Will data centers (DC) write the new chapter of India’s digital landscape? Reports highlight that India’s data centre industry is on the cusp of explosive growth, driven by Artificial Intelligence (AI), along with surging data consumption, cloud adoption, and strict data localisation norms. As per a report by Jefferies, India’s total DC capacity is expected to rise fivefold to 8 gigawatts (GW) by 2030. However, the expansion will require colossal facility capital expenditure (capex) of $30 billion and could push data centre leasing revenues to $8 billion by 2030.
India’s AI data centre capacity to grow 80% by 2027: Kotak Mutual Fund
Data centers—the physical infrastructures that house IT hardware for computing and data storage—have so far been driven by the surge in mobile data consumption, rapid cloud adoption, and 5G expansion. However, the rise of large language models (LLMs) and generative AI is creating a second major stream of data center demand.
A report by Kotak Mutual Fund highlights that AI workloads consume significantly more compute power, requiring three to five times more computing needs. Consequently, DC capacity is expected to see a significant shift, with AI workloads taking up 35% of capacity versus 15% currently. India’s specialized AI data centre capacity is expected to grow by a staggering 80% between 2024 and 2027.
The Kotak Mutual Fund report highlighted that India is at the forefront of AI adoption. It has the second-highest number of ChatGPT users globally (8%, after the US at 19%).
India’s data centre expansion to require $30 billion capex by 2030: Jefferies
However, the path to reaching the target of 8GW by 2030 will need access to large amounts of capital.
Jefferies said that setting up 1 megawatt (MW) of data centre capacity in India requires about $4–5 million in investment. To build the additional 6.4 GW (India currently has 1.7GW of DC capacity) of incremental data centre capacity will require approximately $30 billion in capex.
Revenue opportunity of $8 billion
Data centers require heavy investment and take years to become profitable, but this investment can create massive revenue opportunities in the future. Jefferies highlighted that data centers currently earn about Rs 7,400 per kilowatt each month from leasing space and power to clients. Based on this, the country’s data center market is currently worth around $1.7 billion and could rise to $8 billion by 2030.
Adani, Reliance, and Airtel lead expansion
Jefferies also highlighted that AdaniConneX and Reliance Industries are expected to drive nearly half of the upcoming capacity additions, as both companies ramp up their data infrastructure investments. “Bharti Airtel, Reliance, and Adani Enterprises together may account for 35–40% of India’s total data centre capacity by 2030,” Jefferies estimated.
Among the top players, NTT GDC India currently leads with a 20% market share, followed by ST Telemedia, Sify, and Airtel Nxtra, each with 15–19%.
Government mandates boosting India’s data centre landscape
Apart from Data traffic that increased 30x since FY17 driven by internet, smartphones, OTT, e-commerce, and payments, government policy are spurring demand for local storage.
Key regulatory actions have required companies—both domestic and international—to store and process data within the country’s borders:
The DPDP Act (2023): This legislation governs the processing of digital personal data and empowers the government to restrict cross-border data transfers to certain countries.
SEBI Mandates (2023): Regulated entities such as exchanges, brokers, mutual funds, and depositories are mandated to store and process their data entirely within India.
The RBI Directive (2018): Perhaps the most impactful mandate, the RBI required that all payments data be stored locally. Non-compliance with this policy—which included the temporary bans on companies like Mastercard and American Express in 2021—directly triggered a surge in demand for domestic data centers as firms scrambled to localize their payment data.
These mandates ensure that vast amounts of sensitive information, particularly from the BFSI (banking sector), which currently accounts for 17% of colocation occupancy, must reside in Indian data centers.
However, given the magnitude of the investment needed ($30 billion for facilities plus another $33 billion for IT hardware/servers over the same period), access to capital is considered the single most crucial factor for players aiming to capture market share.
