India Seeks Sovereign Cloud Infrastructure for Strategic Sectors Amid Geopolitical Concerns

India Considers Sovereign Cloud Systems for Critical Sectors Amid Geopolitical Concerns

The Indian government is considering a proposal to ask companies in critical sectors such as energy, telecom, and banking to use Made-in-India sovereign cloud systems, according to a report by The Indian Express. This move is aimed at reducing dependence on foreign cloud providers and strengthening control over sensitive data and digital infrastructure.

The proposal is a direct result of last year's incident involving Microsoft, which temporarily blocked services to oil refiner Nayara Energy. This incident raised concerns in policy circles over India Inc's reliance on overseas digital infrastructure providers. The government is now discussing a plan to require companies in critical sectors to host their digital infrastructure on a sovereign cloud.

Cloud systems provide remote access to computing resources such as servers, storage, databases, and software, making them essential for large businesses that require scalability and lower infrastructure costs. However, a suspension by a provider can lock companies out of their own data, communication tools, and software, creating operational risks in strategic sectors.

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The government acknowledges the challenge in shifting to domestic systems, citing the lack of good enough domestic cloud systems that can rival those from the US. The report noted that the European Union sanctioned Nayara Energy in July 2025 due to its 49.13% stake in the company being held by Russian oil major Rosneft. This led to Microsoft suspending tech support, impacting employee access to Outlook and Teams accounts.

Microsoft has since changed its enforcement mechanism, including adding senior leadership review before suspending services to any entity. The company said the disruption was caused by an automated "legacy" sanctions compliance system, which defaulted to broader global restrictions, leading to an unintended disruption.