Google (s GOOG), if it wants to offer its Gmail service to Indian nationals, will soon have to set up servers locally in India and offer email addresses ending in dot-in (.in). Same holds true for Microsoft’s (s msft) HotMail, Yahoo Mail (s yhoo), Rediff and every other web service that wants to do business in India. These changes are being mandatory because of recent amendments in the country’s IT Act. Government officials are using the Mumbai terror attacks and identity theft cases to push through these baffling changes in the IT Act. Stay tuned for more on this developing story. I wonder if more countries will follow suit, leading to the balkanization of web services. Any thoughts, folks?