India Data Centre Market Dynamics

Indian data centre industry crossed the 1 GW milestone, growing at a robust pace of 24% CAGR since 2019. This strong growth was driven by increasing demand from Cloud service providers. India enjoys the advantage of one of the lowest data usage costs and the world's second-largest mobile user market, leading to strong digital growth. The Indian data centre industry grew from 350 MW in 2019 to 1030 MW in 2024.

In the second half of 2024, the market saw an increased supply of 114 MW, led by pre-commitment deliveries, with Mumbai accounting for nearly half of this total. Absorption also rose strongly to 122 MW during this period, driven by Cloud Service Providers planning for new AI demand and the BFSI segment complying with regulatory requirements. This growth trajectory necessitates substantial industry investment in infrastructure upgrades, compliance measures, and new service offerings. While these changes may increase operational costs, effective implementation could provide a competitive advantage in attracting clients with strict data protection needs, positioning the Indian data centre industry for substantial growth.

The Indian data centre landscape is evolving rapidly, influenced by both technological advancements and regulatory changes. The implementation of the Digital Personal Data Protection Act and its accompanying rules is set to transform the data protection landscape, impacting colocation data centre operators. These regulations aim to balance citizen rights with innovation, implementing graded responsibilities for data fiduciaries.

The Indian data centre industry is expected to add 795 MW of new capacity by the end of 2027, taking the entire capacity to 1825 MW. This will require 9.3 million sq ft of real estate space with USD 5.8 billion towards digital and real estate infrastructure.

The landscape of data centres is undergoing a profound transformation, driven by rapid advancements in computational capabilities. The exponential growth in machine learning hardware performance, particularly in GPUs and AI accelerators, is reshaping the demands placed on data centre infrastructure. This leap in processing power is not only enabling faster training of large language models but also catalyzing a broader acceleration of AI innovation across various sectors. As a result, data centres are being compelled to adapt their designs and operational strategies to accommodate these increasingly powerful and energy-intensive technologies.

This technological surge is precipitating a significant shift in data centre cooling methodologies. The latest generation of AI chips, exemplified by NVIDIA's recent offerings, are pushing power consumption to unprecedented levels, often tripling the energy requirements of their predecessors. This dramatic increase in power density is rendering traditional air-based cooling systems inadequate, necessitating a transition to more efficient liquid cooling solutions. This shift is not merely a technical upgrade but a fundamental reimagining of data centre architecture and management practices, paving the way for a new era of high-performance, energy-efficient computing infrastructure.
 

• Sovereign Cloud Policy: India's push for data localization and security through initiatives like the Digital Personal Data Protection Act is reshaping the industry landscape.
  
• Digital Personal Data Protection Rules: These rules aim to enhance safe digital usage and growth, balancing citizen rights with innovation. They will significantly impact colocation data centre operators, potentially increasing compliance requirements and operational costs.
  
• Robust Digital Growth: India's digital infrastructure is laying the foundation for a USD 1 Trillion digital economy by 2027-28. This growth is driving data centre capacity expansion, with Mumbai and Chennai accounting for 81% of new capacity additions.

• Mumbai: Leads with 536 MW colo capacity and 10 cable landing stations. Significant transformation driven by BFSI migration to colocation facilities.
  
• Chennai: 113 MW colo capacity with growing interest from tier 2 CSPs and BFSI sector.
  
• Pune: Witnessed 15 MW supply addition in H2 2024, driven by CSP commitments.
• Hyderabad: New supply of 3 MW in H2 2024, with self-build facilities by CSPs scaling up operations.
• Delhi NCR: Large pre-committed supply delivered in H2 2024, with 26.1 MW absorption primarily from cloud service providers.
• Bengaluru: Marginal growth in H2 2024, with potential demand from IT testing labs and core tech firms.
• Kolkata: Fresh supply addition after many years, with 2 MW pre-committed demand delivered.

Conclusion : The Indian data centre industry is poised for substantial growth, driven by both global technological advancements and domestic regulatory developments. As the country continues its digital transformation, the demand for data centre services is expected to surge, presenting both challenges and opportunities for industry players.