By Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE
India is rapidly transforming from an emerging market to a developed one, and digital technology is at the forefront of this exciting journey. Digitalisation isn’t just accelerating economic growth across all industries, and it’s also the foundation for better public services,
greater social and financial inclusion, increased productivity, and a more interconnected society. India’s digital economy is projected to reach ~ $1 trillion by 2025. Government initiatives like granting infrastructure status to data centers and introducing the Draft Data Centre Policy in 2020 have significantly improved the business climate for data center operators and developers.
Furthermore, implementing the Digital Personal Data Protection Act (DPDPA) in 2023 has fostered secure cross-border data exchange, legitimate data processing practices, and increased stakeholder confidence. These measures are propelling India’s digital innovation landscape to a new height Fueled by a surge in digital adoption, internet penetration, and data consumption, India’s data center (DC) market is experiencing phenomenal growth. Government policies further amplify this momentum, the rise of Artificial Intelligence, and the upcoming 5G rollout. The ever-increasing data traffic across various sectors is creating a pressing need for robust and reliable data storage and processing facilities. This scenario presents a golden opportunity for foreign investment and cutting-edge data center infrastructure development, crucial for supporting India’s flourishing digital economy.
DC drives various activities, from everyday tasks like mobile banking and social media updates to cutting-edge technologies like artificial intelligence (AI) and immersive gaming experiences. The management landscape of data centers is in a constant state of evolution, requiring continuous adaptation to emerging trends. The industry is undergoing significant transformations, propelled by technological advancements, shifting business landscapes, and evolving consumer expectations.
As the world embraces digital transformation in nearly every facet of daily life, India’s data center sector is pivotal in this evolution. With substantial investments and strategic expansions into tier-II cities, India is positioning itself as a key player in the global digital
infrastructure landscape, continually adapting and growing to meet the demands of a rapidly digitalising world.
Data center boom in India
Globally, despite certain roadblocks, the data center industry is expanding rapidly. India is emerging as a key player, boasting the highest data center capacity in the APAC region, with around 950MW, outpacing major countries like Australia, Hong Kong SAR, Japan, Singapore, and Korea, according to a CBRE report. With an anticipated addition of around 850 MW between 2024 and 2026, India is set for the highest growth in the region. This surge reflects India’s strategic advantages in the data center industry. For instance, lower land costs, a highly skilled workforce, seamless transportation, and a reliable electricity supply are drawing significant foreign investments from tech giants like Microsoft, Google, and Amazon, who are establishing hyperscale data centers in the country.
Furthermore, the shift to hybrid working, online schooling, and EdTech platforms has amplified the need for robust cloud services. The rise of location-agnostic work and learning has led to a substantial increase in data transmission via digital networks. Organisations
across industries continuously create, capture, and analyse vast amounts of data, transforming operational paradigms. This growing digitalisation, coupled with strong government support, drives the demand for data centers in India. The country’s proactive stance in building a resilient IT infrastructure position it to compete with global giants like the USA and Europe, setting the stage for a transformative digital future.
India attracted more than USD 40 billion investment commitments by global and domestic investors. The top states that dominated the cumulative investment commitments include Maharashtra, Uttar Pradesh, West Bengal, and Tamil Nadu. This expansion aligns with the
Government of India’s vision to transform the nation into a digitally empowered society. Furthermore, the cabinet has approved policies specific to states such as Karnataka, Maharashtra, Uttar Pradesh, West Bengal, Tamil Nadu, and Telangana, each with an exclusive policy for the DC sector. With this framework, the Uttar Pradesh (UP) government is striving to establish UP as India’s data center hub. Last year, the state saw three data centres operational, with eight more in the pipeline, underscoring its commitment to leading the nation’s growth and infrastructure development.
Consequently, several tech giants, such as NIDP Developers, Tata Technologies, STT Global Data Center, and Jackson Limited, are channelling investments into the state. Private sector majors and startups can utilise these data centres to test or run their large language models (LLMs) for their AI offerings. As we look ahead, these advancements will be intricately linked to the role of AI in driving operational efficiencies.
AI driving operational efficiencies
GenAI has emerged as a transformative force, commanding the spotlight as IT companies strategically invest in its potential. The next few years are likely to witness investments that revolutionise the data center landscape, fostering unprecedented efficiency, agility, and
performance. The government’s Rs 10,000-crore AI mission will play a pivotal role, establishing a network of high-computing data centres available for lease to industry players, empowering them to train and develop AI models. By leveraging advanced analytics
and machine learning algorithms, data centers can gain deep operational insights, enabling informed decisions, early issue detection, and optimal resource utilisation. This shift towards predictive analytics is expected to enhance data center performance, reduce downtime, and drive cost savings, instilling confidence in the future of India’s data center industry.
As organisations embrace the integration of AI, the global environmental goals, sustainability of data centers becomes essential. This shift reflects a shared responsibility to balance technological progress with ecological concerns, promoting a greener and more sustainable digital infrastructure.
Contributing to green economy
Data centers consume a substantial amount of electricity, accounting for around 2% of global power usage. Their CO2 emissions are comparable to those of the airline industry, known for its high carbon footprint. However, the industry is committed to sustainability.
With the expected expansion in this sector, the strain on electricity grids in key cities with substantial DC infrastructure will surge, too. To address these concerns and meet ESG targets, DC operators are exploring methods to reduce their carbon footprint. This includes
decreasing dependence on traditional, carbon-intensive fossil fuels and incorporating more clean and affordable energy to achieve carbon neutrality goals. Additionally, operators are reevaluating the design and management of every DC, from inception to end-of-life disposal
of buildings and equipment, to ensure they are as environmentally friendly as possible.
Operational sustainability is becoming increasingly important, with a strong focus on energy and water efficiency, waste management, and the use of renewable energy sources. New data centers are partnering with sustainable material providers, implementing optimised
designs to minimise energy consumption for temperature control, maximising server housing efficiency, pre-planning air management, utilising water recycling and disposal systems, enhancing waste management processes, and installing solar panels on available
real estate within the premises.
As we move forward, data centers will continue to be concentrated in tier-I locations, but there is a notable shift as many colocation and edge computing facilities expand into tier-II and tier -3 cities as well. This expansion aims to be closer to customers in these areas,
offering faster response times, reduced latency for time-sensitive applications, and decentralising DC infrastructure to serve a distributed user base across India effectively.
Emerging markets such as Kochi, Jaipur, Ahmedabad, Lucknow, Patna, and Vishakhapatnam are experiencing growth, driven by their strategic locations and improved infrastructure, including enhanced power supply, and upgraded fiber and cable connectivity. In the coming years, the Indian data center sector is poised for significant growth, driven by increasing stakeholder focus on tier-II and III cities, sustained occupier interest, a growing talent base, and the country’s strengths as a hub for technology, R&D, and shared service
platforms. These factors will boost capacity expansion and enhance India’s reputation as a premier global hub for data centers, fostering innovation and attracting substantial international investments.
