Context:

• The Nayara Energy–Microsoft episode highlights a critical vulnerability in India’s digital ecosystem.
• Although India has built globally acclaimed Digital Public Infrastructure (DPI), its growing dependence on foreign-controlled cloud services, AI, and semiconductor technologies raises concerns about long-term digital sovereignty and strategic autonomy.

The Nayara Energy Incident - A Wake-Up Call:

• In 2025, Nayara Energy, one of India's major oil refiners, received a notice from Microsoft indicating that cloud services could be discontinued due to U.S. sanctions compliance obligations linked to its Russian shareholder, Rosneft.
• Although the threat was not ultimately enforced, the episode exposed a key reality - Indian companies operating legally within India can still be affected by decisions taken under foreign jurisdictions if they rely on foreign-owned digital infrastructure.
• The incident demonstrated how geopolitical tensions can directly impact business operations through digital dependencies.

Digital Infrastructure - The New Strategic Asset:

• Cloud platforms such as Microsoft Azure, Amazon Web Services (AWS), and Google Cloud are no longer mere technology services.
• They constitute critical infrastructure supporting the banking and financial transactions, healthcare systems, government databases, supply-chain management, and enterprise operations.
• Since these platforms are owned and governed by foreign corporations subject to their home-country laws, access can potentially be restricted or influenced by geopolitical considerations.

India’s Success in DPI:

• India has emerged as a global leader in Digital Public Infrastructure through platforms such as:
  • Aadhaar – Digital identity
  • UPI – Digital payments
  • DigiLocker and eSign – Digital document management
  • Ayushman Bharat Digital Mission (ABDM) – Health data architecture
  • Open Network for Digital Commerce (ONDC) – Open digital commerce ecosystem
• Key features of India’s DPI:
  • Open and interoperable architecture
  • Public-interest orientation
  • Non-extractive data governance
  • Innovation-friendly ecosystem
  • National ownership and control
• These platforms have reduced dependence on private digital monopolies and enabled inclusive digital growth.

The Unfinished Agenda - Infrastructure Dependence:

• Despite controlling the application layer through DPI, India remains heavily dependent on foreign entities for:
  • Cloud infrastructure: Most fintech, health-tech, and digital businesses built on Indian DPI rely on foreign hyperscalers such as AWS, Azure, and Google Cloud.
  • Artificial Intelligence (AI):
    • Large Language Models (LLMs) and foundational AI systems are largely controlled by U.S. and Chinese firms.
    • Their training datasets, embedded values, safety guardrails, and governance structures are outside Indian regulatory oversight.
  • Semiconductor ecosystem: Advanced chips powering cloud computing and AI are overwhelmingly produced through global supply chains beyond India's control.
• Owning digital applications, while renting the underlying infrastructure, amounts to a form of “digital tenancy.”

Digital Sovereignty vs Digital Isolationism:

• The goal is to lessen strategic vulnerabilities while maintaining integration with the global digital economy, not to promote technological protectionism or isolation from international markets.
• The challenge is achieving a balance between openness and sovereignty.

Four Policy Levers for Strengthening Digital Sovereignty:

• Move beyond data localisation:
  • Keeping sensitive data within India is important but insufficient.
  • So, India must also ensure operational control over critical systems, audit rights for domestic authorities, and emergency powers to maintain continuity during crises.
  • True sovereignty requires control over infrastructure, not merely data storage.
• Develop sovereign cloud capabilities:
  • Initiatives such as MeghRaj and expanding domestic data-centre investments provide a foundation.
  • The objective should be indigenous cloud infrastructure, strategic redundancy, and sovereign fallback options for critical services.
• Extend the DPI model to AI:
  • India successfully created alternatives to foreign platform dominance through UPI and ONDC.
  • A similar approach is required for AI through Indian foundational models; sector-specific AI for agriculture, healthcare, education, and governance; and public digital AI infrastructure.
  • Such systems would align AI development with Indian priorities and regulatory frameworks.
• Build a global south digital coalition:
  • India’s DPI collaborations across Africa, Latin America, and Southeast Asia can evolve into a broader digital partnership.
  • This could help democratise digital governance, reduce dependence on dominant technology powers, and create alternative standards and norms for the digital economy. 

Strategic Significance for India:

• The future geopolitical competition will increasingly occur through digital infrastructure rather than conventional domains alone.
• Key concerns include technological sovereignty, national security, data governance, economic resilience, strategic autonomy, AI governance, and critical infrastructure protection.
• Countries that control their cloud infrastructure, AI ecosystems, and semiconductor capabilities will enjoy greater policy independence and resilience.

Conclusion:

• India’s DPI represents a remarkable achievement and a global model of inclusive digital governance.
• The next phase of India's digital transformation must focus on securing the infrastructure layer, ensuring that technological self-reliance extends beyond platforms to the foundational systems on which the digital economy operates.