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The interim trade agreement between India and the United States marks a significant shift in bilateral technology and electronics cooperation. Under the new framework, both countries have committed to significantly increase trade in technology products, including Graphics Processing Units (GPUs) and other equipment critical for data centres, while also expanding joint technology cooperation. This development assumes importance amid India’s growing ambitions in artificial intelligence (AI), electronics manufacturing, and digital infrastructure.

GPU Access and India’s AI Ecosystem

GPUs form the backbone of modern AI development, powering large language models, data analytics, and advanced computing applications. India currently lacks domestic GPU manufacturing capacity and relies heavily on imports, with US-based firms, particularly NVIDIA-dominating the global market.

India’s IndiaAI Mission, with a total outlay of ?10,370 crore, aims to subsidise compute access for startups and researchers. Around 40,000 GPUs have been installed under the mission so far, but this is widely regarded as insufficient compared to the massive compute capacity available to leading global AI firms. Concerns were further raised after the Union Budget reduced the allocation for the mission from ?2,000 crore to ?1,000 crore for 2026–27.

Against this backdrop, the India–US agreement offers an alternative pathway by improving access to imported GPUs. Importantly, it marks a departure from earlier US export controls imposed during the administration of former President Joe Biden, which had placed quantitative restrictions on GPU exports to India. These controls were set aside after President Donald Trump took office, allowing India to secure more favourable terms and avoid stringent technology restrictions similar to those imposed on China.

Boost to Data Centre Investments

Data centres represent the second major pillar of cooperation. To attract foreign investment, India has announced a tax holiday until 2047 for foreign companies setting up data centres. This move addresses long-standing US demands for greater market access, including tax incentives, duty exemptions, and affordable access to land, power, and water.

Several US technology giants have announced large investments:

• Google: $15 billion investment for a 1 GW data centre in partnership with the Adani Group
• Microsoft: $17.5 billion, primarily for AI-focused data centres
• Amazon: $35 billion investment over five years

Union IT Minister Ashwini Vaishnaw has indicated that recent policy measures could spur up to $200 billion in data centre investments.

India’s data centre market is currently valued at $10 billion, with revenues of about $1.2 billion in FY24. According to industry estimates, India may add 795 MW of capacity by 2027, taking total installed capacity to 1.8 GW.

Electronics Manufacturing and Trade Expansion

The easing of tariffs, cutting US duties on Indian goods from 50% to 18%, is expected to significantly boost the electronics sector. Bilateral electronics trade is projected to reach $100 billion in the coming years. Electronics exports stood at ?3.27 lakh crore (≈$38 billion) in 2024–25, with the US as the largest destination.

The sector, concentrated in states such as Tamil Nadu, Karnataka, Uttar Pradesh, and Maharashtra, employs over two million workers directly. Companies like Apple, supported by India’s Production-Linked Incentive (PLI) scheme, have built extensive supply chains in India. India now accounts for nearly 25% of global iPhone production, second only to China.