India can emerge as global hub for digital infrastructure with data embassies, data cities: PwC report

NEW DELHI: India has a strong opportunity to position itself as a global leader in digital infrastructure innovation by adopting emerging models such as data embassies and data cities, according to a report by PwC. The report highlighted that India can attract foreign governments and international organisations by offering “data embassy” arrangements.

Such a model would require the creation of tax-neutral zones, sovereign immunity frameworks, and robust cybersecurity guarantees. By doing so, India could position itself as a trusted host for the critical digital assets of other nations. It stated, “India can attract foreign governments and international organisations by looking at opportunities such as offering ‘data embassy’ arrangements, sovereign data hosting under diplomatic protections”.

In addition, the report proposed the development of dedicated “data cities” built specifically for digital infrastructure. These data cities would bring together data centres, cloud service providers, artificial intelligence labs, and digital services under a single policy and tax regime.

With targeted incentives, regulatory sandboxes, and ready-to-use infrastructure, these hubs could make it easier for businesses to set up and scale operations in India. According to the report, the combined impact of data embassies and data cities would be the creation of a powerful ecosystem that attracts global capital, accelerates innovation, generates high-quality jobs, and strengthens India’s position in the global digital value chain.

A phased and forward-looking taxation approach, addressing current uncertainties while encouraging sustainable and localised growth, would be critical to building a competitive and future-ready data centre ecosystem. Data centres are emerging as a key infrastructure segment supporting the global digital economy. The report noted that India’s digital economy contributed 11.74 per cent, or $0.402 trillion, to the country’s GDP in FY 2022-23.

This share is expected to grow at nearly double the pace of the overall economy and could account for around 20 per cent of national income by FY 2029-30, surpassing agriculture and manufacturing. As digital adoption rises, demand for data centres in India has increased by nearly nine times. The country’s current installed data centre capacity stands at 1.5 GW and is projected to grow at a CAGR of about 20-24 per cent between 2025 and 2035.

Total capacity is expected to reach around 14 GW by 2035, supported by investment commitments from Indian and global operators. The report also pointed out that India benefits from lower data centre construction costs compared to hubs such as Singapore, Taiwan, Malaysia, and South Korea.

India’s high potential for clean power generation further strengthens its appeal, as reliable and sustainable energy is a critical requirement for data centre development. To sustain growth, the report stressed the need for a predictable, investment-friendly tax and regulatory environment, with clear tax policies across the entire project lifecycle to boost investor confidence. (ANI)