Opportunities in the Indian Data Center Market

Indian Data Center Market

Indian Data Center Market : Unlock the potential growth opportunities

The data center market is one of the bright spots in the construction market in India. The Indian data center market is on the cusp of a significant growth phase, driven by the country’s thriving digital economy, widespread internet access, and the imminent transition to 5G networks. As data consumption continues to rise, businesses and consumers alike are demanding reliable data center infrastructure to support their digital needs. 

The Indian data center market has been experiencing impressive growth, with revenues projected to reach approximately US$7.44 billion by 2023. The network infrastructure segment is expected to dominate the market, valued at US$5.09 billion. Currently, India ranks as the 13th largest data center market globally, with 138 data centers in operation. 

This is just the beginning, as 45 new data centers with a combined capacity of 1,015 MW are scheduled to be developed by the end of 2025. With a compound annual growth rate (CAGR) of 5.84 percent. Considering this, the Indian data center market size is estimated to reach about US$10 billion by 2027.

What is Driving the Indian Data Center Market

Several factors are contributing to the rapid growth of data centers in India. Firstly, the expanding digital economy, encompassing social media, e-commerce, digital transactions, online gaming, and streaming services, is generating a substantial demand for data center infrastructure. Secondly, the changing work culture towards hybrid workplaces, fueled by the rise of remote work and the need for sophisticated hardware, faster networks, and increased data storage options, is adding fuel to the growth of data center services in India.

Additionally, internet penetration in India is low as compared to developed countries. Looking at the Indian economic growth and growing young population, internet users are expected to grow significantly. With over 759 million active internet users in 2023, this number is expected to reach 900 million by 2025. That will drive internet data consumption to an average of 62GB per month by 2028, surpassing even developed markets like the U.S., Western Europe, South Korea, and China. You can imagine the growth rate of this industry considering the above factors.

Government Policies to Support Data center in India

Recognizing the importance of data centers for the country’s digital transformation, the Indian government has introduced various initiatives and policies to support their development. The Ministry of Electronics and Information Technology (MEITY) has formulated a comprehensive data center policy, which includes measures such as creating Data Centre Facilitation Units (DCFU), establishing Data Centre Economic Zones, and granting infrastructure status to data centers. These initiatives aim to streamline the approval process, attract investments, and ensure the uninterrupted availability of internet access, data security, and cloud computing.

In addition, several states, including Karnataka, Tamil Nadu, Uttar Pradesh, Odisha, Telangana, Maharashtra, and West Bengal, have implemented supportive data center policies to attract investments and provide incentives for data center setup. These policies offer benefits such as uninterrupted electricity supply, access to renewable energy, fuel subsidies, infrastructure status, subsidized land, and financial incentives.

The Indian data center market is witnessing a significant influx of foreign investments, with over US$14 billion invested in the past five years. This figure is expected to exceed US$23 billion by 2025, making data centers the largest segment of real asset investments in India.

Key players in the data center sector include pure-play data center companies like NTT, CtrlS, Equinix, Yotta, and Nxtra by Airtel, as well as hyperscalers like Amazon Web Services (AWS), Microsoft, Google, and Colt DCS.

These companies are expanding their presence in India through strategic investments and partnerships. Many big companies are also entering this market Adani, Reliance, and other real estate companies launching data centers in the country. The list of all the companies is given below. 

Another important trend is the focus on environmental sustainability and compliance with Environmental, Social, and Governance (ESG) standards. Data center operators are increasingly adopting measures to reduce their environmental impact, including the use of renewable energy sources and adherence to high-quality environmental, health, and safety (EHS) standards.

Investments in the Indian Data Center Industry

The Indian data center sector is attracting investments from various sources, including pure-play data center companies, hyperscalers, and infrastructure players. Singapore-headquartered ST Telemedia Global Data Centres (STT) is currently the largest player in the Indian data center market, with 27 facilities spanning nine cities and a total IT load exceeding 300MW. 

According to a report from CII-Colliers, Indian data center space is expected to expand its size to 23 million sq ft and attract investment of $10 billion within the next three years.

Indian real estate major DLF is planning to invest Rs 3,400 crore (~$408.38m) in its DLF Techpark and data centers in Noida, India. CtrlS Data Centers India is planning to invest $2 billion over the next six years to scale its operations in India. CtrlS is adding 350MW capacity across new and existing hyperscale and edge data centers in India and other Southeast Asian markets. The company operates in 12 data centers with 234MW capacity across seven Indian cities.

Hubs of Data Centers in India

Mumbai is currently the prime hub for data center in India, accounting for 45 percent of the existing data centers. Chennai is emerging as the next prominent data center hub, with increasing investments and demand. Other major data center hubs include Bengaluru, Hyderabad, Noida (Delhi-NCR), Pune, and Kolkata.

While Tier 1 cities currently dominate the data center landscape, there are significant opportunities for data center development in Tier 2 and Tier 3 cities. These cities are expected to attract investments in edge data centers to support the growing digital needs of their populations.

Regulatory Frameworks on Indian Data Center Market

The Indian government has introduced various regulatory frameworks and compliance standards to ensure the secure and responsible handling of data. The Digital Personal Data Protection Act, 2023 (DPDP Act, 2023) aims to establish higher levels of accountability and transparency for entities handling personal data, putting citizens’ privacy and data protection rights at the forefront.

Data center operators must comply with guidelines from the Reserve Bank of India (RBI) regarding the storage of payment system data within India. These guidelines aim to protect sensitive payment and customer information by ensuring data localization and obtaining clearance for data sharing with foreign regulators.

State-level policies and initiatives have also been implemented to attract investments and provide incentives for data center development. These policies offer benefits such as uninterrupted electricity supply, access to renewable energy, subsidized land, and financial incentives.

Final Words Indian data center Industry

The Indian data center sector is poised for significant growth, driven by the country’s thriving digital economy, increasing internet penetration, and government support. With the demand for data center infrastructure expected to rise, there are ample opportunities for businesses to invest in top-tier data center services and infrastructure.

Overall, the Indian data center market presents tremendous opportunities for businesses to capitalize on the country’s digital transformation and support the growing needs of the digital economy.

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