Microsoft plans to bring in-country data processing for its AI-powered Microsoft 365 Copilot to India by the end of 2025, as it announces a significant move toward enabling data sovereignty and regulatory compliance globally. With this rollout, India becomes one of the first four countries globally, alongside Australia, the UK, and Japan, to be served by in-country data residency for Copilot, where sensitive business and government data are processed and stored within the country.
Microsoft Copilot: Embracing Data Sovereignty in India
The digital economy in India is evolving rapidly, and businesses, as well as government bodies, are now examining enhanced regulatory models that will provide greater control over privacy, compliance, and security. In response, Microsoft will ensure that all interactions with Microsoft 365 Copilot ― from prompts and AI-generated replies in applications such as Word, Excel, PowerPoint, Outlook, and Teams ― can be handled within the country’s borders.
This step provides businesses in regulated fields, such as banking, healthcare, and government, with an important layer of protection. They need to ensure that their AI data doesn’t leave the country and that it complies with India’s growing data protection laws.
Strategic Investments and Infrastructure Expansion
The launch of the service further extends Microsoft’s ambitious plan to ramp up AI and cloud capabilities in India. As early as 2025, Microsoft Chief Executive Satya Nadella pledged an additional $3 billion to expand its Indian data center presence, adding to its existing three major regions in Hyderabad, Pune, and Chennai, with one facility already launched in Mumbai. It will enable in-India processing of Copilot data, achieving high performance with low latency for Indian users.
Microsoft’s partnership with Reliance Jio in India also helps it better serve regulated industries and government agencies that require the highest levels of data residency and compliance.
What Local Processing Means for Enterprises and Users
With in-country data processing, companies will have:
- Enhanced data governance—All Copilot interactions processed and stored domestically, improving control and transparency.
- Regulatory compliance—Alignment with India’s evolving data protection and sovereignty frameworks, helping businesses and agencies avoid cross-border data transfer issues.
- Improved AI responsiveness—Reduced latency for AI-powered productivity tools, ensuring a faster, more seamless user experience across Microsoft 365 applications.
The initiative is aimed at more than just large businesses; it also includes startups, public sector organizations, and small to medium-sized enterprises that want safe and reliable AI tools to help them grow and generate new ideas.
Broader Global Rollout
Microsoft will add eleven more countries to its Copilot data processing in 2026, following the addition of India and the first four markets in 2025. These countries include the US, Germany, Canada, and several European and Asian economies. This phased rollout aligns with Microsoft’s goal of global compliance while also supporting local digital ecosystems.
Industry Context and Competitive Edge
Microsoft’s announcement is part of a trend among cloud and AI companies to store data locally to meet government requirements worldwide. This is a significant step for Indian businesses, as the country is becoming increasingly strict about digital sovereignty.
OpenAI, powered by Microsoft Azure, also began storing business user data in India for its ChatGPT services earlier in 2025. This indicates that the industry is shifting toward cloud innovation driven by compliance.
The Road Ahead
Microsoft’s commitment makes Copilot a reliable and compliance-ready AI solution for Indian and global clients as the rules around data become stricter. For users, this means better data protection, faster AI-powered productivity, and the peace of mind that their information will stay within reach and under local control.
As Copilot’s local processing goes live by the end of 2025, Indian businesses, public institutions, and tech innovators can use Microsoft’s AI ecosystem with more confidence.