India is rapidly transforming into a digital-first economy, where the growing demand for AI, cloud computing, and digital services is reshaping the infrastructure sector. Over the last decade, the country has built a strong digital backbone, with affordable internet, rising smartphone penetration, UPI-based real-time payments, and digital identity systems playing a major role.
Now, this digital expansion is turning the data centre sector into India’s next major infrastructure theme. Rising AI workloads and increasing data processing requirements are driving large investments and rapid capacity expansion in the sector.
Let’s understand the role AI is playing in India’s data centre sector and why this space is becoming increasingly important for investors.
What’s Happening?
India’s data centre sector is currently witnessing rapid expansion. According to a KPMG report, the country’s total data centre revenue could reach approximately $45.69 billion by 2033. The primary reason behind this growth is the rapidly increasing demand for AI and cloud services.
At the same time, the AI-optimised data centre market is expected to grow from $588.6 million in 2024 to $3.55 billion by 2030, at an estimated CAGR of 35.1%.
India’s current data centre capacity stands at approximately 1.5 GW and could increase to nearly 20 GW by 2030. This growth is being driven by hyperscalers, colocation operators, and rising enterprise cloud adoption.
AI-Driven Growth and Market Transformation
AI is no longer just a technology trend; it has become a major driver of infrastructure demand. Traditional data centres are increasingly unable to handle the requirements of high-density GPU clusters and AI processing workloads, which is leading to a sharp rise in demand for next-generation AI-ready data centres.
In India, over one billion internet users and the growing adoption of cloud services are increasing the need for local data storage and processing. Data localisation norms and ESG priorities are also strengthening domestic data centre infrastructure.
According to Schneider Electric, India’s data centre market could reach $31.36 billion by 2035. The company has stated that the data centre business already contributes around 15–20% of its Indian operations and continues to register double-digit growth.
Challenges and the Need for Sustainability
While the data centre boom is creating significant economic opportunities, it is also bringing environmental challenges. The rise of data centre clusters in cities like Bengaluru is worsening heat island effects and weather-related concerns.
AI data centres consume massive amounts of electricity and water. According to reports, a single AI data centre can use approximately 25 million litres of water per MW annually. In Bengaluru alone, the daily water consumption by data centres could reach nearly 20 million litres.
In addition, challenges such as noise pollution, air pollution, and rising energy costs are also becoming more prominent. This is why experts are increasingly emphasising sustainable infrastructure, renewable energy adoption, and better water management practices.
What Does This Mean for Investors?
The data centre sector is emerging as a major opportunity for Indian real estate and infrastructure companies. It is estimated that India’s data centre market could reach approximately $22 billion (around Rs 2 lakh crore) by 2030.
Macrotech Developers is developing a data centre hub across 400 acres in Palava, where approximately 3 GW of power is available. Meanwhile, Anant Raj is already offering cloud infrastructure services with 28 MW of operational capacity.
Moreover, the $67.5 billion investment commitment from hyperscalers such as Amazon, Microsoft, and Google strengthens the long-term outlook for the sector.
However, investors should not focus only on the growth story. The data centre business is highly capital-intensive, and factors such as power, cooling, and regulatory costs play a significant role in profitability. Therefore, companies with strong balance sheets and long-term execution capabilities are more likely to perform better over the long run.
What’s Next?
Data consumption in India is rising rapidly, and with it, the demand for data centre infrastructure is also increasing. According to the government, the country’s installed data centre capacity has grown from approximately 375 MW in 2020 to around 1.5 GW in 2025, nearly a threefold increase in just five years.
However, while India generates nearly 20% of the world’s data, its share in global data centre capacity was only around 3% as of September 2024. This highlights the significant supply gap that still exists and points towards long-term growth opportunities in the sector.
As a result, India’s data centre market is expected to grow from approximately $10 billion in 2025 to nearly $22 billion (around Rs 2 lakh crore) by 2030. Meanwhile, according to S&P Global, the country’s total data centre capacity could reach 6.5 GW by 2030. With rising AI adoption, expanding cloud services, and the continued growth of the digital economy, the data centre sector could emerge as one of India’s key infrastructure growth drivers in the coming years.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
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