India is on the brink of a data revolution, with the country's data centre operational capacity projected to more than double to 2,000-2,100 MW by FY27 from 950 MW in FY24. This significant growth is expected to involve an investment in the range of Rs 50,000-Rs 55,000 crore, according to a report by credit rating ICRA.

The data centre capacity in India is currently dominated by a few key players, including NTT Global Data Centers, STT Global Data Centers, CtrlS Datacenters, Sify Technologies, and Nxtra Data Limited. These companies held a commanding 85 per cent share of the operational capacity as of March 2024. However, the strong demand for data centres in the country has attracted many new developers such as Yotta, Digital Connexion, Lumina CloudInfra, CapitaLand, and Digital Edge, who have entered the industry with substantial investments.

Driving Factors and Geographical Distribution

The surge in data centre capacity is driven by several factors. Anupama Reddy, VP and Co-Group Head-Corporate Ratings, ICRA, highlighted the low data tariff plans, access to affordable smartphones, adoption of new technologies, and the growing user base of social media, e-commerce, gaming, and OTT platforms as key triggers for data explosion. Furthermore, the demand led by artificial intelligence (AI) is expected to increase multi-fold in the next 3-5 years, presenting significant opportunities.

Geographically, around 95 per cent of the existing capacity is concentrated in six cities in India, with Mumbai and Chennai leading due to their inherent advantage in the form of the dense wet cable ecosystem, which offers the best latencies.

Sustainability and Technological Advancements

In terms of sustainability, data centre players are expected to invest in green power to meet their power requirements. While green power constitutes around 75 per cent of total power consumption for the top three global data centre operators, it is currently below 5 per cent for Indian data centre players. However, this is projected to increase to 20-25 per cent by 2028.

The retail landscape is also undergoing a significant shift, largely propelled by technological advancements. The global pandemic and the ascent of eCommerce have intensified the influence of technology. Retailers have leveraged technology innovations to enhance efficiency while remaining steadfast in their commitment to customer centricity.

Generative AI, a powerful technology that leverages vast datasets to create personalized experiences and optimize various aspects of retail operations, has emerged as a potent force for businesses. It offers multiple benefits across different functions, including content creation and optimization, and providing personalized discounts by analyzing purchase history.

The data centre industry in India is poised for significant growth, driven by the digital explosion, data localisation initiatives, and favourable regulatory policies. The industry is also expected to become more sustainable, with an increased focus on green power. The integration of advanced technologies like AI and the rise of eCommerce are further shaping the landscape, presenting new opportunities and challenges for businesses and investors. This growth trajectory underscores the potential of India's digital economy and the pivotal role of data centres in this evolving landscape.