India's Data Centre Sector Set for Major Expansion Driven by AI and Digital Economy Growth

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India's Data Centre Sector Set for Major Expansion Driven by AI and Digital Economy Growth

Team Finance Saathi

27/May/2024

Key Points:

India's data centre capacity is projected to nearly double to 1645 MW by 2026, fueled by AI adoption and digital economy growth.
The data centre sector will require 10 million sq. ft. of real estate and attract investments worth $5.7 billion.
Cloud Service Providers are adjusting strategies to meet the rising demand, highlighting India's potential as a global data hub.

India's data centre sector is on the brink of significant expansion, poised to almost double its capacity by 2026. This remarkable growth trajectory is underscored by a JLL India study, forecasting an additional 791 MW of capacity within the next few years, bringing the total to 1645 MW by 2026. The sector's expansion is set to demand approximately 10 million square feet of real estate space and attract substantial investments totaling around US$ 5.7 billion.

A key driver behind this surge is the accelerating adoption of Artificial Intelligence (AI). As AI continues to integrate into various industries, the demand for robust data infrastructure grows in tandem. The study highlights that the demand for Indian data centres is projected to range between 650-800 MW during 2024-2026, propelled by the increasing computational power required for new AI applications and services.

Cloud Service Providers (CSPs) are at the forefront of this transformation, with many adjusting their strategies to accommodate the rising AI-driven demand. These adjustments include plans for increased investments to scale their operations and meet the burgeoning needs of the market.

Samantak Das, Head of Research & REIS, India at JLL, points out that India's economic landscape is set for a major shift. By 2027, India is projected to become the third-largest economy globally, with a Gross Domestic Product (GDP) of US$ 5 trillion. Approximately 20% of this GDP will be contributed by the digital economy, which is a substantial driver for the data centre industry. This digital expansion is not only a testament to India's growing technological capabilities but also a catalyst for the data centre sector's robust growth.

The government's focus on AI is clearly reflected in the India AI mission, an initiative aimed at fostering innovation, upskilling the workforce, and ensuring the responsible deployment of AI technology. This mission underscores the country's commitment to becoming a leader in AI and digital technologies, creating a conducive environment for the data centre industry to thrive.

India's data centre landscape has already shown significant growth, expanding from 350 MW in 2019 to 854 MW in 2023. This rapid increase aligns with the broader trends of digital usage and the proliferation of data-driven services. The growth trajectory is set to continue, driven by factors such as a large and growing user market, a talented workforce, and a thriving startup ecosystem that is increasingly reliant on digital and AI technologies.

As the data centre industry evolves, sustainability practices are becoming a crucial component. India is uniquely positioned to leverage sustainable practices in its data centre operations, ensuring that growth is not only rapid but also environmentally responsible. This approach aligns with global trends and investor expectations, making India an attractive destination for data centre investments.

In conclusion, India's data centre sector is set for impressive growth, driven by the adoption of AI and the expansion of the digital economy. With projections indicating a near doubling of capacity by 2026, significant real estate requirements, and substantial investment inflows, the sector is poised to play a pivotal role in the country's economic and technological advancement. Cloud Service Providers and other stakeholders are gearing up to meet this demand, highlighting India's potential to emerge as a global data hub. As the industry grows, sustainable practices will ensure that this expansion is not only rapid but also responsible, paving the way for a resilient and robust data infrastructure ecosystem in India.

Also Read : Record Wheat and Rice Procurement Secures India’s Food Grain Stock for 2024

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India's Data Centre Sector Set for Major Expansion Driven by AI and Digital Economy Growth

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