The planned investments will be in several areas including education, partnerships and localization, the company said in a statement.
"Today, India is of strategic importance to our business and will continue to be so, as its developer and skill base continues to grow," said Gates, who was visiting India for the third time.
Gates' visit to the Asian IT hotbed could be an attempt to stop Linux from gaining momentum in the populous country.
Officials in India's Department of Information Technology in New Delhi disclosed details of an open-source move called the Linux India Initiative just weeks before his visit, The New York Times reported.
On the education front, Microsoft on Tuesday launched Project Shiksha, an initiative to raise computer literacy in India.
As part of the project, the company will set up 10 computer centers in partnership with state education departments, and more than 2,000 school labs in cooperation with partners.
The project, which includes teacher and student scholarships, is expected to reach over 80,000 schoolteachers and 3.5 million students across India. The company added it has established a dedicated team to support this initiative.
Microsoft also debuted its "Partnering with India"
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"Today, an increasing number of .Net projects across by the globe are being developed by talented Indian companies," Gates said.
Without disclosing specific launch dates, Microsoft also plans to launch a Hindi version of Windows XP and Microsoft Office. In addition, the company will work with its Indian partners to add support for two additional local languages in Windows XP, on top of the nine that are currently supported.
Microsoft said it aims to increase the staff strength of its development center in Hyderabad, capital of state of Andhra Pradesh, to 500 by 2005. The company first launched its India development center in 1999 with 40 employees.
Winston Chai reported from Singapore.