With the rapid expansion of digital services, cloud computing, and artificial intelligence, the demand for scalable, reliable data centres is growing faster than ever. As one of the world’s largest digital economies, India stands at a critical juncture in this transformation.
The country is experiencing sweeping changes in internet penetration, technology adoption, and data generation. But is our existing infrastructure equipped to handle this surge? And how are cities, corporations, and policymakers preparing for this digital leap?
This article explores the current landscape of India’s data centre industry — its growth, strengths, roadblocks, and future potential.
Current State of the Data Centre Industry in India
India’s data centre industry is expanding rapidly and is currently valued at around $10 billion. According to Anarock Capital, the sector earned nearly $1.2 billion in revenue in FY24. Interestingly, just four major players account for approximately 78% of this revenue, underscoring a highly concentrated market.
Due to its strategic location and large user base, India is becoming an attractive hub for global data centre operations. As per Cushman & Wakefield, the top seven Indian cities collectively have a data centre capacity of 977 MW. An additional 1.03 GW is under construction and expected to be completed by 2028. Further, another 1.29 GW is in the planning phase — projecting India’s total capacity to touch 3.29 GW by 2028.
India’s data centre capacity has grown 139% over the past five years — from 590 MW in 2019 to 1.4 GW in 2024.
Over the last decade, the sector has attracted over $6.5 billion in investments through private equity, joint ventures, and acquisitions. Yet, India still lags behind global peers in infrastructure — with just 1 MW of data centre capacity per million internet users, compared to 4 MW in China and 51 MW in the US. This highlights the pressing need for accelerated infrastructure development.
Indian Cities Emerging as Major Data Centre Hubs
India’s data centre footprint is currently concentrated in a handful of metros. Mumbai and Chennai lead the pack, together accounting for nearly 70% of the country’s total IT power capacity. Mumbai alone contributes 49%, reinforcing its dominance. Between 2022 and 2024, Mumbai’s data centre supply surged by 92%, while Chennai registered a staggering 340% increase.
Other prominent cities in this space include Noida, Bengaluru, Hyderabad, and Pune. These hubs are also witnessing strong growth, contributing to India’s high data centre occupancy rate of 76% — a sign of robust demand and efficient utilisation.
Accompanying this capacity growth is a spike in land acquisition for hyperscale data centres. In the past five years, around 440 acres have been acquired. Hyderabad leads this trend with 69% of the land, followed by Mumbai (22%) and Pune (9%). This reflects the increasing interest of global tech giants, many of whom are looking to build and operate their own data centres in India.
What’s Driving India’s Data Centre Growth?
Several structural trends are powering the rise of India’s data centre ecosystem:
- Rising Internet Usage: Internet penetration rose from 33.4% in 2019 to 55.2% in 2024. Per capita data usage has doubled, resulting in surging demand for robust data storage and computing power.
- RBI’s Data Localisation Rule: In 2018, the RBI mandated the storage of financial data within India. This spurred investments in local data centres to safeguard sensitive data.
- Boom in Digital Services: With over 886 million internet users in 2024, the demand for digital apps and services is rising sharply — necessitating dependable and secure data infrastructure.
- Emerging Technologies: The rise of cloud computing, big data, IoT, and e-commerce has created massive volumes of data that need processing and storage.
- AI Adoption: Artificial intelligence, including machine learning and natural language processing (NLP), requires high-speed, high-performance computing — making advanced data centres indispensable.
Challenges Facing India’s Data Centre Growth
Despite the momentum, several hurdles need to be addressed:
- High Energy Consumption: Data centres are energy-intensive, and the increasing use of AI workloads has only amplified power requirements — raising sustainability concerns.
- Limited Access to Renewable Energy: India aims to double its power capacity by 2030, with 61% from renewable sources. However, high costs and inconsistent supply of solar and wind power challenge data centres, especially in power-stressed cities like Mumbai and Chennai.
- Infrastructure Constraints: Many of the current data centres aren’t equipped to handle high-density AI workloads. Upgrades in cooling systems, power supply, and network connectivity are urgently needed.
- Regulatory Delays: While government policies support data centres, complicated approval processes and bureaucratic red tape continue to delay project execution.
- Over-Reliance on Metro Cities: The industry’s heavy concentration in a few metros highlights the need to expand into tier-2 and tier-3 cities for more balanced growth.
Government Initiatives to Support Data Centre Growth
The Indian government has rolled out several measures to support the sector’s development:
Incentive-linked Policy: A proposed policy will focus on enhancing computing power and AI capabilities — not just physical infrastructure. It also aims to include start-ups and MSMEs in the benefits framework.
AI Infrastructure Investment: The government has approved Rs 10,732 crore ($1.24 billion) to build AI-ready data centres to support rising digital workloads. Capacity is expected to increase by 500 MW over the next four years.
Financial Support: Offers include 100% grant-in-aid for establishing, operating, and maintaining state data centres (SDCs) for five years — covering infrastructure, consultancy, and workforce needs.
Infrastructure Status: Data centres with over 5 MW capacity have now been granted infrastructure status, easing access to financing and encouraging FDI.
Single Window Clearance: Maharashtra has implemented a single-window clearance system to fast-track approvals — following global best practices seen in regions like Singapore.
Regulatory Reforms: Efforts are underway to streamline rules related to land, environment, and construction, reducing project timelines and costs.
MeghRaj Initiative: A flagship cloud initiative delivering ICT services nationwide. As of November 2024, it supports 1,917 applications via the National Informatics Centre and 23 empanelled cloud providers.
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Future Prospects
India’s data centre market is poised for strong, sustained growth. Its value is expected to rise from $4.5 billion in 2023 to $11.6 billion by 2032 — registering a CAGR of 10.98%.
Over the past six years, the sector has attracted $60 billion in committed investments, and this figure is projected to exceed $100 billion by 2027. In addition to established metros, tier-2 cities like Noida, Pune, and Hyderabad are also emerging as key locations for new capacity.
India’s relatively low construction costs offer a significant advantage in becoming a global data centre hub. In 2023, the median cost to build a data centre in India was $6.8 million per MW — far below Australia ($9.17 million), Japan ($12.73 million), and Singapore ($11.23 million).
*The companies mentioned in the article are for information purposes only. This is not an investment advice.
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