Why India must expand data centre footprint

Nishant kumar hota and atharv pawde

The Statesman

0
29.03.2026

Walk into any modern city, and the markers of development are easy to spot: flyovers, metro lines, power grids, and airports. But the infrastructure shaping India’s future is far less visible. It sits behind secured campuses, runs quietly through the night, and rarely enters public conversation. Yet it determines how quickly a digital payment is processed, how securely personal data is stored, and how efficiently artificial intelligence systems function. These are data centres, the largely invisible backbone of India’s digital economy. For a long time, data centres in India were seen as technical back-end facilities, an extension of the IT services industry.

That framing no longer fully captures their role. As digital services deepen across finance, governance, commerce, and communication, data centres are increasingly being recognised as foundational infrastructure systems that underpin economic activity rather than merely support it. The scale and pace of expansion reflect this shift. India’s operational data-centre capacity has crossed roughly 1.5 gigawatts, with one of the fastest growth trajectories globally. Recent years have seen record annual additions, and projections suggest capacity could reach 4-5 gigawatts by 2030 under realistic scenarios, with the upper range extending to 8–10 gigawatts if enabling infrastructure scales in tandem. Investment pipelines already indicate commitments of $60–70 billion over the next decade, pointing to a sustained build-out rather than a cyclical surge.

This momentum is rooted in structural demand. India continues to generate vast volumes of data from digital payments and streaming to enterprise cloud adoption and AI-driven applications. Platforms such as UPI and Aadhaar have created a uniquely large, real-time digital ecosystem, while businesses across sectors are increasingly moving toward cloud-based operations. Despite this, India still hosts only about 3 per cent of global data centre capacity, highlighting the extent of the gap that current investments are beginning to address. What makes this transition particularly significant is that data centres, while central to the digital economy, are deeply physical systems.

They depend on reliable electricity, robust fibre connectivity, land, and water for cooling. As a result, their growth is shaped not just by demand, which remains strong, but by how effectively these underlying inputs are scaled and managed. Electricity is emerging as a key factor in determining how the sector evolves. A single hyperscale facility can consume power comparable to a small urban cluster, and as more such facilities come online, their cumulative demand is expected to rise steadily. Estimates suggest that data centres could account for 2–3 per cent of India’s total electricity consumption by 2030. This has brought the sector into closer alignment with India’s broader energy transition, with operators increasingly sourcing renewable power and states expanding generation capacity and storage to meet future needs.

Water use, particularly for cooling, is also receiving increasing attention. As computing density rises especially with the growth of AI workloads cooling requirements become more significant. At the same time, advances in cooling technologies, water recycling, and system design are beginning to shape how new facilities are built. These considerations are gradually becoming part of how projects are planned, rather than afterthoughts. Geographically, India’s data centre footprint continues to be anchored in a few major hubs: Mumbai, Chennai, Bengaluru, Hyderabad, and Delhi-NCR. These locations offer strong connectivity, a relatively reliable power supply, and proximity to enterprise demand. At the same time, there are early signs of diversification.

Secondary cities are beginning to attract interest, not only due to cost advantages but also because they offer opportunities to distribute infrastructure more evenly and reduce latency for emerging applications. As digital use cases become more real-time across sectors such as healthcare, logistics, and manufacturing the need to process data closer to end users is likely to grow. This could gradually lead to a more distributed architecture of data infrastructure, complementing existing metropolitan hubs. Policy has played an enabling role in shaping the current trajectory. The classification of data centres as infrastructure, along with state-level incentives in key regions, has helped attract investment and accelerate project development.

At the same time, evolving regulatory frameworks around data protection and localisation are influencing how and where capacity is built. While the policy environment continues to evolve, it is increasingly interacting with the practical requirements of scaling digital infrastructure. Globally, data centre development is entering a more mature phase, with greater emphasis on efficiency and sustainability. India’s advantage lies in the fact that much of its capacity is still being built. This creates an opportunity to incorporate these considerations earlier in the development cycle, aligning growth with long-term resource planning. The rise of artificial intelligence is likely to further accelerate demand. AI workloads require higher-density computing infrastructure, which in turn drives the need for more advanced and larger-scale data centres.

India’s expanding digital base, combined with its growing role in AI adoption, positions it as an important market in this evolving landscape. All of this points to a broader shift. Data centres are no longer peripheral to economic activity; they are becoming central to it. Their expansion reflects not just rising demand, but a deeper integration of digital systems into everyday economic processes. India’s trajectory in this sector is therefore shaped by both opportunity and execution. The country brings together a large domestic market, strong demand fundamentals, and increasing investor interest. As infrastructure, policy, and technology continue to evolve together, the data centre ecosystem is likely to become more resilient, efficient, and geographically distributed.

Infrastructure is often judged by what is visible. But some of the most consequential systems operate out of sight. Data centres may remain largely unseen, but their role will only become more prominent. As India’s economy becomes more data-driven, the systems that store and process that data will quietly support everything from enterprise growth and innovation to public service delivery. The next phase of India’s infrastructure story may not be the most visible one. But it is increasingly becoming one of the most important.

(The writers are policy analysts.)

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Why India must expand data centre footprint

Nishant kumar hota and atharv pawde

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