India’s rapid digital growth underscores the importance of retaining control over data infrastructure and AI capabilities, highlighting strategic concerns over foreign reliance amid expanding data centres and technological advancements.
Dadabhai Naoroji never saw a server farm, but he would have understood the logic of one immediately. The nineteenth-century economist’s central insight was simple: a country can produce plenty and still end up poorer if the ownership of the system that moves value lies elsewhere. In today’s India, that question has shifted from railways and cotton to code, chips, cloud storage and data centres. The stakes are different, but the arithmetic is familiar.
India’s digital economy is now large enough to matter in strategic terms, not just commercial ones. According to Reserve Bank of India data, services exports reached a record $421.3 billion in the financial year ending March 2026, with telecommunications, computer and information services accounting for nearly half that total. At the same time, India has become one of the world’s biggest generators of data, but it still has far less capacity to store and process it than the US or China, a gap that infrastructure groups say is now attracting major investment.
That gap is visible in the country’s data-centre build-out. Capitaland has argued that India’s low mobile data costs have widened access to digital services, while also creating a long-term opportunity in power and data infrastructure. KPMG has gone further, describing the sector as moving from a gradual expansion phase to an accelerated one, driven by local data rules, 5G adoption and artificial intelligence workloads that demand far more computing power than older systems. KPMG also estimates that the wider data-centre value chain could represent a roughly $90 billion opportunity by FY35.
The challenge is that infrastructure alone does not guarantee sovereignty. India already has strong examples of domestic digital public infrastructure, including the Unified Payments Interface and Aadhaar, which KPMG says have become pillars of economic and strategic capability. But the same reports warn that global AI power is concentrated among a small number of large technology groups, leaving countries such as India exposed if they depend too heavily on foreign compute, foreign cloud services or foreign-owned platforms to run critical systems.
That concern is becoming more pressing as AI moves from the edges of the economy into core public and private services. KPMG’s work on sovereign AI says India must build trusted systems that can support national security, economic resilience and digital governance. Business Standard, citing a Prosus and ICRIER report, said India was the world’s fifth most digitalised economy in 2026, with rapid AI adoption and a large user base, but it also noted a shortfall in private AI investment and compute infrastructure. The message is clear: adoption is moving faster than ownership.
The same tension runs through the country’s physical digital assets. India has seen a sharp rise in electronics manufacturing and smartphone assembly, but it still imports far more chips, components and finished devices than it exports. The government has tried to change that through production incentives and a semiconductor mission, yet much of the most valuable intellectual property remains offshore. Even where India hosts factories and engineering teams, the profits, patents and balance sheets often sit in another jurisdiction.
There is no simple argument for shutting out foreign capital. Global technology companies have brought jobs, infrastructure and services, and Indian firms and consumers have benefited from them. The stronger case is for selective capability-building: keeping sensitive data in India, expanding domestic cloud and compute capacity, deepening support for Indian-language AI, and making sure public procurement rewards interoperable local systems rather than defaulting to foreign ones. That is less about protectionism than about bargaining power.
Naoroji’s old question still works because it was never only about empire. It was about who owns the machinery that turns activity into lasting wealth. India’s digital economy is now producing that wealth at scale. The unresolved issue is whether enough of it stays attached to Indian ownership, Indian infrastructure and Indian strategic choice, or whether the country remains, for all its success, mainly a market and a labour pool for someone else’s system.
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