DIGITAL TRADE AND INFRASTRUCTURE: HOW INDIA’S TRADE AGREEMENTS ARE SHAPING THE NEXT WAVE OF TECHNOLOGY INVESTMENT

INTRODUCTION

Trade used to be about ships, ports, and containers moving goods across borders. Today, a growing share of global commerce moves through data, software, and digital platforms instead. Businesses can deliver services, sign contracts, process payments, and manage operations across jurisdictions without a single physical shipment. Recognising this shift, modern trade agreements are beginning to address the digital foundations of global commerce. Agreements such as the India – United Kingdom Comprehensive Economic and Trade Agreement ("CETA") and the India-UAE Comprehensive Economic Partnership Agreement ("CEPA") include provisions that support electronic transactions, cross border data flows, and digital commerce. At the same time, India’s push to expand digital infrastructure, including data centres and Global Capability Centres ("GCCs"), is positioning the country as an increasingly important hub for technology investment and cross border digital services.

DIGITAL TRADE PROVISIONS IN INDIA’S TRADE AGREEMENTS

Recent trade agreements signed by India increasingly recognise that facilitating digital commerce requires more than reducing tariffs on goods. They also require legal frameworks that allow businesses to transact, exchange data, and deliver services digitally across borders. Agreements such as CETA and CEPA therefore include dedicated chapters addressing various aspects of digital trade and digital cooperation.

These chapters generally focus on enabling electronic transactions, promoting paperless trade, facilitating cross border data flows, and encouraging regulatory cooperation in areas such as cybersecurity, digital identities, and digital payments. Such provisions reflect the growing recognition that digital infrastructure and regulatory compatibility are essential for modern cross border commerce.

Digital Trade Provisions under CETA

CETA contains a comprehensive chapter on digital trade aimed at facilitating electronic commerce and supporting the development of a modern digital economy between the parties. A key feature of the agreement is the recognition that commercial transactions increasingly take place through digital means. To address this shift, the agreement requires each party to maintain a legal framework for electronic transactions and ensures that contracts concluded electronically cannot be denied legal validity or enforceability solely because they exist in digital form.

Closely connected to this framework is the recognition of electronic signatures, electronic authentication methods, electronic time stamps, and electronic trust services. By affirming the legal effect of these digital mechanisms and allowing them to serve as admissible evidence in legal proceedings, the agreement strengthens the reliability of electronic transactions and helps build confidence in cross border digital commerce.

The agreement also promotes the adoption of paperless trading systems. Trade administration documents are encouraged to be made available electronically and accepted as the legal equivalent of paper documentation wherever possible. In addition, CETA supports the development of interoperable electronic invoicing systems, which can improve the efficiency and reliability of commercial transactions conducted across jurisdictions.

Beyond transactional mechanisms, the agreement places considerable emphasis on cooperation in areas shaping the future of the digital economy. The parties recognise the importance of digital identity frameworks and encourage collaboration aimed at promoting compatibility between their respective digital identity regimes. CETA also supports initiatives relating to data innovation, including cooperation on data driven projects, regulatory sandboxes, and frameworks that facilitate data mobility and portability.

The agreement also addresses certain issues that are increasingly relevant in digital commerce. Both parties commit to maintaining legal measures that protect consumers engaging in online transactions and to cooperate in addressing misleading or fraudulent practices in digital markets. CETA further includes protections for technology companies by limiting circumstances in which a government may require the transfer of or access to the source code of software owned by a person of the other party. Such provisions help build confidence in digital markets while safeguarding the intellectual property that underpins many technology driven businesses.

Digital Trade Provisions under CEPA

CEPA contains a dedicated chapter addressing digital trade and electronic commerce between the parties. The agreement recognises the growing importance of digital connectivity in facilitating cross border commercial activity and encourages the development of legal and regulatory frameworks that support electronic transactions and online trade. One of the key features of the chapter is the promotion of paperless trading systems. The agreement encourages both parties to make trade administration documents available in electronic form and to accept electronically submitted documents as the legal equivalent of paper documents wherever possible. These measures are intended to simplify administrative procedures, reduce documentation requirements, and improve the efficiency of cross border trade processes.

The agreement also supports the establishment of legal frameworks governing electronic transactions. CEPA recognises the legal validity of electronic signatures and authentication mechanisms and encourages both parties to maintain domestic laws that allow businesses to conclude and verify transactions electronically without unnecessary regulatory barriers. By reinforcing the legal recognition of electronic documentation and authentication systems, the agreement facilitates digital commerce and reduces the need for physical documentation in cross border commercial dealings.

Another important aspect of CEPA relates to the movement of digital information across borders. The agreement recognises that cross border information flows play an important role in enabling digital trade, while also emphasising the need for legal frameworks that protect personal data and strengthen consumer confidence in online transactions. In addition, CEPA maintains the existing practice of not imposing customs duties on electronic transmissions between the parties. By ensuring that digitally delivered content and services are not subject to customs duties, the agreement helps reduce potential barriers to digital commerce and supports the expansion of cross border digital services.

CEPA also encourages cooperation in several areas that are increasingly central to digital commerce. These include the development of interoperable systems for digital and electronic invoicing, the promotion of secure and efficient cross border digital payments, and cooperation between the parties on digital identity frameworks and cybersecurity initiatives. Taken together, these provisions reflect an effort to create a regulatory environment that supports the continued growth of digital commerce while strengthening the digital infrastructure required for businesses to operate and transact across jurisdictions.

GLOBAL CAPABILITY CENTRES

India’s emergence as a hub for cross border digital services has been accompanied by the rapid growth of GCCs. Established by multinational corporations, these centres perform a range of functions including technology development, engineering research, analytics, financial services operations, and other strategic business services. Their expansion has also had a significant impact on India’s commercial real estate sector, driving demand for large technology campuses, Grade A office spaces, and specialised infrastructure across major technology clusters.

To attract such investments, several Indian states have introduced dedicated GCC policies offering financial incentives and infrastructure support. A notable example is the Karnataka Global Capability Centre Policy 2024–2029, which provides a range of incentives including:

·      Reimbursement of 50 percent of internship stipends up to INR 5,000 per month for up to 20,000 interns annually.

·      Reimbursement of 20 percent of skilling expenses, up to INR 36,000 per graduate and INR 18,000 per diploma holder.

·      Financial assistance for leadership development programmes and platforms promoting industry academia collaboration.

·      Funding of up to 40 percent of capital expenditure for establishing innovation labs or Centres of Excellence, capped at INR 5 crore in Bengaluru.

·      Grants of up to 40 percent or INR 50 crore for the development of research and development infrastructure.

·      50 percent reimbursement of domestic patent filing costs up to INR 2 lakh and 50 percent reimbursement of certification costs up to INR 6 lakh.

·      Operational incentives including reimbursement of internet infrastructure costs up to 25 percent, electricity duty reimbursements, and support for telecommunications infrastructure.

·      Additional incentives such as 30 percent reimbursement of property tax for three years, rental assistance covering up to 50 percent of rent, recruitment assistance linked to employee hiring, and funding support for establishing innovation labs in emerging clusters.

DATE CENTRES

Alongside the growth of Global Capability Centres, India is also witnessing rapid expansion in data centre infrastructure. As digital trade increasingly depends on the ability to store, process, and transmit large volumes of data, data centres have become a critical component of the digital economy. These facilities support cloud computing, online platforms, financial services, e-commerce, and a wide range of digital services that operate across borders. In this sense, data centres form the physical backbone of the digital trade ecosystem.

Recognising their importance, both the central and state governments in India have introduced policies aimed at attracting investment in data centre infrastructure. Several states have adopted dedicated data centre policies. One example is the Karnataka Data Centre Policy 2022–2027, which aims to position the state as a destination for large scale data centre investments and to integrate Karnataka into the global data centre ecosystem. The policy offers a range of incentives and regulatory support, including:

·      One time capital subsidy of 7 percent of the value of fixed assets (excluding land and buildings), capped at INR 10 crore for eligible projects located outside Bengaluru Urban district

·      Land subsidy of up to 10 percent of land cost, capped at INR 3 crore, for data centre units established outside Bengaluru Urban district.

·      100 percent exemption from stamp duty for land transactions relating to data centre projects outside Bengaluru Urban district.

·      Power related incentives including eligibility for industrial power tariff, exemption from electricity duty for five years, and reimbursement of green power tariffs for projects using renewable energy.

·      Relaxations in building norms, including higher permissible floor area ratio, flexibility in zoning regulations, and special provisions for installation of equipment such as cooling infrastructure and power systems.

In addition to state level initiatives, recent fiscal policy has also signalled strong support for data centre investments. In the Union Budget 2026, the Government of India proposed a tax holiday until 2047 for foreign companies providing cloud services to global customers, provided such services are delivered using data centre infrastructure located in India. The measure is intended to attract global cloud service providers and encourage them to establish data centre operations within the country, further strengthening India’s position as a destination for digital infrastructure and technology investment.

CONCLUSION

Trade policy is gradually adapting to the realities of a digital economy. As businesses increasingly rely on digital platforms, cloud infrastructure, and cross border data flows to deliver services and manage operations across jurisdictions, trade agreements are beginning to address the regulatory issues that arise from digital commerce. Provisions in agreements such as CETA and CEPA recognising electronic transactions, digital documentation, and digital trade reflect this broader shift in how international commerce is evolving.

At the same time, domestic initiatives encouraging the growth of Global Capability Centres and large scale data centre infrastructure demonstrate how India is building the ecosystem required to support this transformation. The GCC sector alone is projected to reach USD 105 billion by 2030, while India’s data centre capacity is expected to grow nearly fivefold to around 8 GW over the same period. Together, these developments point to a strong trajectory for India’s digital economy, where supportive trade frameworks, investment policies, and expanding digital infrastructure are increasingly working in tandem to position the country as a major hub for global digital services.