The Real Reason Amazon and Microsoft Are Betting Big on India

96%.

That was how much India's net foreign direct investment had collapsed in 2024-25.

From $10.1 billion down to $353 million.

Not a slowdown. A freefall.

The narrative they had been selling for years—India as the irresistible emerging market magnet—suddenly looked fragile.

Global capital was losing interest.

But three floors below, something else was happening.

Microsoft: $17.5 billion for AI infrastructure.

Amazon: $35 billion by 2030.

If foreign money was fleeing, why were Amazon and Microsoft moving in the opposite direction?

The analysts were looking at the wrong numbers.

The real story wasn't about foreign capital retreating.

It was about who was still showing up.

Because there's a deal on the table. A quiet one.

The kind neither side advertises too loudly.

India gets infrastructure, jobs, and global legitimacy.

Big Tech gets to print money.

The Morning the Data Dropped

Foreign money, at least on the surface, seems to be packing its bags. FDI headlines look grim.

Net FDI collapsed by a staggering 96% in 2024-25, sinking to just $353 million from $10.1 billion a year earlier.

Source: DrishtiIAS

Source: India Brand Equity Foundation (IBEF)

That is not a slowdown. That is a near standstill.

Yet gross FDI inflows actually climbed to $81 billion during the year.

Capital is still coming in, but it is also going out almost just as fast.

FDI equity inflows fell to $44.42 billion in FY24, a five-year low.

Net FDI as a share of GDP dropped to just 0.01% in 2024-25, the weakest level India has seen in 25 years.

For a country that has long relied on foreign capital to fuel growth narratives, that is a meaningful shift.

And yet, even as aggregate numbers weaken, big-ticket commitments from names like Microsoft and Amazon keep rolling in.

If foreign capital is retreating in the data, why are global giants still doubling down on India?

The Money Walked Out

In FY25, the money did not just slow down.

Foreign investors repatriated and disinvested $51.5 billion, with IPO exits doing much of the heavy lifting.

Outward investments jumped to $29.2 billion in FY25, a 75% rise over FY24.

More domestic liquidity heading offshore, adding another twist to India's already thinning net capital inflows.

Then Big Tech Wrote Billion-Dollar Cheques

And yet, the headlines refuse to stay gloomy.

In December 2025, Microsoft dropped $17.5 billion aimed at scaling India's AI and cloud infrastructure.

Microsoft plans to deepen sovereign cloud capabilities, train the workforce, and build AI-heavy data centres.

Almost immediately after, Amazon announced $35 billion in India through 2030, on top of $40 billion already invested.

Amazon's priorities: AI-led digitisation, scaling India's exports to $80 billion, and creating one million new jobs.

BlackRock has been vocal about India's long-term appeal, even as it acknowledges near-term discomfort.

High valuations and growth uncertainties are real.

But a young demographic base, ongoing structural reforms, and a steadily formalising economy matter more than temporary capital flow wobbles.

Portfolio capital may be cautious. But strategic capital, the kind that builds data centres, trains workers, and plans a decade ahead, is still very much leaning in.

Why the Paradox Makes Perfect Sense

So how do you explain falling FDI numbers on one page and Big Tech writing multi-billion-dollar cheques on the next?

The answer lies in timing, policy alignment, and a quiet race that has very little to do with the next quarter.

First, these companies are not investing for 2025. They are investing for 2030.

Hyperscale data centres, AI compute stacks, and cloud ecosystems are built on 5 to 10-year horizons.

Most public commitments talk about rollouts between 2026 and 2030.

There is also a timing mismatch at play.

Announcements signal intent early, but actual cash outflows show up in FDI data over time, not all at once.

Second, policy alignment has reduced execution risk.

Digital India's "AI for All" vision and NITI Aayog's National Strategy for AI have laid out a clear framework.

Third, India's IndiaAI mission, backed by an outlay of more than ₹10,300 crore, aims to build national AI capacity at scale.

Plans include around 38,000 GPUs and deeper AI integration across sectors.

For hyperscalers, this signals demand visibility.

Source: Press Information Bureau (PIB)

Finally, there is competition.

The close timing of Microsoft's and Amazon's announcements is not a coincidence.

It reflects a broader clustering effect, part of a larger wave estimated at around $70 billion. Once grid capacity is secured, land parcels are identified, and clearances are negotiated, rival players are incentivised to build nearby.

Short-term capital flows may wobble, but long-term strategic capital is still lining up.

What India Put on the Table

1. Tax Incentives for Data Centers

One of India's strongest hooks is buried in policy fine print.

The National Data Centre Policy 2025 proposes tax holidays of up to 20 years for developers that hit performance benchmarks, plus GST input tax credits on capital assets. On the ground, states sweeten the deal further with electricity duty waivers, transmission charge exemptions, and power-related concessions for hyperscale facilities.

2. Production-Linked Incentives (PLI)

PLI has quietly become one of India's most effective capital magnets.

By mid-2025, PLI-linked investments had reached ₹1.76 lakh crore, beneficiary sales crossed ₹16.5 lakh crore, and the programme generated over 12 lakh jobs across 14 sectors. For global firms, this is not just a subsidy—it is a signal that scale will be rewarded.

Source: Press Information Bureau (PIB)

3. Special Economic Zones (SEZs)

SEZs remain one of India's most underappreciated advantages: Section 10AA offers 100% income tax exemption on export income for five years, 50% for the next five, plus an additional 50% deduction on reinvested export profits for another five years. On top of that comes duty-free imports, zero-rated supplies under IGST, and state-level incentives that materially shift return profiles for export-oriented digital infrastructure.

4. Data Localisation

India has avoided a blunt localisation mandate.

But the Digital Personal Data Protection Act, 2023, permits cross-border data transfers under strict conditions, with 2025 draft rules introducing whitelists, blacklists, tighter breach reporting, and consent management.

For hyperscalers serving hundreds of millions, latency, compliance, auditability, and sovereignty concerns often make local infrastructure the sensible choice.

Expansion, in this context, becomes the price of true scale.

5. Lower Corporate Tax

Tax rates complete the picture.

New domestic manufacturing companies under Section 115BAB can opt for a 15% base corporate tax rate, while other domestic firms can choose 22% under Section 115BAA—rates competitive with China, Vietnam, and other Asian hubs.

Put together, these levers explain why big tech is willing to look past near-term FDI noise.

India is not just offering scale.

It is offering a framework where scale becomes cheaper, safer, and harder for competitors to ignore.

Why Both Sides Win

This arrangement suits both parties, even if it looks odd on the surface.

For India, jobs get created, digital infrastructure deepens, skills move up the curve, and all of this happens without the government writing a large upfront cheque.

The state is swapping near-term tax collections for longer-term economic capacity.

Just as importantly, it nudges global tech firms to build locally, which anchors expertise, supply chains, and decision-making within the country rather than offshore.

For Amazon and Microsoft, tax concessions and policy support lower operating costs and improve long-term margins.

An early build-out helps them lock in customers, talent, power contracts, and regulatory familiarity before competition intensifies.

The headline "investment" is less about discretionary spending and more about the price of doing business in a market where scale, compliance, and local infrastructure are non-negotiable.

In that sense, this is not generosity on either side. It is alignment.

The Real Reason: India Is Cheaper to Build In

Strip away the headlines, and the answer comes down to plain arithmetic.

Building data centres in India costs about $7 per watt compared to roughly $10 per watt in the US—knocking nearly 30% off upfront capital costs.

Add taxes to the mix and the gap widens further.

In the US, data centre operators face an effective corporate tax rate of 25-32% once federal and state levies are added.

In India, new manufacturing entities can opt for a 15% corporate tax rate, and recent policy frameworks allow tax exemptions stretching up to 20 years—pushing the effective tax burden close to zero.

Running these facilities also tilts the balance in India's favour.

Electricity accounts for 60-70% of operating costs, and state-level policies quietly do the heavy lifting.

Tamil Nadu's 2021 data centre policy offers 100% exemption on electricity duty, 50% discount on wheeling charges, and concessional open-access tariffs.

Compare that with the US, where wholesale power prices have jumped sharply, especially in hubs like Virginia.

India adds Production-Linked Incentives of 4-6% of sales on top of tax relief and cheaper power.

Over a 10 to 20-year operating horizon, these benefits compound—effective costs can fall to half, or even less, of what similar operations would incur in the US.

When you look at it this way, the India play is not about sentiment or optics.

It is about margins, longevity, and a cost structure that is very hard to replicate elsewhere.

The Bottom Line: India Cannot Be Ignored

Amazon and Microsoft aren't investing despite the noise.

They're doing it because the numbers work.

Construction costs are 30% lower, tax relief spans decades, and staying out costs more than stepping in.

But here's what the FDI exit story misses. India doesn't need permission to grow.

Foreign investors can pull out. FDI can hit 25-year lows.

India has 1.4 billion people, a young workforce, and expanding infrastructure.

Microsoft's $17.5 billion creates data centres needing engineers.

Amazon's $35 billion creates logistics requiring millions of workers. Every job is a new consumer.

FIIs can exit. But foreign companies cannot. The market is too large. India isn't asking companies to stay.

It is making it impossible for them to leave.

Sources:

• The Southfirst
  
• Drishti IAS
  
• Newslaundry
  
• Times of India
  
• CNBC
  
• Press Information Bureau
  
• EEPC India
  
• SEZ India
  
• Primus Partners
  
• Cleartax
  
• DevDiscourse
  
• Tax Summaries
  
• Tax Foundation
  
• Investing In Tamil Nadu