Global Hub: India emerging as a primary market for data centres

India has evolved from an emerging market to a primary market for data centres, with an estimated capacity of over 700 MW. With rising green energy investments, skilled manpower and low-cost locations for establishing data centres, it has become one of the most attractive destinations for global majors. Inc­re­asing private sector investments, an ­en­­abling regulatory environment and spiking demand for data are paving the way for India to emerge as a global data centre hub. Moreover, given that the country’s data centre capacity per million population is still very low compared to its Asia-Pacific (APAC) peers, there is a high potential for further growth.

Market overview

India is the fastest growing data centre market in the APAC region. The market is valued at $7 billion. The total live operational capacity in India was 722 MW as of end 2022, compared to 551 MW in 2021. This indicates a robust growth of 31 per cent in total supply over that in the previous year. Of the total capacity, Mu­mbai holds nearly 50 per cent share, followed by Pune, Chennai, Delhi NCR and Bengaluru. The IT load is around 660 MW. Hyperscalers account for half of the total occupancy, followed by banking and financial services, technology and telecom. The demand for data centres grew in sync with the supply, with an estimated absorption of 161 MW during 2022 as against 119 MW in 2021.

Growth drivers

The demand for data centres in India is being driven by the need for data storage, given the government’s thrust on e-governance as well as the Digital India scheme and data localisation policies. Besides, the countrywide 5G roll-out and a rise in the adoption of data-intensive technologies such as internet of things (IoT) and artificial intelligence (AI) are leading to an explosion of data usage. An increased shift from on-premises solutions to co-location or cloud are further pushing the market for data centres in the country. The widespread adoption of digital services such as e-commerce, unified payment interface and over-the-top (OTT) platforms is also accelerating the de­ma­nd for data.

Key trends

Edge data centres

Edge data centres have emerged as an important subsegment of the industry. Unlike hyperscale data centres with thousands of racks, edge data centres house 10-20 racks and cater to the specific needs of users geographically close to the data centre. This is particularly helpful for emerging technologies such as IoT, AI and extended reality applications. Most of the demand for edge data centres is driven by e-commerce and OTT adoption. There is also a considerable push from state governments to set up smaller edge data centres near Tier II cities.


Data centres consume nearly 1-3 per cent of the world’s total power and account for up to 3.7 per cent of the global carbon emissions, which is grea­ter than the global airline industry. While India is the world’s third largest producer of renewable energy, merely 22 per ce­nt of data centre buildings in the country are Leadership in Energy and Environmental De­sign-certified. Data centre operators are making significant efforts to de­p­loy sustainable materials, ensure minimum en­ergy consumption, and pre-plan air manageme­nt, water re­cy­cling and waste disposal.


Software-defined data centres (SDDCs) have emerged as a result of the continuing evolution of server virtualisation. SDDCs extend virtualisation from compute to storage and networking resources, and provide a single software to manage the virtualised resources. SDDCs also enable policy-driven automation of provisioning and management, which improves delivery sp­e­ed and enhances efficiency.

AI and automation

AI is transforming the data centre landscape by facilitating intelligent automation and predictive analytics. Automation continues to be a fo­cus area for operators with respect to increasing operational efficiency. The key use cases of data centre automation include provisioning and orchestration, virtual machine manageme­nt, parts management, server power budgeting, scheduled charts and reports, and thresholds and alerts.

Government initiatives

The Ministry of Electronics and Information Technology (MeitY) released the draft Data Cen­tre Policy in November 2020 to incentivise in­vestments and develop India’s potential as a global data centre hub. In the union budget 2022, data centres were granted “infrastructu­re” status and included in the harmonised mas­ter list of infrastructure subsectors in October 2022, which has eased long-term financing for such projects. MeitY intends to provide up to Rs 150 billion as incentives. Further, the Ministry of Power recently released the Green Open Access Regulations, 2022, allowing locations with a connected load of 100 kW and above to source green power. This will enable data centres to adopt affordable and reliable renewable energy as their primary power source.

Various state governments are also revising their data centre policies to support the infrastructural growth of data centres and attract private investments through tax subsidies. These policies offer incentives to reduce the upfront and operational costs for data centre operators and ease compliance procedures, to provide a conducive investment atmosphere.

Private investments

Several foreign investors, global majors and In­dian corporates have announced a flurry of in­vestments in setting up data centres or ex­panding their current capacities over the past year. Recently, Equinix, Inc. announced an in­vest­ment of $42 million for its fourth international business exchange data centre in Mumbai, called MB4. NTT Limited launched its hyperscale data centre campus, Chennai 2. The company also entered into an agreement with the Prestige Group to develop a 100 MW data centre in Bengaluru. This marked the Prestige Group’s entry into the Indian data centre market. Additionally, SentinelOne launched its virtual data centre in Mumbai. Earlier, in March 2023, France-based OVHcloud launched its first data centre in India. STT GDC announced investments of around Rs 20 billion to develop two new data centres in its existing Pune campus. In February 2023, the company signed an MoU with the Uttar Pradesh government to establish data centres in the state at a proposed investment of around Rs 41 billion.

Domestic giants are investing heavily in the data centre domain. For instance, Reliance Industries Limited entered into an agreement with Brookfield Infrastructure and Digital Realty to invest in their joint venture (JV) for developing data centres in India. The JV’s first 20 MW greenfield data centre (MAA10) in Chennai is expected to be completed by the end of 2023. Meanwhile, AdaniConneX, a JV between Adani Enterprises and EdgeConneX, sealed the largest data centre financing deal in India by raising $213 million for its data centre asset portfolio. The tied-up facility will finance two data centres with an aggregate capacity of 67 MW, namely, the Chennai 1 campus with 17 MW of capacity in Phase I, and the Noida campus with 50 MW of capacity. AdaniConneX also envisions a 1 GW data centre powered by 100 per cent green energy by 2030. Bharti Airtel has announced an investment of Rs 20 billion for setting up a large hyperscale data centre in Hyderabad. The telco recently announced that it would purchase 23,000 MWh of renewable energy by the fourth quarter of financial year 2024 to power six of Nxtra’s edge data centre facilities. Notably, Nxtra was the first data centre company in India to install a hydrogen-ready fuel cell-based captive power plant to provide clean energy to data centres.

Further, PowerGrid announced the establishment of a pilot data centre at the Powergrid Manesar substation at an investment of $86.9 million through its subsidiary, Powergrid Tele­ser­vices Limited. The Web Werks-Iron Moun­ta­in Data Centers JV inaugurated its first data centre, HYD-1, in Hyderabad in May 2023, while its first greenfield data centre, MUM-2, was launched in Navi Mumbai in February 2023. The JV recently acquired a parcel of land to expand its data centre campus with a third facility, MUM-3, in Navi Mumbai.

Challenges and future outlook

The key roadblocks faced by data centre operators include limited land in relevant micro-markets, inadequate availability of power, and issues with the sourcing and availability of green energy. In addition, supply chain disruptions and a lack of skilled resources impact capacity additions. Climate change disruptions can also impact data centre operations.

Despite these challenges, India’s data centre industry is set to witness continued growth, with a strong pre-commitment pipe­line expected to result in a supply addition of 678 MW between 2023 and 2025. According to JLL’s latest estimates, this expansion will necessitate a demand for 9.1 million sq. ft. of real estate space, requiring a total investment of $4.8 billion. This represents a significant opportunity for investors and stakeholders alike.