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India Rising Perspective: Inside the $1 Trillion Economy - Issue 2: Last Friday, we released the second issue of our new India Rising Perspective. “Tamil Nadu’s GCC Ascent: The Silent Champion of India’s Knowledge Economy” by Godson George Micheal Rai and Priyadarshini Samikumar from Guidance Tamil Nadu covered the state’s GCC landscape. Check it out and find my main takeaway at the end.

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Big Techs latest investments planned to drive AI development and adoption in India.

India has been the backbone in the technological development of US companies for a long time. Last week’s announcements by Amazon and Microsoft highlight the country’s relevance and confirm a clear trend: the AI race is moving to India.

In October, Google announced a USD 15 billion investment in India, their largest data centre development outside the US. Other technology firms such as OpenAI, Tata, or REITs like CapitaLand did so as well (see prior issues of India Rising). But the Big Tech companies Amazon and Microsoft announced within hours of each other even larger sums:

Main goals are to support India’s scale, skills, and sovereignty in AI, but broad market access is most likely the most crucial factor. Microsoft expects India to become the world’s largest software development community by 2030 and the data centre cluster around Hyderabad will become a crucial hub of the company’s global data centre strategy.

The technology consultancy Zinnov recently shared how India’s development over the past decades laid the foundation for its strong positioning in technology and how this development of India’s technology ecosystem is about to start compounding. And what is needed to establish the country as leader in AI.

Availability and quality of talent is the basis for scaling technology development. India has the second largest tech pool in the world, and the largest English speaking one. A crucial advantage for the next phase of technological development and where deep understanding of business processes is advantageous.

Moving from models into real world applications is where AI becomes tangible. And India is already actively shaping this phase of AI development and implementation:

If AI products can operate efficiently in such a vast and diverse country, and with such tech-savvy customers like in India, it will work elsewhere as well.

Infrastructure is a core item, and if we consider the latest announcements in combination with the importance of India’s GCCs for Big Tech’s innovation and development already today, one thing becomes clear: the AI race is being actively shaped and decided in India. Not only because of the talent required, but especially due to the large market, its diversity, and growing importance of its economy as well.

For European companies watching from the sidelines, this represents both opportunity and urgency. While US tech giants race ahead, European firms risk falling further behind in AI capabilities, unless they tap into the same ecosystem. European companies can profit from these developments in many ways, whether its the infrastructure build-up or establishing AI centres of excellence in the country themselves. Additionally, data centre developments come with crucial downsides that cannot be ignored. They require large parcels of land, enormous amounts of energy and water. As water stress levels are expected to become extremely high for India (see curiosity corner), water and energy efficient data centre operations will be required, technology European companies can deliver. On top of unlocking their own AI future with support and at scale from India’s ecosystem.

Sources: Microsoft, Tech Crunch, Statista, Zinnov

India is on track for a landmark year and has attracted unprecedented interest from corporations globally. According to The Economic Times, Foreign Direct Investments (FDI) pledged in 2025 have reached USD 135 billion and throughout all sectors. On top of the announcements by Big Tech covered in our Rise of the Week, major players such as Intel, Samsung or Bosch announced new initiatives in the past week.

FDI grew by 16% year over year in the April to September quarter and reached USD 50.4 billion. While some commitments will be spread over several years, officials expect annual FDI inflows to be over USD 100 billion for the first time ever this fiscal year.

Outside of Big Tech, more than 750-800 investments are planned that add USD 65 billion to the pipeline. Only last week, these major players announced new initiatives:

India's net FDI tells a more nuanced story. At USD 7.4 billion for April-September, while nearly double the previous year, it remains modest compared to gross inflows. This gap reflects two trends: Indian companies confidently investing abroad to secure global supply chains, and multinationals restructuring holdings after listing their Indian subsidiaries locally. Rather than weakness, this suggests a maturing, two-way capital relationship.

The recent announcements in the technology and manufacturing sectors, as well as upcoming Free Trade Agreements, will stabilise the demand and interest for FDI inflows into India and continue to grow. Make in India is becoming more attractive, not only for the domestic market, but globally.

Sources: The Economic Times, Times of India, IndianWeb2, Guidance Tamil Nadu, Department for Promotion of Industry and Internal Trade (DPIIT)

A Free Trade Agreement between India and the EU remains pending. While it was targeted for the end of the year, both sides remain committed to a conclusion in the coming weeks. According to Reuters, main differences persist on tariffs, market access, and sustainability matters.

German Chancellor Friedrich Merz will visit India in the third week of January, his first visit to the country since taking office. This will be followed by the India-EU summit at the end of January, which focuses on the partnership in trade, migration, security, and technology. Officials expect a breakthrough could come during the summit.

A breakthrough latest during the India-EU summit would be a positive signal given geopolitical pressures and the importance of the FTA for both regions.

Sources: Reuters, The Economic Times

A podcast episode on Google’s decision to invest in India’s AI founders.

Your random facts and stories about India and the Indo-European friendship.

This week: Water stress globally by 2050

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