The Indian data centre market is recording double-digit growth, with an influx of private sector investment. The industry gained momentum after the Covid-19 pandemic, driven by a host of factors such as rapid digital transformation, technological advancements, a widening digital customer base, and the rising number of smart devices. The roll-out of 5G has further highlighted the demand for data centres in the country due to an increased need for computing capacity and associated infrastructure. Given the growth potential of data centres and increased private sector participation, the central and state governments have launched several initiatives. The concept of sustainability and green data centres has also become a priority.
tele.net presents the key policy moves, sustainability initiatives and investment scenario in the data centre space during 2022, as well as the outlook for 2023…
Government initiatives
The government took active steps during the past year to create a favourable environment for data centres in the country. In the Union Budget 2022, the government granted infrastructure status to data centres. The move aims to enable data centre companies to get easier access to institutional credit at lower rates and attract foreign investments. Recently, the government also notified that data centres would be included in the Harmonized Master List of Infrastructure subsectors with the insertion of a new item in the category of communication. As a result, data centres housed in a dedicated/centralised building for storage and processing of digital data applications with a minimum capacity of 5 MW of IT load will be considered eligible for infrastructure status.
Further, the Ministry of Electronics and Information Technology (MeitY) issued the draft Digital Personal Data Protection Bill, 2022. The bill relates to the processing of digital personal data. It allows for cross-border storage and transfer of data to certain notified countries and territories. The bill may impact the data centre business in India from a growth perspective, although the magnitude of the impact is uncertain.
The government has been actively promoting digitalisation across sectors with the goal of providing internet connectivity to all villages and remote areas by 2025. It also aims to set up 75 digital banking units in 75 districts. These initiatives are expected to increase the rate of data production in the country and drive the growth of hyperscale data centres. Moreover, the innovative use of blockchain and new-age technology in the Covid era, digitalisation of land records, etc. have advanced the Digital India mission, which requires a strong data centre infrastructure backbone.
The state governments also released their own data centre policies in 2022. These policies lay down guidelines for data centre infrastructure in the respective states. Karnataka notified its data centre policy along with attractive incentives and concessions for investment in these units, as the government aims to attract about Rs 100 billion in the sector over the next five years. The cabinet granted Rs 1 billion to implement the Karnataka Data Centre Policy, 2022. The Uttar Pradesh government, too, approved amendments to its Data Centre 2021 policy to facilitate the opening of more data centres in the state.
Expansion of edge data centres
The proliferation of internet of things, augmented reality and virtual reality is also driving the expansion of edge data centres as these technologies require low-latency edge processing close to the end user. Moreover, with 5G services being rolled out across the country, a decentralised small cell network of edge data centres will be crucial for providing low-cost and low-latency support for high-device-density 5G use cases. Recognising edge data centres as the biggest potential disruptor in the data centre industry, a number of companies have started eyeing opportunities in this domain. Further, service providers are increasingly moving towards software-defined network and network function virtualisation to become more agile.
The deployment of such technologies creates more demand for edge data centres. In 2022, NxtGen Datacenter and Cloud Technologies announced an investment of Rs 13 billion to set up 236 edge data centres in India. The company has four edge data centres, in Faridabad, Mumbai, Bengaluru and Ahmedabad, and it is looking forward to developing new facilities in Hyderabad, Visakhapatnam and Chennai. The latest entrant in the domain is the RailTel Corporation of India, the telecom arm of Indian Railways, which has announced its plans of establishing 102 edge data centres on railway premises, especially in Tier 2 and Tier 3 towns of the country. This will entail an investment opportunity of around Rs 5 billion.
Burgeoning hyperscale data centres
In India, select companies have already established hyperscale data centres. For instance, Yotta Infrastructure, the data centre business of the Hiranandani Group, launched north India’s first hyperscale data centre, Yotta D1, in the Greater Noida Data Centre Park. The facility is part of its first hyperscale data centre in the country, Yotta NM1 in Navi Mumbai, and was set up with an investment of around Rs 15 billion. AdaniConneX announced the opening of the Chennai 1 hyperscale data centre campus in the SIPCOT IT Park, Chennai. The campus hosts Tamil Nadu’s first pre-certified Indian Green Building Council platinum-rated data centre. Microsoft Corporation, too, announced plans to develop a hyperscale data centre in Pune as part of its multicity data centre strategy for India.
Investment influx
Between 2020 and 2022, data centres received cumulative investments of $10 billion and saw a number of partnerships between developers and global operators. The investments came mainly from global data centre operators looking to tap the Indian market, investments from corporates and real estate developers, and private equity funds. The large gap between the demand for data centres and the limited current capacity is attracting global investors to the industry. Domestic equity players, too, are gearing up for competition. To cater to the increasing demand, domestic corporates, such as the Hiranandani Group and the Adani Group, and foreign investors, including Amazon, EdgeConnex, Microsoft, CapitaLand and the Mantra Group, have started investing in Indian data centres. Existing players such as NTT, CtrlS, Nxtra and STT India have also expanded their capacities.
Recently, NTT India announced around $2 billion investment to strengthen the information and communications technology infrastructure in the country over the next three to four years, and meet the rise in data consumption. The key areas where the company’s capex is planned include new data centres, cloud computing, submarine cable landing stations and solar parks. Yotta Infrastructure announced investments of Rs 85 billion and Rs 40 billion for setting up data centre parks in Kolkata and Chennai respectively. Moreover, CapitaLand India Trust Management Pte Limited announced an investment of Rs 19.4 billion to develop its third data centre in India in Chennai. Given the surge in the digital payments volume, PhonePe also announced an investment up to $200 million in building data centres across the country. A new entrant in the market, the Princeton Digital Group launched its first data centre at an investment of $300 million (approximately Rs 24.46 billion) in Navi Mumbai in December.
Maharashtra and Uttar Pradesh emerged as preferred investment destinations in the data centre space. Yotta Infrastructure signed an MoU with the Uttar Pradesh government to invest Rs 390 billion in a phased manner over five to seven years for the expansion of the company’s Greater Noida Data Center Park. The Karnataka, West Bengal and Tamil Nadu governments also signed multiple MoUs with operators to promote the establishment of data centres.
Focus on sustainability
Leading data centre operators agree that new standards and metrics, in combination with power usage efficiency, can unlock the next green wave of impact and value for the industry. The sector saw notable efforts towards renewable energy adoption. As hyperscale cloud majors are the biggest consumers of data centres across the world, they have been commissioning captive units and entering into power purchase agreements (PPAs). Hyperscalers account for a major share in the global renewable PPAs. For instance, Amazon has signed PPAs for around 14 GW of energy, while Microsoft has signed PPAs for around 10 GW. Going forward, these organisations aim to become 100 per cent renewable energy driven. Owing to the government’s thrust, India has been experiencing an increase in solar energy adoption, including by data centre players. Bharti Airtel’s data centre subsidiary Nxtra has set up two captive solar power units in Uttar Pradesh and one in Maharashtra during the past year.
Outlook for 2023
The data centre industry’s growth story is driven by multiple strong demand factors. To cater to the rising demand, several companies have prepared detailed plans to increase their capacity in India, while hyperscalers such as Amazon Web Services, Microsoft and Google are revamping their business models.
India is in a unique position and has the potential to emerge as a data centre hub globally. With cities such as Chennai and Mumbai, which have abundant network and compute capacity combined with low latency, the country has the opportunity to serve the entire APAC market.
Sarah Khan
