The tech giant will also train 10 million people in AI skills in India by 2030, Nadella said, addressing a conference attended by startup founders and executives from technology firms here.
Nadella is the latest in the list of tech tycoons to have visited India - the nation of 1.4 billion people that is emerging as an AI battlefront.
Chip maker Nvidia chief Jensen Huang, AMD's Lia Su and Meta chief AI scientist Yann LeCun had in recent months visited India, home to millions of programmers and technology services providers like Tata Consultancy Services (TCS), Infosys and Wipro.
He, however, did not give a time frame for the spending.