New Delhi

India has a strong opportunity to emerge as a global leader in digital infrastructure innovation by adopting new models such as data embassies and data cities, according to a report by PwC.

The report said India could attract foreign governments and international organisations by offering “data embassy” arrangements, under which sovereign data would be hosted with diplomatic protections. Such a model would require the creation of tax-neutral zones, sovereign immunity frameworks and strong cybersecurity guarantees, positioning India as a trusted host for critical digital assets of other nations.

“India can attract foreign governments and international organisations by looking at opportunities such as offering ‘data embassy’ arrangements, sovereign data hosting under diplomatic protections,” the report stated.

In addition, PwC proposed the development of dedicated “data cities” designed specifically for digital infrastructure. These hubs would integrate data centres, cloud service providers, artificial intelligence labs and digital services under a unified policy and tax regime. With targeted incentives, regulatory sandboxes and ready-to-use infrastructure, data cities could significantly ease business setup and scaling in India.

According to the report, the combined impact of data embassies and data cities could create a powerful ecosystem capable of attracting global capital, accelerating innovation, generating high-quality jobs and strengthening India’s position in the global digital value chain.

The report also underscored the importance of a phased and forward-looking taxation approach to address current uncertainties while encouraging sustainable and localised growth, which it said would be critical for building a competitive and future-ready data centre ecosystem.

Data centres are emerging as a core pillar of the global digital economy. PwC noted that India’s digital economy contributed 11.74 per cent, or USD 0.402 trillion, to the country’s GDP in FY 2022–23. This share is expected to grow at nearly twice 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 nearly ninefold. The country’s installed data centre capacity currently stands at 1.5 GW and is projected to grow at a compound annual growth rate of about 20–24 per cent between 2025 and 2035, reaching around 14 GW by 2035.

The report also highlighted India’s advantage of lower data centre construction costs compared to hubs such as Singapore, Taiwan, Malaysia and South Korea. India’s strong potential for clean power generation further enhances its appeal, as reliable and sustainable energy is a key requirement for data centre development.

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To sustain long-term growth, PwC emphasised the need for a predictable and investment-friendly tax and regulatory environment, with clarity across the entire project lifecycle to boost investor confidence.