India: The Next Frontier for Global Data Centres

As the digital revolution accelerates, data centers are becoming the backbone of modern infrastructure, supporting cloud computing, AI, and big data applications. India, with its competitive advantages in infrastructure costs and a robust technology sector, is poised to emerge as a global data centre hub. In this blog post, we delve into why India is on the cusp of this transformation, the challenges it faces, and what the future holds.

Competitive Cost Advantage

One of India's most compelling advantages is the relatively lower cost of constructing data centers compared to other Asia-Pacific (APAC) nations. According to Cushman & Wakefield, the median cost of building a data center in India is estimated at $6.8 million per MW of capacity. This is significantly lower than in other APAC countries, where costs are higher—Australia at $9.17 million, Japan at $12.73 million, Singapore at $11.23 million, and China at $6.84 million.

Expanding Capacity to Meet Growing Demand

India's current data center capacity stands at 977 MW across its top seven cities. The country has a substantial pipeline of under-construction capacity additions, projected to reach 1.03 GW by 2028. Furthermore, an additional 1.29 GW is planned, bringing the total projected capacity to 3.29 GW by 2028. However, the Cushman & Wakefield report indicates that this may not be sufficient. India will require an additional 1.7 to 3.6 GW of data center capacity beyond the planned 2.32 GW to meet the burgeoning demand.

Key Markets and Emerging Trends

Mumbai, Chennai, Delhi NCR, and Hyderabad are the primary markets driving this growth. Mumbai remains the clear leader, but Hyderabad is quickly emerging as a significant hub. Smaller data centers are also appearing in tier-2 cities, reflecting the expanding geographic footprint of the industry. The growing interest in tier-2 cities indicates a broadening of the data center market, which is crucial for balanced regional development.

Robust Tech Industry and Financial Support

India's technology industry is globally unmatched in both size and depth of capabilities, providing a strong foundation for the growth of data centers. Financial institutions in India are increasingly receptive to providing debt for data center transactions, reflecting growing confidence in this asset class. This financial support is crucial for sustaining the capital-intensive nature of data center development. According to Vivek Dahiya, Managing Director & Head of Data Centre Advisory Team at Asia Pacific, there is significant potential to keep investing and growing in this sector.

Power and Sustainability

A critical factor for the data center industry is the availability and quality of power supply. India is among the few nations aiming to double its power generation capacity to 820 GW by 2030. Importantly, a dominant 61% of this capacity is expected to come from renewable sources, emphasizing India's high focus on sustainability. The availability of ample power supply, coupled with a commitment to sustainable energy, is vital for data centers, which are major consumers of electricity.

The AI Factor

The increasing demand for Artificial Intelligence (AI) is expected to further boost the need for data centers in India. AI applications require substantial computational power and data storage, driving up the demand for data center capacity. Dahiya notes that AI's growing prominence will likely double the demand for data centers, highlighting the need for continuous investment in data center infrastructure.

Challenges and Opportunities

Despite the promising outlook, there are challenges that India must address to realize its potential as a global data center hub. Infrastructure development, especially in terms of reliable power supply and advanced connectivity, remains a critical area. Additionally, regulatory frameworks need to be streamlined to facilitate smoother investment flows and faster project approvals.

Conclusion: A Data Centre Revolution on the Horizon

India is on the brink of a data center revolution, possessing all the necessary elements to become a major global hub. With lower construction costs, a robust tech industry, supportive financial institutions, and a commitment to sustainable power, India is well-positioned to lead the next wave of data center development. While the focus has often been on supply, understanding and meeting the burgeoning demand is equally crucial. The growing integration of AI and other advanced technologies will continue to drive demand for data centers. As India continues to invest in its digital infrastructure, the potential for growth in the data center sector is immense.

The journey towards becoming a global data center hub is underway, and India is poised to be at the forefront of this transformation. By addressing the challenges and leveraging its competitive advantages, India can emerge as a leader in the global data center industry, driving innovation and supporting the digital economy of the future.

--- SOUMYA RANJAN