The announcement was made following Microsoft CEO Satya Nadella’s meeting with Prime Minister Narendra Modi.

In their meeting, both leaders discussed the country’s AI roadmap and growth priorities, the company said in a press release. Nadella is also expected to speak at events in New Delhi, Bengaluru, and Mumbai over the next few days as part of his India AI tour.

India has emerged as a key growth market for US tech giants such as Google and Microsoft that have poured billions into building and scaling their AI and cloud operations in the country.

Microsoft has been operating in India for more than two decades now, and has more than 22,000 employees across 10 Indian cities. However, much like its rivals, the Windows maker has come under pressure to show that the billions it is pouring into AI will start to reap profits.

The outlay of $17.5 billion will also be used to skill two crore Indians in AI by 2030 as well as support the company’s ongoing operations in Bengaluru, Hyderabad, Pune, Gurugram, Noida, and other cities.

Its data centre hub in Hyderabad, comprising three availability zones that are equivalent in size to two Eden Gardens stadiums combined, is set to be officially inaugurated in mid-2026. Some of the investment amount will also be channeled toward scaling its existing operational data centre hubs in Chennai, Hyderabad, and Pune.

Microsoft on Tuesday, further said it is working with the Union Ministry of Labour and Employment to integrate advanced AI capabilities into the e-Shram portal and the National Career Service (NCS) platform. Powered by the Azure OpenAI service, which makes OpenAI’s large language models (LLMs) available on the Azure platform, these new AI features include multilingual translation, AI-assisted job matching, predictive analytics for skill and demand trends, and automated resumé creation.

The integration of Microsoft’s AI in government platforms was not well-received by some Indian AI startups, even as the Centre has enlisted local firms like Sarvam and Tech Mahindra to build sovereign AI models under its Rs 10,300 crore India AI mission.

“Popular LLMs are driven by global training data and are devoid of local linguistic and cultural nuances. In recent years, the global uncertain climate is a reminder for a greater “Atmanirbhar Bharat” as elucidated by Indian government directives. There is a need for greater resilience in an AI-first world via sovereign AI models hosted on local native clouds,” Neelima Vobugari, co-founder and COO of Bengaluru-based AiEnsured, told The Indian Express.

Data localisation efforts

Microsoft is also rolling out its sovereign cloud options in India, enabling its enterprise customers to store data locally.

Its ‘Sovereign Public Cloud’ option lets companies run sensitive workloads on Azure’s pre-set architectures with compliance guardrails built-in. Its ‘Sovereign Private Cloud’ offering can be deployed in customers’ data centres and supports both connected and offline operations. It is powered by Azure local, Microsoft’s on-prem infrastructure, that lets customers leverage the high performance of Nvidia’s latest GPUs in a secure and compliant environment.

“A large volume of public data handled by the government is required to stay within India, and this move will support that requirement. It will enable extensive work to be done on this data by various organisations, including non-government institutions. It will also reduce infrastructure costs because the data will be stored within the country and will align with data privacy norms,” Pawan Prabhat, co-founder of Gurugram-based Shorthills AI, said.

The announcement comes months after the IT Ministry notified the Digital Personal Data Protection (DPDP) Rules, 2025, which looks to operationalise India’s data protection law. While the parent Act does not mandate data localisation, the DPDP Rules empower the government to set up a committee that can decide which categories of personal data may not be transferred outside India.

With the possibility of a future committee restricting certain data from leaving India, enterprise clients may be incentivised to use localised cloud computing and storage solutions. German software giant SAP also launched its sovereign cloud capabilities in India a few months ago.