CONTEXT: ICRA Limited, an Indian credit rating agency, has projected that India’s data center operational capacity will increase to between 2,000 and 2,100 MW by March 2027, rising from more than 1,150 MW in December 2024. Achieving this growth will necessitate an investment ranging from ₹40,000 to ₹45,000 crore over the next two years.
What are Data Centers?
- Data centers are specialized facilities designed to house computing systems and their associated components, such as hardware, servers, networking devices, and storage solutions.
Utility of Data Centers:
- Data centers play a crucial role in the processing, storage, and distribution of data for various applications, including websites, cloud computing, and enterprise functions.
- They enable organizations to securely and efficiently manage substantial amounts of data, ensuring the smooth operation of cloud computing services and other data-driven services.
The Potential of Data Centers in India
India is working towards positioning itself as a global leader in artificial intelligence (AI) innovation and the development of data centers.
Current Capacity:
- As of March 2025, India’s data center capacity stands at approximately 1,255 MW.
- Despite accounting for 20% of the world’s data, India currently possesses only 3% of the global data center capacity.
Future Expansion Potential:
The growth of data centers in India is expected to accelerate due to several key factors:
- The increasing digitalization and data consumption.
- Rising demand for artificial intelligence and generative AI technologies.
- The nationwide roll-out of 5G technology.
- The growing need for edge computing to process data closer to devices.
- Data localization efforts that aim to store data within national borders.
Concentration of Data Centers in India:
- At present, around 95% of the data center capacity is concentrated in metropolitan areas, particularly in cities like Mumbai, Chennai, and Hyderabad.
- Mumbai alone accounts for over 50% of the total capacity, largely due to its strategic location, reliable power supply, and the presence of cable landing stations.
Government Initiatives in This Context
1. Data Localization Regulations
Indian legislation has introduced several regulations aimed at data localization, requiring specific types of data to be stored within the country:
- Reserve Bank of India’s Directive (2018): Mandates that payment system providers retain all payment-related data, including transaction details and customer information, within India.
- IRDAI (Maintenance of Insurance Records) Regulation, 2015: Requires covered entities to keep insurance-related data within the country.
- Proposed Digital Personal Data Protection Rules: Focuses on targeted data localization, addressing challenges such as online age verification for children, and enhancing overall data protection measures.
- Digital Personal Data Protection Act: Allows cross-border data transfers to all countries unless the Central Government imposes restrictions through official notifications.
2. Digital India Initiative
- Launched in 2015, the Digital India campaign aims to create a secure and robust digital infrastructure, which includes the expansion of data centers.
- The initiative also seeks to facilitate the digital delivery of government services and promote universal digital literacy across the country.
3. IndiaAI Initiative
The IndiaAI Mission, with a budget of Rs 10,370 crore, focuses on advancing AI technology and infrastructure:
- The initiative plans to establish a computing capacity exceeding 10,000 GPUs to support AI-driven projects.
- Development of foundational AI models with over 100 billion parameters, trained on datasets covering major Indian languages, with a focus on sectors like healthcare, agriculture, and governance.
- The goal is to build an infrastructure that empowers start-ups to utilize these resources for developing AI systems.
- Of the total budget, Rs 4,564 crore has been allocated for the construction of computing infrastructure.
The growing demand for high computing capabilities, driven by advancements in generative AI, highlights the urgent need for expanded data center capacity. Supportive regulatory policies and the designation of infrastructure status for the data center sector are expected to drive significant growth in India’s data center and AI capabilities.