India’s Data Centre Growth: A Booming Industry Set for Explosive Expansion

India’s data centre (DC) industry is poised for significant growth over the next few years. According to ICRA, a prominent rating agency, the country’s data centre operational capacity is expected to surge from 1,150 megawatts (MW) in December 2024 to an impressive 2,000-2,100 MW by March 2027. This remarkable growth is being driven by the surge in data consumption, the push for data localisation, and a broader shift in the digital ecosystem.

Massive Investment in Infrastructure

Indian data centre operators are projected to invest a substantial amount — between ₹2,00,000-2,30,000 crore — in expanding their infrastructure over the coming years. A development pipeline of 3-3.5 gigawatts (GW) is set for completion over the next 7-10 years. This is indicative of the increasing demand for data services across industries, as businesses adapt to the new digital landscape.

Key Hubs for Data Centres: Mumbai, Chennai, and Hyderabad

As the demand for data centres rises, the report highlights that 75% of the upcoming facilities will be concentrated in three major cities: Mumbai, Chennai, and Hyderabad. Among these, Mumbai is emerging as the dominant location for data centres. The city’s strategic advantage lies in its large number of landing stations, which play a critical role in connecting global data traffic.

The rapid expansion of hyperscalers, which provide large-scale cloud infrastructure, is a key factor driving the demand for data centres. ICRA notes that global trends have led to multiple deals involving 300 MW or more in artificial intelligence (AI) workloads. Other significant drivers include the ongoing rollout of 5G technology, the growing adoption of cloud computing, machine learning, and the Internet of Things (IoT).

Outlook Supported by Favourable Policies

Despite these challenges, ICRA anticipates that favourable regulatory policies and the sector’s designation as infrastructure status will provide strong support for the continued growth of India’s data centre industry. These factors, coupled with ongoing investments, should help the sector sustain its expansion for the foreseeable future.

Conclusion

India’s data centre market is entering an exciting period of rapid growth. With substantial investments, a concentration of facilities in key cities, and strong demand driven by advancements in AI, 5G, and cloud computing, the future of India’s data centre sector looks incredibly promising. The industry’s growth trajectory will likely be further supported by a favourable regulatory environment, making it an attractive market for both developers and investors alike.

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