Data Centres

Data Centres

India’s data centre sector is experiencing significant growth, with projections indicating that its capacity will double by FY27. This growth is being driven by several key factors, including digitalization, the adoption of Artificial Intelligence (AI), the rollout of 5G, and data localization laws. However, challenges such as infrastructure gaps, the need for sustainable power solutions, and intense competition from global players like China persist.

What are Data Centres?

Definition: Data centres are specialized facilities that store, manage, and process large volumes of electronic data. These centres house critical IT infrastructure such as servers, storage devices, and networking equipment, along with systems for cooling, power supply, and security. They are designed to offer scalable and reliable solutions for data storage, processing, and management.

Components of a Data Centre:

• Servers & Storage Systems: Handle workloads such as hosting websites, running applications, and managing cloud storage.

• Networking Equipment: Routers, switches, and firewalls that facilitate communication between servers and external networks.

• Power Supply Systems: UPS and backup generators ensure continuous power availability.

• Cooling Systems: Essential to prevent overheating, using mechanisms like air conditioning or liquid cooling.

• Security Infrastructure: Both physical and cybersecurity measures to protect data and infrastructure from unauthorized access and cyber threats.

Current Status of Data Centres in India

• Growth Projections: The data centre market in India is projected to grow from USD 4.5 billion in 2023 to USD 11.6 billion by 2032, reflecting a Compound Annual Growth Rate (CAGR) of 10.98%.

• Global Data Share vs. Local Capacity: India produces 20% of global data but currently holds only 3% of the global data centre capacity. This indicates a significant opportunity for expansion.

• Geographical Distribution: Over 50% of India’s data centre capacity is concentrated in Mumbai, a key location due to its strategic positioning, reliable power supply, and access to international cable landing stations. Emerging hubs include Ahmedabad, Pune, and Vizag, owing to lower operational costs and improving infrastructure.

• Industry Leaders: India hosts approximately 150 data centres, with major players such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud, CtrlS, Sify, and Yotta leading the market.

Key Reasons for Growth of Data Centres in India

• Digitalization: Increasing adoption of digital technologies like AI, cloud computing, and data storage has fueled demand for data processing and storage solutions. With India having 751.5 million internet users in 2024, the country’s growing reliance on mobile internet and digital services is propelling data centre expansion.

• RBI Mandate on Financial Data Storage: In 2018, the Reserve Bank of India mandated that payment system data related to Indian customers be stored within India, ensuring the secure storage and processing of sensitive financial data.

• AI and 5G Rollout: The rise of AI, including generative AI, and the nationwide rollout of 5G will significantly increase data consumption. This is expected to triple the demand for data centres, especially as IoT and AI technologies proliferate.

• Data Localization Laws: India’s data localization regulations, including the Public Records Act (1993) and the Digital Personal Data Protection Act (2023), mandate that certain types of data be stored within the country, further driving demand for local data centres.

Significance of Data Centres in India’s Economic Growth

• Data Processing for Digital Economy: Data centres are crucial for supporting cloud services, data analytics, AI, and machine learning. They provide the computational capacity required for vast data processing.

• Enabling Digital Services: Data centres ensure the seamless delivery of essential services like e-commerce, social media, banking, entertainment, and communication, reaching billions of users worldwide.

• Supporting Critical Infrastructure: Data centres host critical systems that support essential sectors such as healthcare, finance, and government, playing a vital role in national security, emergency services, and financial transactions.

• Boosting Economic Growth: The expansion of data centres creates jobs, drives infrastructure development, and accelerates the growth of the digital economy. Investments in technology, power infrastructure, and real estate also follow, with projections suggesting an economic activity of over Rs 50,000 crore by FY27.

• Reducing Latency with Edge Computing: As demand for real-time applications increases, the role of edge data centres is becoming crucial. Edge data centres help minimize latency by processing data closer to users. The rollout of 5G will further amplify this trend, enhancing speed and reliability.

Key Challenges Hindering the Growth of India’s Data Centre Sector

• Infrastructure Constraints: Challenges such as unreliable power supply and limited connectivity, especially in non-metro areas, raise costs and risks for data centres. Investments in cooling systems and meeting stringent security regulations also increase operational costs.

• Regional Disparities: Major metros like Mumbai dominate the market, while smaller cities lack the necessary investments in infrastructure and power supply, causing an uneven distribution of data centres.

• Environmental Sustainability: Data centres are highly energy-intensive, contributing to carbon emissions. The sector faces pressure to adopt renewable energy solutions and energy-efficient technologies to mitigate environmental impacts.

• Skill Shortages and Competition: A lack of skilled professionals in data centre management and operations is a significant hindrance. Additionally, global competitors like China with advanced data centre capacities intensify the competition.

• Cybersecurity Threats: With data centres handling vast amounts of sensitive information, they are prime targets for cyberattacks. Robust cybersecurity measures are essential to protect personal and corporate data.

• Scalability: As demand for data grows, scaling infrastructure to meet these needs while maintaining cost-effectiveness remains a challenge.

Initiatives to Promote the Data Centre Ecosystem in India

• Digital India (2015): Aimed at enhancing online infrastructure and internet connectivity, fostering the growth of digital services across India.

• National Informatics Centre (NIC): Established advanced National Data Centres to support government initiatives and digital infrastructure.

• Infrastructure Status for Data Centres: Data centres with an IT load of more than 5 MW have been granted infrastructure status, facilitating easier access to financing and incentives.

• State-Level Policies: Policies like Maharashtra’s IT and ITES Policy 2023 offer targeted benefits and incentives to the data centre industry, promoting regional development.

• Hyperscale Data Centres: India’s first hyperscale data centre, Yotta D1, was established in Greater Noida, Uttar Pradesh, marking a significant milestone in the country’s data centre capacity.

Way Forward

• Infrastructural Improvements: India must invest in upgrading its power infrastructure, including renewable energy solutions, to provide reliable and cost-efficient energy to data centres.

• Policy Support: Continued development and refinement of policies are essential to facilitate the growth of the data centre industry, such as easing land acquisition processes and offering infrastructure development incentives.

• Regional Development: Encouraging data centre growth in smaller cities by improving local infrastructure and offering incentives will help reduce regional disparities and promote more equitable growth.

• Human Resource Development: India needs to collaborate with global companies and countries for technology transfer and investment in human resource development. This includes training professionals and establishing international partnerships to support sustainable growth.

Conclusion

India has significant potential to emerge as a global leader in the data centre market. The growth of digital technologies, AI, 5G adoption, and rising data consumption will be key drivers. However, addressing challenges such as infrastructure gaps, competition from China, and investment needs in power and cooling solutions will be critical. With continued policy support and infrastructure development, India can become a prominent data centre hub on the global stage in the near future.