The Indian data centre industry is gearing up for exponential expansion, with experts forecasting a staggering increase in capacity to 791 MW by 2026. This growth will necessitate an additional 10 million square feet of real estate space and attract investments totaling USD 5.7 billion. The surge is fuelled by the rising adoption of Artificial Intelligence (AI), which is driving demand for data storage and processing power. Cloud Service Providers (CSPs) are leading the charge, aligning their infrastructure to accommodate the AI-driven demand. India's commitment to AI development, coupled with its growing digital reliance, positions the nation as a global data hub.
The data centre (DC) industry in India is poised for remarkable growth, driven by the surging adoption of Artificial Intelligence (AI). Experts predict a significant increase in data centre capacity of 791 MW by 2026. This expansion will necessitate an additional 10 million square feet of real estate space and attract investments valued at USD 5.7 billion.
The primary driver behind this data centre boom is the increasing utilization of AI. As AI applications become more widespread, the demand for data storage and processing power will inevitably rise. Indian data centers are expected to experience a significant rise in demand, ranging from 650 MW to 800 MW of capacity during the next 2-3 years (2024-2026).
Cloud Service Providers (CSPs) are at the forefront of this trend. These companies offer IT infrastructure systems, primarily for data storage and computing power, accessible through the internet. Recognizing the growing demand for AI, CSPs are realigning their requirements to accommodate the AI-driven surge and have announced increased investments to scale up their infrastructure.
The data centre market witnessed a strong rebound in the second half of 2023. Data centre absorption, which measures the amount of space occupied by tenants, increased by 12% compared to the same period in 2022 (72 MW in H2 2022 vs. 81 MW in H2 2023). This growth can be attributed to CSPs returning to the market after a brief slowdown in the first half of 2023. Mumbai, in particular, saw data centre absorption nearly double during this period.
India's commitment to becoming a global leader in AI development is evident through initiatives like the India AI mission. This program aims to foster innovation, equip the workforce with the latest AI skills, and ensure responsible use of this powerful technology. Combined with a large user base, a talented workforce, and a thriving startup ecosystem, India has the potential to emerge as a global data hub.
India's data centre sector has already witnessed significant growth, expanding from a capacity of 350 MW in 2019 to 854 MW in 2023, reflecting the nation's growing reliance on digital technologies. With a focus on sustainable practices, India is well-positioned to become a leader in the global data centre landscape.
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