieved what few markets ever do: the convergence of fiscal certainty, legislative clarity, and operational economics that make long-term capital deployment not just attractive, but inevitable. For hyperscalers evaluating their next decade of infrastructure commitments, the calculation is straightforward. India isn’t just competitive anymore. India is strategic.