India’s data centre market continues to grow robustly, with the total capacity projected to rise to 2 GW by 2026. There is nearly 525 MW capacity under various phases of construction across top cities like Mumbai, Chennai, Hyderabad & Bengaluru. Cloud computing, technology advancements, 5G rollouts and the digitalisation of BFSI continue to be the demand drivers with Artificial Intelligence (AI) workloads to ramp this demand up further. These growth drivers are projected to push the India data centre market value to 11.6 Bn USD by 2032.
Data centres have also emerged as an attractive asset class for institutional investors in the last few years, with a large capital pool being committed and deployed in this sector. The industry has seen advancements on various fronts and will continue growing exponentially in the next 2-3 years.
Some of the key trends to look out for in 2025 and beyond:
Large Data Centre Campuses - Data centre operators are increasingly investing in large-scale projects with capacities of over 100+ MW, specifically in Navi Mumbai. Apart from Mumbai, Chennai is another preferred market for data centre operators to set up facilities. Hyderabad will also see significant hyperscaler capacity development in the next few years, with two major hyperscalers - each with 100+ acres of land - having projects in various stages of development.
With the increase in cloud computing and large-scale Artificial Intelligence (AI)-led demand, the industry will see various large campuses to house this growing demand.
Creation of New Availability Zones & Micro-markets - Mumbai and Chennai continue to be the preferred markets for data centre operators. However, due to the scarcity of suitable land parcels and the exponential rise in land prices in the existing DC clusters, the focus is on exploring alternatives slightly away from the conventional hubs in these cities.
AI-led Data Centre Demand Surge & Infrastructure Changes - As per NASSCOM, India’s AI market is expected to grow at a CAGR of over 20% between 2023 and 2028. This will strengthen the data centre demand. With this increasing AI workloads, data centres are becoming increasingly dense and power-consuming. The average rack density is anticipated to increase up to 30 KW/rack compared to the existing 8-10 KW/rack server density.
Advanced & Sustainable Cooling Solutions - To incorporate the Artificial Intelligence (AI)-led changes in data centre infrastructure, the industry is gearing up for the adoption of newer, more energy-efficient technologies. This includes incorporating cooling techniques like liquid immersion cooling which offer significant power efficiency and substantial cost savings. The upcoming hyperscale and purpose-built AI data centres are expected to adopt this technology.
Collaboration Between Chip Makers & Infrastructure Providers - Over the past two years, India’s data centre industry has witnessed collaborations between chip developers and infrastructure providers (for instance, the partnerships between NVIDIA and Yotta and Tata Group and Reliance Jio Infocomm on various fronts). These collaborations aim to build sustainable, energy-efficient, future-ready data centres and are expected to take shape in the next two years. Such collaborations align with the government’s India AI mission, and the data centre ecosystem will benefit immensely.
Edge Data Centre Facilities Development - Another important development in the Indian data centre industry which will witness incremental growth in the next couple of years is the setting up of edge data centre facilities closer to end-users and devices generating data. These facilities are expected to manage the growing data traffic from tier II and tier III cities and support applications like OTT (over-the-top) platforms, IoT (Internet of Things) devices, gaming, Smart Cities, etc. with reduced latency and a better consumer experience.
Various tier II cities like Patna, Jaipur, Lucknow, Ahmedabad, and Bhubaneshwar have already begun getting commitments from the data centre operators to set up such edge facilities.
Migration from On-Premise to Cloud - Many companies increasingly prefer hosting on a hybrid cloud rather than relying on traditional on-premise infrastructure. Cloud computing reduces costs and maintenance needs associated with traditional IT infrastructure. This also offers improved scalability and better security solutions, and will, in turn, accelerate data centre demand from cloud companies.
Sustainability - Focus on Green Data Centres - The data centre industry is becoming increasingly committed to its Environmental, Social & Governance (ESG) considerations. Operators have started using renewable energy to support a part of their power demand via wind and solar energy through strategic power purchase agreements.
Some data centre operators plan on 100% green facilities in the next few years, and continuous efforts are being undertaken to meet this goal. There is backward integration by data centre operators to develop their own sources of green power by investing in renewable energy projects. Efforts related to water and waste management are focused on adopting circular economy principles.
The Government is also exploring the feasibility of using nuclear energy to power data centres, and 2025 could be the start of this vision.
Enhanced Security Measures - The industry continues to improve on the security aspects of data centres to prevent cyber threats and security breaches by integrating advanced security measures like AI-powered security tools, Zero Trust Architecture, multi-factor authentication, etc.
Skill Development & Enhancement of Talent Pool - Efforts on training programs and learning centres for skill development in hardware, software and data centre operations and IT infrastructure management have improved. Both private operators and the government are focusing on creating a talent pool to align with the country's digital growth.
Overall, the Indian data centre market is on an exponential growth trajectory, driven by institutional capital, technological innovation, regulatory support, and the country’s vast digital ecosystem.
