India’s Growing Data Center Infrastructure


India’s tremendous population growth, increasing internet penetration, and government initiative to become a digital-first economy are driving new opportunities in the tech sector. The data center industry in particular is undergoing a remarkable transformation with significant growth potential.

India ranks 13th in the world in terms of total number of data centers, with 138 currently in operation. 45 more are on the way, according to the Indian Ministry of Electronic & Information Technology (MeitY), set to cover 13 million square feet with 1,015 MW of capacity by the end of 2025. While India has only 3% of the total number data centers and 6% of data center capacity globally, the industry is witnessing rapid progress, and its market share may soon reach double digits. The foundation of this growth was laid a few years back when the Indian government, with its strict policy on data localization and storage policy through the 2019 data protection bill, mandated local storage of sensitive information. Enforcement of these policies has created a need for big players to localize data through the construction of data centers throughout the country.

Source: Statista

Government Initiatives to Boost Investment

Against the backdrop of India’s growth as a major IT-ITes hub, many state governments such as Haryana, Karnataka, and Odisha have implemented their own data center policies, which provides investors with a range of financial and non-financial incentives, from exemption on electricity duties and taxes to providing land at a concessional rate.

To further boost investment in this sector and to create an ecosystem conducive to growth, the Indian Government has an aggressive plan to set up a Data Center Economic Zone (DCEZ) & Data Center Parks across India. This plan is part of its Central Sector Scheme, intended to create an ecosystem of hyperscale data centers, cloud service providers, IT companies, R&D units, and other allied industries.

The Indian Government’s decision to allow 100% FDI under the automatic route has drawn global tech giants and infrastructure providers to invest in India’s data center ecosystem. Per data published by NASSCOM, India is expected to receive an average of US$ 5 billion in investment annually until 2025, with a cumulative investment of US$ 28 billion expected in the period from 2019 to 2025. However, this number is expected to surge even faster, as many global companies have announced either new greenfield investments or an expansion of their current capacities in India. Digital Realty unveiled its first data center in India this year. Likewise, Sify, Yotta, Adani Connex, Reliance, and Google have all announced significant investment in India’s data center industry.  AWS alone plans to invest US$ 10-12B to expand its data centers in the country.

Data Localization

Currently, 90% of data centers are concentrated in Tier-1 metro cities in India, with the majority in Mumbai (60%), followed by Chennai (15%) and Bengaluru (10%), primarily due to the high concentration of various industries. However, over the last few years, more companies have begun to look at second and third tier cities like Ahmedabad, Chandigarh, Pune, and Vizag that have improved infrastructure while still offering a lower cost than first-tier cities. These cities also offer fiber connectivity and skilled labor forces. As the data center industry continues to grow in India, the geographical distribution will change, and second and third-tier cities will attract more investment as they accelerate growth and digitalization.

Source: Tractus Research

The Indian data center industry is on an upward trajectory, fueled by digital transformation, government initiatives, foreign investment, edge computing needs, renewable energy potential, and a skilled workforce. As India continues to embrace digital technologies, the demand for data center services will only intensify. This sector offers lucrative opportunities for investors, businesses, and job seekers, positioning India as a major player in the global data center landscape.

Authored by

Anuj Kumar is a Senior Consultant based in India.

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