India is poised to witness a massive surge in demand for data centre infrastructure driven by the accelerating adoption of Artificial Intelligence (AI) technologies across sectors. According to Deloitte’s latest report titled “Attracting AI Data Centre Infrastructure Investment in India,” the country will require an estimated 45–50 million sq. ft. of additional real estate and 40–45 terawatt-hours (TWH) of incremental power by the year 2030 to cater to AI data centre needs.

While the report highlights India’s competitive cost base, renewable energy potential, and favourable geography, it also flags serious concerns over the country’s readiness in terms of policy, infrastructure, and skilled workforce. These gaps, if not addressed in time, could become major roadblocks in India’s ambitions to become a global AI data centre hub.

Key Drivers and Gaps Identified

The Deloitte report identifies six critical enablers required to build a robust and globally competitive AI ecosystem in India:

1. Real Estate

2. Power and Utilities

3. Connectivity

4. Compute Infrastructure

5. Skilled Talent

6. Conducive Policy Framework

Despite favourable conditions, India lacks a unified and simplified regulatory ecosystem for data centres. Long approval cycles, ambiguous land use classifications, and non-standardised norms for essential utilities like electricity and water are proving to be major hurdles.

Infrastructure Needs: Space and Power

Deloitte’s analysis estimates that India must develop:

• An additional 45–50 million square feet of real estate specifically designed to host AI-driven data centres

• 40–45 TWH of incremental power capacity to ensure uninterrupted operation of these centres

The report warns that rapid growth in AI data centres could significantly strain India’s existing power grid, especially during peak demand cycles. Hence, there is an urgent need to scale up power generation and integrate more renewable energy sources into the mix.

Connectivity Remains a Bottleneck

The availability of high-speed, low-latency connectivity is crucial for AI data centres. However, India continues to face significant connectivity issues, especially in rural and tier-2/3 regions, due to:

• Low fibre penetration

• Inconsistent broadband speeds

• Limited network redundancy

Deloitte stresses that enhanced telecom infrastructure is a non-negotiable requirement for seamless AI operations.

Policy and Regulatory Recommendations

Deloitte’s report is especially notable for its bold and actionable policy recommendations, which, if adopted, could dramatically improve India’s attractiveness for global AI data centre investments.

Key recommendations include:

• Granting data centres a distinct category under the National Building Code

• Recognising data centres as essential services under the Essential Services Maintenance Act (ESMA)

• Setting up dedicated data centre facilitation units for expediting approvals and resolving inter-departmental conflicts

In addition to the above, Deloitte proposes:

• Establishing dedicated data centre zones similar to Special Economic Zones (SEZs)

• Relaxing data localisation norms to enable smoother cross-border data flow

• Amending the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, to offer legal clarity and operational support

• Exempting data centres from surveillance clauses under the Telecommunication Act, 2023

New Models: Safe Harbour and Data Embassies

To promote global confidence in India’s data infrastructure, Deloitte recommends:

• Implementing safe harbour rules for hosting service providers to limit liability and promote innovation

• Introducing the concept of ‘data embassies’, which would allow countries to store data on Indian soil under their own legal jurisdiction – a move expected to attract foreign sovereign investments

Talent and Compute Infrastructure

Another key challenge is the shortage of skilled professionals capable of building and managing AI-powered data centres. India needs to invest in:

• Specialised training programs for data engineers, cloud architects, and system integrators

• Incentives for universities and tech institutes to develop AI curriculum tailored to the needs of the industry

• Increased investments in high-performance compute (HPC) infrastructure to cater to AI’s processing needs

Environmental Sustainability and Energy Efficiency

While AI data centres offer massive economic potential, they also come with a significant carbon footprint. Deloitte urges all stakeholders to:

• Prioritise green building standards

• Mandate energy-efficient cooling systems

• Maximise use of solar, wind, and other renewable sources

The report also suggests incentivising battery energy storage solutions and smart grid integration to handle AI-induced load fluctuations more effectively.

Conclusion: India at a Crossroads

The Deloitte report serves as a wake-up call as much as it is a roadmap. With AI adoption accelerating globally, India stands at a crucial juncture. It can either:

• Address infrastructure, policy, and connectivity gaps swiftly and position itself as a leading AI data centre hub, or

• Fail to capitalise on this trillion-dollar opportunity due to systemic inertia and regulatory ambiguity

As Ms. Neha Aggarwal, Partner at Deloitte India, aptly puts it: “The future of India’s AI ambition depends on how quickly we build scalable infrastructure, embrace compute innovation, and reform our policy landscape.”

The Upcoming IPOs in this week and coming weeks are Integrity Belrise Industries, Integrity Infrabuild Developers, Accretion Pharmaceuticals, Wagons Learning.

The Current active IPO are Virtual Galaxy Infotech.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.