Powering India's digital future: Rise of data centres driven by deeper tech proliferation

India's data centre landscape is undergoing a seismic shift, driven by the country's expanding tech ecosystem, increasing digital-first consumers, and AI proliferation.  India's tech ecosystem is booming as a growing number of startups and businesses are proactively adopting tech imperatives and relying on data-driven decisions. 

This growth is creating a huge demand for data centre services, as companies need to store and process increasing amounts of data. Similarly, India has a large and growing number of digital-first consumers who are inclined heavily towards varied digital services to satisfy their evolving aspirations. 

Amidst this dynamic ecosystem, India's data centre (DC) market is demonstrating a sustained upward trajectory, thus fuelling the country's ever-increasing digital economy. 

In 2024, the country's DC capacity reached approximately 1,270 MW (19 million sq. ft.), with nearly 200 MW (3 million sq. ft.) added during the year alone. This momentum is expected to continue, with total capacity projected to rise by another 40%, reaching around 1,760 MW.

One of the key growth drivers is the infrastructure status accorded to the data centre sector, coupled with the 2020 Draft Data Centre Policy, which has fostered a conducive environment for operators and developers. Furthermore, the implementation of the Digital Personal Data Protection Act (DPDPA) in 2023 has facilitated cross-border trade and legitimate data processing and built stakeholder trust, propelling India's digital innovation ecosystem. 

Given the current growth curve, it is forecasted that cumulative investment commitments in data centres are likely to surpass USD 100 Bn by the end of 2027. 

Tier 2 cities: Future growth frontiers
Historically, Tier-I cities like Mumbai, Chennai, Delhi-NCR, and Bengaluru have dominated the data centre map due to their superior infrastructure, connectivity to submarine cables, and reliable power supply. These cities are expected to contribute over 90% of the upcoming capacity, with Mumbai and Chennai alone accounting for nearly 70%.

Yet, India’s data story is no longer confined to the metros. A quiet transformation is underway in Tier-II cities such as Pune, Ahmedabad, and Coimbatore. The burgeoning e-commerce sector and the increasing adoption of digital services by local businesses in cities like Pune and Ahmedabad are significant drivers of this demand. 

Lower real estate costs, growing demand from local enterprises, and better access to power make these cities emerging digital infrastructure hubs. This shift not only decentralises India’s data centre ecosystem but also broadens digital inclusion beyond urban strongholds.

Fuelled by investment, driven by demand
As per industry data, investor interest in the sector remained elevated during 2024, with DCs attracting commitments worth USD 20 billion. Deployments for hyperscale facilities continued to dominate, representing 89% of these investments, while colocation facilities accounted for the remaining 11%. Moreover, states like Maharashtra, Tamil Nadu, Telangana, Uttar Pradesh, and West Bengal continue to attract investment, pivoting the sector's ongoing growth. 

Various state governments in India have implemented dedicated policies and incentives to foster the growth of the data centre (DC) sector. Many states have deemed DCs as 'essential services', underscoring their importance for uninterrupted operations. Maharashtra, Telangana, and Tamil Nadu were pioneers in this regard, releasing state-specific incentives. Subsequently, other states have followed suit, offering substantial incentives and infrastructure support to attract DC investments.

The Data Centre (DC) market in India has experienced substantial investment from global operators, real estate developers, and private equity funds seeking to capitalize on the country's burgeoning market. 

Between 2019 and 2024, India attracted investment commitments totalling more than USD 60 billion from both domestic and international investors. Maharashtra, Tamil Nadu, Telangana, Uttar Pradesh, and West Bengal emerged as the leading states in terms of cumulative investment commitments. The report anticipates India surpassing USD 100 billion in cumulative investment commitments by the end of 2027.

Notably, hyperscale data centres—purpose-built for cloud giants and tech platforms—account for nearly 90% of the new capacity. These facilities are critical for hosting massive volumes of data, AI model training, and high-speed computing. The remaining share is occupied by colocation centres, which cater to the digital needs of SMEs and traditional enterprises transitioning to cloud-native operations.

As more capital flows into the sector, investors and operators alike are recalibrating their strategies to meet the next wave of digital transformation. AI, machine learning, and real-time analytics are creating entirely new infrastructure requirements, pushing the boundaries of traditional data centre design. 

AI era defining DC design
Generative AI (GenAI) has unlocked new opportunities, driving a substantial increase in computational requirements across various applications and is anticipated to generate a second wave of data centre demand comparable to the cloud. Multiple 500+ MW requirements from hyperscalers in the market indicate that incremental demand from AI workloads is likely to outpace traditional cloud computing soon. 

This evolution is prompting a shift toward advanced cooling technologies, particularly hybrid liquid-air systems, that can handle higher heat loads efficiently. Additionally, modular designs and scalable power infrastructure are being integrated to ensure that tomorrow’s facilities are ready for a world of continuous tech evolution. 

As sustainability takes centre stage, data centre design is also increasingly incorporating renewable energy solutions—such as on-site solar panels, wind integration, and green power procurement—to reduce carbon footprint and align with global ESG goals. Edge centres are not just an extension of core infrastructure—they represent a strategic shift. 

By enabling faster, localised processing in Tier-II and III cities, edge DCs support regional economic development and reduce pressure on centralised hubs. Their modularity also ensures faster deployment and customisation based on local demand.

Scaling responsibly
As infrastructure expands, so does the responsibility to build smart and sustainable. Developers are increasingly embracing green power, efficient cooling, and sustainable building practices. Regulatory support and land reforms are also helping ease deployment timelines, especially for operators focused on rapid scalability.

The momentum is clear: India’s data centre sector is no longer in catch-up mode—it’s in lead mode. With the right blend of scale, speed, sustainability, and smart design, India is positioning itself not just as a regional leader but as a global digital infrastructure hub. 

With its strategic focus on scalability, sustainability, and cutting-edge design, India is not just participating in the global digital revolution – it is poised to lead it, powering the future for itself and the world.

-- -- Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE.