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The Data Centre (DC) industry in India is set to witness remarkable growth, with projections of adding 791 MW capacity by 2026. This expansion will drive a demand for 10 million sq. ft. of real estate space, attracting investments worth USD 5.7 billion. The surge is primarily fuelled by the increasing adoption of Artificial Intelligence (AI). As usage of AI gains pace, the demand for Indian DCs is expected to be in the range of 650-800 MW during 2024-26.
The exponential growth in computing power and the resulting new applications are expected to drive strong demand for DC industry over the medium term.
Cloud Service Providers (CSPs), who essentially offer IT infrastructure systems primarily for data storage and computing power accessible through the Internet, have realigned their requirements to factor in AI-led demand. The CSPs have also announced higher investments to scale up AI-led growth.
During the second half of 2023, there was a 12% increase in absorption to 81 MW compared to 72 MW during the same period last year. This growth can be attributed to CSPs gaining momentum after a brief hiatus during the first half of 2023. In Mumbai, absorption nearly doubled during this period as CSPs renewed their pace of absorption.
There was a lower supply addition of 75 MW during H2 2023 as the available supply from the first half was utilised to meet the demand, resulting in tighter vacancy levels of 5.5%.
India's focus on AI is evident through the India AI mission, aimed at fostering innovation, upskilling the workforce, and ensuring responsible and ethical deployment of AI technology. With a large user market, talented workforce, and thriving startup ecosystem, India presents a significant opportunity to emerge as a global data hub, driven by sustainable practices. The country's DC sector expanded from 350 MW in 2019 to 854 MW in 2023, in line with the increasing digital usage trends.
