India’s Data Center Industry Set for Significant Expansion by 2026
India’s data center sector is poised for a significant surge, with investments expected to reach USD 5.7 billion by 2026. This growth is primarily driven by the increasing demand for Artificial Intelligence (AI) applications, according to a recent report from real estate and investment management firm, JLL. The industry’s expansion is anticipated to require an additional 791 MW capacity and an extra 10 million sq. ft. of real estate space to accommodate the uptick in operations.
The Catalysts for Growth
The impetus behind the data center boom in India can be attributed to several factors. Foremost among these is the exponential rise in computing power, which has been essential in developing new applications, particularly in the field of Artificial Intelligence. The report by JLL underscores the growing need for data centers capable of meeting the increasing demands for energy, processing power, and cooling solutions to support the advancement of various AI disciplines.
Furthermore, the role of Cloud Service Providers (CSPs) has been crucial in this growth trajectory. CSPs, which offer crucial IT infrastructure for data storage and computing power over the Internet, have recalibrated their strategies to tap into the AI-driven demand. This adjustment includes ramping up investments to fuel AI-led innovations and expansions. According to the report, CSPs have intensified their data absorption rates, particularly in Mumbai, where absorption rates nearly doubled, signaling a robust momentum in the sector.
India’s Digital Economy: A Future Global Data Hub
India’s digital economy is on the brink of a transformative leap, with projections indicating that it could contribute approximately 20% to the country’s GDP by 2027, potentially elevating India to the third-largest global economy. This digital boom is expected to significantly bolster the data center industry, with capacity projected to ramp up from 853 MW in 2023 to 1,645 MW by 2026.
Despite a brief slowdown in the first half of 2023, the data center sector witnessed a 12% increase in absorption to 81 MW in the latter half of the year, compared to 72 MW during the corresponding period in the previous year. This rebound was largely fueled by the renewed vigor among cloud service providers after the initial hiatus, showcasing the sector’s resilience and potential for growth.
The Road Ahead
India’s emergence as a global data hub seems increasingly plausible, driven by a vast user market, a skilled workforce, and a burgeoning startup ecosystem. The focus on sustainable practices within this sector further enhances its appeal to global investors and tech companies looking to expand their digital footprint.
The country’s data center capacity has witnessed a remarkable growth trajectory, evolving from 350 MW in 2019 to an impressive 854 MW in 2023, in step with the burgeoning digital usage trends. This expansion underscores the vital role of data centers in supporting the digital transformation journey of businesses and the economy at large.
As we forge ahead, India’s data center market is set to become a cornerstone of the global digital infrastructure, propelled by strategic investments and a forward-looking approach to embracing new technologies and digitalization pathways.
