Amazon is planning a substantial investment of approximately $2.8 billion in Telangana to establish a new Amazon Web Services (AWS) Cloud region within the Indian state, as announced by a leading Indian official on Friday.

This investment will facilitate the launch of an AWS Cloud region in Hyderabad by the middle of 2022, according to K. T. Rama Rao, the Minister for Information Technology, Electronics & Communications, Municipal Administration and Urban Development, and Industries & Commerce Departments for the Telangana Government.

According to a press release from Amazon, the new AWS Asia Region will represent Amazon’s second infrastructure region located in India. The company did not specify the exact amount of the investment.

The e-commerce company stated that the new AWS Asia Pacific (Hyderabad) Region will empower a wider range of developers, startups, businesses, and organizations – including those in the government, education, and non-profit sectors – to operate their applications and serve users through data centers situated within India.

However, Amazon also stands to gain significantly from this expansion. Jayanth Kolla, a principal analyst at Convergence Catalyst, explained to TechCrunch that increasing the number of cloud regions in India will simplify Amazon’s adherence to the country’s data localization policies. This compliance will also likely attract additional customers, solidifying Amazon’s current leading position in the Indian cloud market.

AWS has successfully secured numerous prominent businesses as clients in recent years. These include major companies such as Ashok Leyland (automotive), Aditya Birla Capital (financial services), Byju’s (edtech), Axis Bank, Bajaj Capital, ClearTax, Dream11, Edelweiss, Freshworks, HDFC Life, Mahindra Electric, Ola, Oyo, Policybazaar, RBL Bank, redBus, Sharda University, Swiggy, Tata Sky, and Zerodha.

Kolla also suggested that additional Indian states may introduce their own data localization regulations in the future. He further noted that “this is a considerable achievement for the Telangana state government, and for the high-tech city of Hyderabad, in attracting this magnitude of investment.” Rama Rao confirmed that this represents the largest foreign direct investment received by Telangana since its formation in 2014.

Peter DeSantis, senior vice president of Global Infrastructure and Customer Support at Amazon Web Services, stated, “Indian businesses are increasingly adopting cloud computing to lower expenses, enhance flexibility, and accelerate innovation to cater to the demands of billions of customers both within India and internationally.” He continued, “Alongside our existing AWS Asia Pacific (Mumbai) Region, we are providing customers with greater flexibility and options, while enabling them to design infrastructure with improved fault tolerance, resilience, and availability across different geographic areas.”

This investment highlights the significant opportunities Amazon, having already invested over $6.5 billion in its Indian operations, foresees in the world’s second-largest internet market.

Amazon, Google, and Microsoft have all been actively exploring strategies to broaden the reach of their cloud services in India. Microsoft established a long-term agreement with Jio Platforms last year to provide millions of businesses with access to Office 365 and other Microsoft services at reduced costs. Earlier this year, Amazon entered into a strategic partnership with Airtel, a leading Indian telecom operator, under which Airtel will market AWS to its extensive customer base. Currently, Microsoft operates three data center regions in India, while Google has two.

The potential of India’s public cloud market, projected to reach a value of $7 billion by 2024 according to market research firm IDC, is a key driver of this competition.