The Growth of Data Centres in India

Data centre investment in India is expected to surpass $20 billion by 2025. The digital landscape across industries and the public sector is witnessing a tectonic shift with increasing penetration and real-life use cases of novel technologies like Artificial Intelligence, Machine Learning, Big Data & Analytics, Internet of Things, and Blockchain among others. These are essentially bringing people closer to businesses and governments in a multitude of ways.

The Government and the regulatory authorities of India are constantly focusing on the advancement of the digital payments’ ecosystem in the country. According to a Deloitte study, India’s smartphone user base is expected to reach 1 billion (100 crores) by 2026, and interestingly this growth will be largely driven by the country’s hinterlands. This indicates that the amount of user-generated data will only grow in the coming times.

As more and more people get access to internet-enabled mobile devices, the uptake of digital platforms and internet-based services will witness a massive surge, thereby leading to the need for more data center capacities. The pandemic has pushed the demand for cloud across the globe with digital transformation accelerating across industries.

This shift towards cloud has pushed increased investments in hyperscale data centers. The need for data centers has shot up exponentially in proportion to the rise in data consumption and cloud adoption.

The much-awaited Infrastructure status for data centers is a landmark development that will provide a fillip to the industry. As India embarks on the next phase of the Digital India journey, the Government recognises data centers as the backbone of the country’s digital infrastructure.

While the penetration of mobile internet has given us a glimpse of the power of connectivity through increased OTT and social media usage, a robust internet connectivity layer supported by data center presence will catalyse digital adoption at a larger scale. The push for data localisation will not just mandate data to be stored and processed in India, it will also result in a massive influx of Indian data that currently resides in overseas data centers.

One of the key things driving growth lies in Government measures aimed at driving digital infrastructure growth, including the Digital India initiative; classification of data centers as infrastructure assets, and proposing new data localization laws, all of which will drive the data center industry in the country – both cloud and colocation.

The data center sector in India is witnessing a robust growth in the era of digitisation. The country is well poised to be a global hub for data centers focused on cloud computing with a projected growth of USD 8 billion by 2026 riding on technologies such as artificial intelligence, machine learning and analytics, an ASSOCHAM-EY report has pointed out. In terms of CAGR over 2019 to 2025, India is expected to grow at 5% i.e. 2X faster than the global, according to a Nasscom report.

The rapid adoption of cloud-based business operations has encouraged businesses to acquire data management capacities to handle huge volumes of data that are being generated. Increased proliferation of online shopping due to the availability of user-friendly interfaces, high-speed internet, and smart devices such as smartphones, tablets, laptops, etc. is expected to drive the market in the future.

Cloud is the biggest customer for colocation. As they grow, the colocation space will grow, we just have to keep persuading them that they should not build their own data centers.

The Government of India and various state governments are revising their data center policies to support the infrastructural growth of data centers in India through tax subsidies.

Under a national policy framework for data centers, the IT ministry allocated Rs 15,000 crore as incentives and plans to invest up to Rs 3 lakh crore in the data center ecosystem, over the next five years, as per the policy. A robust amalgamation of all these drivers will continue to fuel the growth of data centers in India.

The future of the Indian data center market looks bright. As the Indian economy continues to grow and digital technologies become more widely adopted, data centers will play an increasingly important role in supporting the country’s development.

With growing reliance on digital connectivity, demand is likely to ramp up further due to imminent rollout of 5G and increasing use of IoT-linked devices. With the right policies in place, India has the potential to become a global leader in data center development and usage.

Dr. Deepak Kumar Sahu, President & CEO, VARINDIA