India and the United States took a significant step toward deepening economic and technological cooperation by unveiling an interim trade agreement framework. Beyond traditional trade issues such as tariffs on agricultural and industrial products, this deal emphasizes technology, semiconductors, and digital infrastructure. In particular, it prioritizes access to graphic processing units (GPUs) and other cloud compute‑enabling hardware essential for artificial intelligence (AI). This emerging partnership could reshape India’s AI ecosystem, influence global cloud compute dynamics, and strengthen both countries’ positions in an increasingly strategic technological landscape.
The interim trade agreement was announced in February 2026, outlining frameworks to transform how technology products, including GPUs and data centre infrastructure, flow between the two nations. Government officials confirmed that both sides will significantly increase trade in technology products, including GPUs and other goods used in data centres, while aligning regulatory standards and compliance procedures.
At first glance, the focus on GPUs and cloud compute infrastructure may seem technical and niche. Yet AI and machine learning workloads rely heavily on high‑performance compute. GPUs from leading American and global manufacturers such as Nvidia and AMD form the backbone of training advanced neural networks. They also power inference operations and scalable cloud services. Without abundant access to these chips, any nation’s AI ambitions, in government, industry, higher education, and startups, remain constrained.
Opening the Gates to Critical Hardware
India hosts a rapidly expanding technology and digital services sector. Growing data generation, a booming startup ecosystem, and national initiatives such as the India AI Mission and the Common Compute Facility highlight the need for robust, local compute resources. Until now, access to enterprise‑grade GPUs and infrastructure has depended largely on imports, often with import duties ranging from 20 to 28 percent. These levies have made GPU‑ready data centres in India significantly more expensive than in competing hubs such as Singapore or the UAE.
Industry bodies estimate that rationalizing import duties and streamlining tariffs could reduce the cost of building data centres by roughly 14 percent, potentially unlocking large‑scale investments. This reduction could attract global cloud providers and hyperscalers to expand their presence in India. Recent corporate commitments already point in that direction. Companies like Google, Microsoft, Amazon, and Digital Connexion have pledged tens of billions of dollars in Indian data centre investments, reinforcing the country’s potential as a future compute hub.
If implemented successfully, the trade framework could lower some cost barriers to building AI infrastructure in India. Reduced duties could increase adoption of cutting‑edge GPUs, making large‑scale model training and inference more affordable. Startups could experiment more freely, established enterprises could deploy AI at a greater scale, and research institutions could undertake advanced compute‑intensive projects that were previously cost‑prohibitive.
Operational efficiencies may also improve as trade collaboration extends to mutual recognition of standards and certification processes. Faster and more predictable product approvals benefit companies on both sides by reducing lead times and regulatory friction. In an industry where time to deployment is a strategic advantage, even modest reductions in bureaucratic delays can significantly enhance competitiveness.
Reassurance Amid Geopolitical Flux
The trade deal is as geopolitical as it is economic. In 2025 and 2026, US export control policies had placed India in a “second tier” category for advanced chip exports, limiting access to cutting‑edge AI GPUs without explicit export licenses. Under that regime, India would have faced caps on GPU imports and restrictions on the cloud capacity foreign providers could deploy within the country.
Although that export control proposal has been rescinded, it highlighted a key concern for Indian tech leaders: dependency on foreign policymakers for essential compute resources. The interim deal signals that India will not face abrupt, China‑style export restrictions that could destabilize its AI ambitions. Such strategic reassurance is crucial in an era where technology supply chains are central to geopolitical competition.
For investors and industry leaders, a stable environment for importing critical AI hardware reduces risk. It encourages long‑term planning, attracts capital inflows, and positions India as a reliable destination for global compute investments.
Beyond Import Dependence: Building Locally
While the trade agreement supports access to US-made GPUs, Indian policymakers emphasize that it should not hinder domestic innovation or hardware design efforts. According to senior officials, India’s sovereign GPU program is still in its early stages and will take time to mature. In the interim, imported GPUs are essential to support the national compute ecosystem and international use cases from Indian data centres. However, indigenous chip development remains a parallel priority.
This dual approach, securing global hardware while building domestic capabilities, reflects a mature understanding of technological dependencies. Immediate needs are met through imports, but long-term resilience requires indigenous design and manufacturing. In a world where semiconductor self-sufficiency is increasingly strategic, India’s trajectory will be shaped by both trade cooperation and domestic capability building.
Risks and Counterpoints
No major policy initiative is without risks. Industry voices caution that easier hardware access must be paired with policies protecting data sovereignty, national security, and domestic value creation. There is a risk that India could become a “low‑margin compute colony,” exporting compute but capturing minimal economic value, if infrastructure growth is not linked to higher-value segments such as hardware design, cloud software services, and AI product innovation.
Critics also warn that broader trade commitments might limit India’s ability to regulate its digital sector or levy certain taxes. Some see the deal as favoring increased imports from the US without guaranteed reciprocal gains for Indian exports. Navigating these trade-offs will require careful policy calibration.
Looking Toward a Compute‑Driven Future
The India‑US trade deal may be interim, but its implications for AI GPUs and cloud compute are already shaping India’s technology ecosystem. By lowering barriers to critical compute hardware, it sets the stage for expansive AI development, broader data centre deployment, and deeper integration into global technology value chains.
If these changes unfold as anticipated, India could transition from a data producer underserved by compute resources to a regional, and potentially global, AI compute hub. This transformation is not merely about importing more GPUs; it is about enabling competitive AI services, fostering innovation, and embedding India in a future where computational power is as central to economic growth as energy was in earlier industrial eras.
In the long run, strategic cooperation with the United States on technology and compute infrastructure is likely to define India’s digital future. Success will depend on how effectively the two countries implement the trade framework, how India balances foreign access with domestic innovation, and how it integrates new compute capacity into broader economic goals.
