India Rising: The Emerging Data Centre Superpower

India is poised to become a leading data centre hub due to strategic location, cost advantages, and increasing digital demand. Despite generating 20% of global data, India's capacity remains limited. Significant investments are anticipated as the country aims to expand its data centre footprint to meet domestic needs.

India is positioning itself as a premier data centre hub, leveraging factors such as enhanced cross-border connectivity and lower operational costs. According to a report by JM Financial, the nation has a strategic advantage due to its location between the Middle East and Southeast Asia, bolstering its data centre appeal.

The demand for data centres in India is undeniably on the rise, as confirmed by the recent JM Financial report. With a vast internet user base and the government's push for data localization, coupled with the surge of AI technologies, there's a structural boost creating an unprecedented demand for data facilities in the country.

Despite this growth, India holds a smaller share of global data centre capacity. Though responsible for 20% of global data production, India accounts for only 5.5% of global data centre capacity. This discrepancy has led to a significant demand-supply gap, ushering in a capacity expansion boom.

As of 2024, India's co-location data centre capacity has risen by 38% year-on-year to 1.35 GW, although the density remains low globally. To match 50% of China's data centre density by 2030, India would require a total capacity of 5 GW, aligning with plans to achieve 3.3 GW by 2028.

Huge capital investments are expected in this sector, particularly targeting data centre capacity expansion. JM Financial estimates expenditures of USD 20bn for upcoming projects, highlighting the sector's capital-intensive nature and potential for stock market listings by domestic operators within five years.

This expanding sector signifies opportunity, yet primarily serves India's local demands. The anticipated wave of IPOs and investments will focus on the upstream value chain, offering a fertile ground for investors.

(With inputs from agencies.)