India’s data centre industry, set to grow to $25 billion thanks to advances in artificial intelligence (AI) and the rollout of 5G technologies, represents a market opportunity over the next decade, according to Avendus.
The data centre industry in India is on the verge of a transformation driven by advancements in Artificial Intelligence (AI) and the launch of 5G technologies, according to a report by Avendus, a leading financial services company.
This shift is being driven by an increase in demand for high-performance computing infrastructure, including the deployment of high-end GPU servers and AI-focused cloud solutions.
India’s data center sector is experiencing unprecedented growth driven by demand for AI. India is currently home to approximately 1,300 AI companies, and this is expected to significantly increase the need for high-density server racks ranging from 5 to 50 kW.
Demand for data centers is accelerating due to enterprise adoption of cloud services, increased use of AI services, data localization requirements, 5G deployment and increasing bandwidth services, an explosion in data creation and consumption, and business continuity and backup plans.
This increase in server density will also lead to higher cooling requirements. The generative AI market in India is projected to grow at a compound annual growth rate (CAGR) of 28 percent between 2023 and 2030, resulting in strong demand for data centers.
The projected demand for AI-enabled data centres in India is estimated to be around 500 megawatts (MW) over the next four years. This increase is attributed to the rapid expansion of digital services and the growing need for low-latency data use across various sectors.
India’s current installed data centre capacity is just 1,011 MW, of which about 94 per cent is located in seven major cities. Mumbai and Chennai are leading the way, thanks to their well-established infrastructure networks.
Mumbai accounts for 48 percent of India’s total data center capacity, benefiting from its submarine landing stations, reliable power supply and dense fiber infrastructure. The city is expected to receive more than 35 percent of the total additional capacity over 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 additional demand from the Asia-Pacific (APAC) region.
Delhi and Kolkata are key players in northern and eastern India respectively, with Delhi projected to contribute around 15 per cent of the incremental capacity.
The Avendus report says India’s data centre industry is maturing with higher and stable capital inflows over the long term, driven by digitalisation and data localisation trends.
Developers plan to deliver more than 3 gigawatts (GW) over the next decade, requiring an estimated capital investment of approximately $25 billion, presenting a significant opportunity for investors.
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