India is firmly on the digital transformation journey, with 1.16 billion mobile connections, 800 million internet users and an average data consumption of 14.73 GB per month, as of October 2021. Data centres have been the key pillars of this digital growth, and have witnessed exponential growth themselves in the last few years. The convergence of data protection, industry-friendly regulations, the government’s digital initiatives and investments are going to give a structural push to the data centre industry. This, coupled with the roll-out of 5G, ever-rising digital usage, cloud consumption, and real-time applications triggering edge data centres, will usher in high growth over the next few years. In fact, due to its natural resources, strategic location, competitive cost advantage, skilled resou­­rces and large user market, India is ideally suited to be the global data centre hub.

Nxtra by Airtel recently released a report titled “Data Centres: The Building Blocks of Digital Revolution in India”, in association with JLL India. The joint st­udy predicts that expansion of the Indian data centre industry will be supported by the accelerated adoption of digital infrastructure led by the pandemic, rising digital usage, cloud consumption and the na­tional 5G roll-out.

A look at the key findings of the report…

Co-location data centres poised for growth

The Indian data centre industry, which stood at an IT load of 499 MW during the first half of 2021, is expected to record an­other strong year of demand growth with commensurate supply. Cloud, data ce­­ntre and telecom players are adopting va­rious strategies to capture a slice of India’s digital growth pie. To this end, data centre operators have acquired land parcels at key data centre hubs to provide scalable and seamless options for cloud players, leading to an appreciation of land prices at the preferred data centre hubs. Further, cloud players with self-build plans are in the process of acquiring land parcels at new locations in line with their growth strategies. Several state governments, too, have announced policies to provide various incentives for establishing data centres. The grant of “infrastructure” status to the data centre industry in the recent union budget will make it more cost-competitive going forward, with access to long-term funds and lower rates.

Mumbai and Chennai lead the domestic data centre space

According to the Nxtra by Airtel and JLL report, much of the industry’s growth will centre around Mumbai and Chennai due to their business and infrastructure advantages, strategic location and cable landing stations, which are well positioned to support and enable the growth of data centres across India. These two coastal cities are leading in the domestic data centre space due to the inherent advantage of dense wet cable ecosystems offering the best global latencies. Mumbai has been the front runner due to its central location on Indian geography with the availability of reliable power, cable landing stations and absence of natural hazards, alongside it being a banking, financial services and insurance (BFSI) hub.

Chennai is considered the second best due to its global BFSI presence and strong manufacturing base, coupled with lower set-up costs. Its strategic location, with lower global latency – specially for Asia-Pacific (APAC) countries – is a shot in the arm for the industry. Chennai also acts as a network exchange hub for the southern part of India for major Indian telcos, and is well connected with other key business hubs of India. The ease of availability of skilled IT and non-IT resources makes Chennai a favourable spot for data centre co-location companies setting up large hy­­perscaler parks. Moreover, Chennai of­f­ers a very competitive cost structure for data centre construction, with a significant land pool setting it apart from other domestic and APAC cities. The easy green energy options that Tamil Nadu presents also ma­kes it a highly sought-after location for global cloud and data centre players who are keen on meeting their sustainability goals.

Growth trends in other cities

The report highlights the fact that while India’s data centre future will largely depend on coastal cities with ready access to cable landing stations, landlocked cities such as Delhi-NCR, Hyderabad, Benga­luru, Kolkata and Pune will also be beneficiaries of the growing data centre industry. Delhi-NCR’s data centre industry has been supported by regulatory incentives and can potentially see large demand from government organisations setting the public community cloud. Pune has been deve­loped as a disaster recovery location for BFSI players due to its proximity to Mu­m­bai and better risk profile owing to it being landlocked. Bengaluru has a higher proportion of on-premises data centres operated by in-house centres of global technology firms as well as IT/IT-enabled services (ITeS) players. Kolkata, located in the densely populated eastern region of India, is expected to have a new cable landing station in the next few years and will also emerge as an important location for data centres in the future.

Cable landings in India

The report also highlights that India’s international connectivity, at 9.8 Tbps, is comparatively lower than that of China and other developed countries. India’s co-location data centres are currently conne­cted with the global network through 20 cable landings. Mumbai accounts for the highest number of cable landings, as the early telecommunication network was es­tablished there. Chennai, due to its st­ra­te­gic location in APAC and domestic geography, presence of IT/ITeS industries, and dense interconnection capabilities, will lead the growth of new wet ca­b­les, thus spurring data centre growth.

The way forward

The existing and potential drivers of data consumption indicate that the benefits of data consumption are going to be massive. The sector is witnessing action from policymakers, investors, operators, regulators, enterprises and cloud players. As a result, the capacity of the Indian data centre in­dustry is expected to double from an IT load of 499 MW to 1,008 MW by 2023. At the same time, the industry is adopting sustainability measures to reduce its carbon footprint.

Digital transformation in India is expected the create an economic value of $1 trillion by 2025. Data centres, along with robust telecom infrastructure, will be the key factors driving this wave. The inc­reased thrust by the Government of India and the pandemic has added a lot of mo­mentum to this growth. Existing and up­coming sectors such as fintech, over-the-top content, content delivery networks, on­­­line education, video collaboration, in­tu­i­­tive maps, autonomous cars, online gaming and digital netizen services have changed the way we consume online services, leading to humongous growth of data and real-time computing.

The Indian data centre industry will act as an important cog in the wheel of In­dia’s digital transformation, providing jobs, community development, and a cy­clic economy, and bringing global technologies to India. Mumbai and Chennai are expected to be the largest beneficiaries of this growth. While Mumbai has the lead, Chennai is catching up owing to its strategic location in the APAC region cable landing ecosystem for interconnections, competitive costs and highly skilled resources. Data centres are poised to be another growth driver in the success story of digital India.