The data centre industry in India is on the brink of a significant transformation, driven by rapid advancements in Artificial Intelligence (AI) and the rollout of 5G technologies. According to a report by Avendus, a leading financial services firm, this sector is set to witness a market opportunity of approximately $25 billion over the next decade.
AI and 5G Leading the Charge
The transformation is primarily being fuelled by a surge in demand for high-performance computing infrastructure. This includes the deployment of high-end GPU servers and AI-centric cloud solutions. Currently, India is home to around 1,300 AI companies, and this number is expected to grow, significantly increasing the need for high-density server racks, ranging from 5 to 50 kW.
With companies increasingly adopting cloud services, AI technologies, data localization, 5G rollout, and increased bandwidth services, there is an explosion in data creation and consumption. This has resulted in a growing demand for data centres, as businesses require enhanced continuity and backup plans.
Generative AI Market and Data Centre Growth
The report highlights that the generative AI market in India is projected to grow at a compound annual growth rate (CAGR) of 28% from 2023 to 2030. This growth is expected to drive strong demand for data centres, especially those capable of handling higher server densities, which in turn, will require more advanced cooling solutions.
Over the next four years, India is anticipated to see a demand for AI-enabled data centres amounting to approximately 500 megawatts (MW). This surge is attributed to the rapid expansion of digital services and the growing need for low-latency data usage across various sectors.
Regional Insights and Infrastructure Developments
India’s current installed data centre capacity stands at 1,011 MW, with about 94% of this capacity concentrated in seven major cities. Mumbai and Chennai are leading the charge, thanks to their well-established infrastructure networks. Mumbai alone accounts for 48% of the total data centre capacity in India, benefiting from its submarine landing stations, reliable power, and dense fibre infrastructure. The city is expected to account for over 35% of the additional capacity in the next five years.
Chennai is also witnessing substantial demand due to its similar infrastructure advantages and the recent landing of the MIST cable, which is likely to attract more demand from the Asia-Pacific (APAC) region. Meanwhile, Delhi and Kolkata are emerging as key players in North and East India, respectively, with Delhi projected to contribute around 15% of the incremental capacity.
A Promising Future for Investors
The Avendus report emphasizes that the Indian data centre industry is maturing, with increased long-term stable capital inflows driven by digitization and data localization trends. Developers have a pipeline of over 3 gigawatts (GW) set to be delivered over the next decade, requiring an estimated capital expenditure of around $25 billion. This presents a significant investment opportunity for those looking to capitalize on the booming data centre market in India.
