The next wave in India is going to be the demand for data centre capacity. The data centre industry is set for huge expansion, with total installed capacity expected to nearly triple from 1.65 GW in 2025 to 5 GW by 2030. What’s driving the growth? According to Avendus Capital, the sector is benefiting from a dual growth trajectory. On one hand, the sector benefits from a rapid expansion of India’s digital economy and on the other, a rising demand for artificial intelligence (AI) infrastructure.
“India’s data centre ecosystem is on a dual growth trajectory, driven by surging demand from expanding digital economy, and scaling infrastructure to support GPU deployments for AI training and inference workloads,” Avendus Capital said in its report.
India’s data centre capacity is projected to grow at a compound annual growth rate (CAGR) of 26% through 2030. Developers are expected to invest around $25 billion to add more than 3 GW of new capacity over the next five years. However, AI-dedicated data centre capacity in India alone could rise from 0.3 GW in 2025 to 1.2 GW by 2030.
Alongside AI, traditional demand drivers such as cloud adoption, need for data localisation and increased data consumption, continue to support the sector, along with the rollout of more 5G services.
The $131 billion AI opportunity
AI is emerging as the next major growth engine for the data centre industry. According to the report, India’s domestic AI market is expected to reach $131 billion by 2032, growing at a CAGR of 39%.
India, which hosts the second-highest number of ChatGPT users globally as of January 2026, is expected to see strong demand for AI applications and the need for more computing power. To support these ambitions, the country is expected to deploy between 650,000 and 700,000 GPUs over the next five years.
GPUs or graphics processing units are advanced computer chips that provide the massive computing power required to train and run AI models.
The increased use of AI is coming not only from individual users but also from businesses. More than 80% of Indian firms are prioritising AI adoption, while 45% have already started implementing AI in their business processes. The report also noted that 64% of Indian enterprises are planning to build in-house AI products using cloud-based computing power, which in turn would fuel the need for more data centres.
IndiaAI Mission accelerates infrastructure creation
The government is helping accelerate these infrastructure creations. Under IndiaAI Mission, more than 38,000 GPUs have been committed by the government, with over 22,000 already allocated for AI workloads.
According to Avendus, deployment of the committed GPUs alone will require around 48 MW of AI-ready data centre capacity.
AI-ready data centres become the new focus
In order to build an AI-ready infrastructure, data centre operators are redesigning their facilities to support higher rack densities, liquid cooling systems.
While developers are expected to invest around $25 billion in additional data centre capacity over the next five years, nearly $23 billion of that opportunity is linked specifically to AI infrastructure, including large-scale GPU deployments and AI-ready facilities.
Several companies are expanding aggressively to capture this opportunity. Reliance Industries is developing a 1 GW AI data centre campus in Jamnagar, while Adani has partnered with Google on a $15 billion AI infrastructure project in Visakhapatnam. TCS-backed HyperVault has also announced a $2 billion commitment towards AI-ready infrastructure.
“GenAI’s rapid adoption is accelerating data centre demand at an unprecedented scale,” Avendus Capital said, adding that the user base for intensive computing is expanding beyond AI labs to include enterprises and governments.
Investor interest gathers pace
The growing convergence of cloud computing and AI is also attracting investor interest.
Avendus Capital said strong demand prospects, long-term leases and attractive yields are making data centres an increasingly sought-after asset class among infrastructure investors, private equity firms and REITs globally.
The sector has witnessed more than $5 billion worth of transaction activity over the past three years, underscoring growing investor confidence in India’s digital infrastructure story.
Conclusion
As AI adoption accelerates and digital consumption continues to rise, the convergence of these two growth drivers is expected to reshape India’s data centre landscape.