India is preparing to supercharge its digital infrastructure with an ambitious push to attract global and domestic investment into data centres. A new draft of the National Data Centre Policy 2025 proposes sweeping incentives — including tax holidays of up to 20 years — for developers who expand capacity, adopt green energy, and generate jobs.

By coupling fiscal relief with measures to ease land and power access, the government aims to position India as a global hub for cloud services, AI development, and advanced digital technologies at a time when demand for storage and computing power is exploding.

What the draft proposes

At its core, the 2025 draft policy lays out a generous incentive structure:

* Tax holiday: Up to 20 years, linked to capacity, efficiency, and employment.

* GST input tax credit: Likely to be extended to capital assets such as construction material, cooling systems, HVAC, and electrical equipment.

* Foreign players: Companies leasing or operating at least 100 Mw of capacity could gain permanent establishment status in India.

* AI push: Eligible firms may be nudged to set up AI development centres or global capability hubs in the same city as their data facilities.

“This will help create new jobs as well as strengthen domestic capacity in advanced technologies, such as AI, Cloud computing, and cybersecurity, not just in metro cities but also in Tier-II and Tier-III towns,” an official said.

India’s data centre industry has grown at a blistering pace, a 24 percent compound annual growth rate since 2019. JLL estimates that 795 Mw of new capacity will come online by 2027, taking the total to 1,825 Mw. Occupancy rates are already running at 75–80 percent, signalling demand far outstripping supply.

“As India’s digital economy scales up, this demand will only intensify, underscoring the urgency for next-gen infrastructure that can support this growth,” CBRE noted in a recent report.

The draft policy also outlines how the government wants to tackle two of the sector’s biggest bottlenecks: land and power.

* Land banks: States will be encouraged to earmark land near industrial corridors, IT hubs, or manufacturing clusters for data centre parks.

* Power availability: The IT ministry will coordinate with the Ministry of Power, the Central Electricity Authority, and the Central Transmission Utility of India to ensure reliable access.

* Green energy: Developers will be nudged towards renewable sources, with proposals for uniform rules on energy storage and even the deployment of small modular reactors near large data centre hubs.

“Power is one of the key resource demands for data centres. It is imperative for us to encourage newer centres to use renewable energy as much as possible,” an official said.