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Data Center Boom: The Silent IT Revolution India is Witnessing

The digital revolution in India has been huge and it is quite evident.

With multiplying Internet users, e-commerce market and 5G, India’s data centre industry is experiencing a remarkable surge, set to double its size to 23 million square feet and attract a potential investment of $10 billion within the next three years in the top seven cities, as per a recent report by the Confederation of Indian Industry (CII).

This unprecedented growth is driven by several factors, including the exponential increase in data consumption, a more favourable regulatory framework, and significant investments in the sector. Let’s delve deeper into this success story and explore what's driving the data centre boom in India.

Driving Forces for Data Center Boost

Data Consumption Explosion: The rapid increase in data consumption, fueled by the proliferation of smartphones and affordable data plans, has created an insatiable demand for data storage and processing facilities.

Regulatory Support: India’s regulatory framework has become more supportive of the data centre industry, with initiatives like the Digital Personal Data Protection Bill 2023. This offers confidence to investors and operators.

Infrastructure & Location: Key cities like Mumbai, Chennai, and Hyderabad, boasting robust infrastructure and supportive regulations, are well-positioned for substantial growth.

India’s data centre industry has witnessed significant growth in the post-pandemic period, with a two-fold increase in total capacity since 2020. As of August 2023, data centre capacity across the top seven cities stands at 819 MW, spread across 11.0 million square feet. The report suggests that this capacity is likely to double in the next phase of growth, reaching 1,800 MW by 2026.

Foreign Investments & High-yield Potential

Foreign investors are increasingly recognizing the high-yield potential of India's data centres. Since 2020, the sector has attracted $7 billion in cumulative investments from global players, real estate developers, and private equity funds. Notably, foreign investors accounted for 93% of the $1.1 billion institutional inflows into the sector.

Emerging Tier-2 Cities

Tier-2 cities like Ahmedabad, Jaipur, Kochi, Nashik, Vijayawada, and Bhubaneswar are emerging as potential locations for edge data centre expansion. Factors like increased internet penetration, the rise of startups, and technology hubs make these cities attractive for data centre growth. Currently, tier-2 cities hold only 4% of the total data centre capacity in India.

India’s data centre industry stood at US $4.4 billion in 2020 and it is becoming a prime market for data centre expansion. This trend is expected to lead to further investments in the sector over the next 3-4 years, solidifying India’s position as a hotspot for data centre growth and investment. According to data, by 2026, the data centre industry in India is expected to rise by US $8 billion.


India is currently the world’s 13th largest data centre market, with 138 data centres. And by the end of 2025, it is anticipated that 45 new data centres with a combined 13 million square feet and 1,015 MW of capacity will be built. In 2021, India’s data centre industry was estimated to be worth US$ 4.35 billion. It is anticipated to increase by 132% in just six years, to US $10.09 billion, by 2027.

India’s data centre industry is on the verge of a quantum leap in growth and investment. The combination of surging data consumption, favourable regulations, foreign investments, and emerging tier-2 cities is propelling the country into a significant role in the global data infrastructure landscape. As India continues to digitise and connect, data centres will remain at the forefront of this transformative journey.

(Author: Karishma Chandnani is a Content Writer at TechDoQuest. She offers refreshing & youthful perspective on the topics she writes about).

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