Powering a Digital Nation: The state of India’s data centre market

India’s digital evolution is no longer new; it has become the current reality. Each shared app, every executed transaction and every video streamed comes with a discreet facilitator, a data centre, doing all the tedious work. These are no longer simply server rooms; rather, they are evolving into the trillion-dollar economy’s digital backbone on overdrive.

In the last few years, India’s data centre sector has shifted from being an underappreciated asset to one of the most prominent bets in infrastructure. There is a rush of investors, alongside hyperscalers who are building at scale, while state jurisdictions provide unprecedented subsidies. We have witnessed growth, but for once, it is not just growth–vision, direction, momentum and ambition have been blended to create the perfect honeypot.

The pulse of the market

In the next three years, India’s data centre capacity is expected to more than double, jumping from around 870 MW to over 1,800 MW through 2027.

This is unprecedented change, challenging the preposterous forces of cloud consumption, business-first digitalisation, AI-driven paradigm shifts and legal mandates on data’s physical boundaries. It is about cementing the presence of Indian heavyweights, not just global tech juggernauts. While the latter strengthen their foothold through partnerships and buyouts, the former are relentlessly pushing to scale from the eastern front. They are evolving simultaneously, but at their own pace.

Geography of growth: It’s not just Mumbai any more

For years, Mumbai was the unchallenged capital of India’s data centre economy, due to its proximity to undersea cables and well-established infrastructure. But that is rapidly changing. Other metros and even Tier II cities are catching up.

Chennai is quickly gaining traction, fuelled by robust connectivity and a good coastline. Hyderabad and Bengaluru are attracting hyperscale interest due to their tech ecosystems and stable power. Delhi NCR is coming into its own, especially for banking, financial services and insurance; and public sector demand.

Beyond the metros, we are starting to see action in cities such as Pune, Jaipur, Ahmedabad and even Nagpur. These aren’t just spillover markets – they’re emerging edge data centre hubs, which will become critical as latency-sensitive services (gaming, augmented reality/virtual reality, telemedicine, etc.) gain traction.

From hyperscale to high density: A diversifying landscape

Today’s data centres are not single-purpose monolithic facilities. We are witnessing some form of layered evolution:

• Edge data centres that bring computation closer to users.
• Hyperscale data centres which cater to large enterprises and cloud providers.
• Co-location data centres where multiple clients share space and services.
• AI compute data centres that enable dense computing of large models and advanced analytics.

Each of these configurations uniquely contributes to India’s emerging digital infrastructure. And what connects all of them? A single focus on the need for power, security and sustainability.

GPUs: The digital economy’s new oil

The beginning of this decade saw the arrival of AI, which came with the capability to transform multiple industries. The same is happening in India, where forethought is now being put into industry-changing concepts. AI has the potential to transform every single category, from conversational interfaces all the way to precision farming and everything in between.

In parallel with AI development, there is a need for brawn. AI requires sophisticated algorithm implementation to function off the graphics processing unit’s (GPUs) muscle power, which is referred to as deep learning. Furthermore, most of the outstanding GPUs available in the market are imported, which strategically weakens our economy. Here, GPU-as-a-service is an exciting prospective for the use of GPU resources in the country; providing the option of paying for high-powered computing on a lease basis instead of purchasing it, such models can fuel outstanding innovation within start-ups and research labs.

Such a practice would boost innovation across global studies focused on AI by negating the initial hefty investments in capital infrastructure. However, there is still a fair amount to be done in order to develop a robust infrastructure backbone. Semiconductors and the IndiaAI Mission policies will allow us to see the light at the end of the tunnel.

Network-as-a-service: Unlocking the next layer of value

In tandem with compute and storage, Network-as-a-service (NaaS) is rapidly becoming a transformative pillar for India’s digital infrastructure narrative. The adoption of multicloud and hybrid IT approaches increases the need for scalable and secure network access. Progressive data centre companies are adding NaaS capabilities to their offerings to include infrastructure solutions such as direct cloud on-ramps, low-private latency connections and software-defined networking. Some research indicates the market size was $1.3 billion in 2024, with projections estimating that it will surpass $15.68 billion by 2033, achieving a CAGR of 28.1 per cent during 2025–33. The growing need for scalable and flexible networking solutions, the rise in remote work and increased access to mobile devices will all drive this growth.

This development also paves the way for “anything-as-a-service” (XaaS) platforms that bundle and flexibly provide computing resources along with network, storage, security and even AI/machine learning capabilities. The XaaS market is expected to grow significantly in India. The market is forecasted to provide a projected revenue of $114.92 billion by 2030, growing at a CAGR of 34.1 per cent from 2025 to 2030. This growth is driven by enhanced cloud adoption, initiatives towards digital transformation and the growing demand for agile and scalable IT services.

The integration of cloud-native networking and the infrastructure of data centres will determine the future of digital enterprises in India. Transitioning to a service-oriented architecture paradigm will enable data centre operators to develop into fully fledged digital infrastructure platforms that provide comprehensive services to modern enterprises. This transition will improve operational capabilities while also increasing India’s competitiveness on the international digital infrastructure market.

Policy support: Strong signals, mixed execution

Policymakers have not completely ignored data centres and their strategic value. The Digital Personal Data Protection Act, 2023 introduced new pressure by requiring certain data types to be stored domestically. The draft National Data Centre Policy and the designation of data centres as “infrastructure” are further steps forward. On the regional level, it is encouraging to witness tailor-made policies and even incentives – from power cuts to one-stop-shop clearances – in places such as Maharashtra, Tamil Nadu, Uttar Pradesh and Telangana. On the restructuring of the value chain, developers are beginning to come forward. However, the skies are not entirely unclouded. Land purchasing issues, environmental approvals and grid-connected power availability may still delay projects by 18-24 months.

The intention is there, but gaps in implementation continue to exist–particularly in the case of power supply and interdepartmental coordination. Power, however, is a double-edged sword. Data centres require round-the-clock supply – typically 25-50 MW per location. India is developing its renewable capacity, yet open access to green power is greatly state-dependent. It is difficult to plan around, particularly for operators who are committing to net zero horizons.

Talent and security: The silent enablers

Modern data centre management involves more than just cooling and racks. Complexity, risk and dependability are paramount at all times. And it requires people.

Here, India is currently lacking. There is simply a dearth of qualified works for facility management, HVAC systems, cybersecurity and electrical engineering. Although some training programmes have begun to be implemented, the industry requires a more comprehensive skilling programme, ideally in collaboration with academia. Physical and cyber threats are on the rise, in terms of security.

Expectations for compliance, resilience and breach response are rising as data centres house increasingly sensitive workloads, such as government databases, financial data and health information. The standard is rising, as it should.

What needs to shift: Recommendations from the ground

From a consultant’s perspective – and from what we hear from regulators, clients and operators alike – there are five priority focus areas India needs to address:

• Faster coordination and clearances: Create a nodal agency to consolidate authority, land and state-to-state compliance permits.
• Power sustainability and reliability: To guarantee that clean energy is both feasible and predictable, build green power corridors at the state level and coordinate open access standards.
• Comprehensive skill-building: Establish a collaboration between industry and academia to train engineers, technicians and security experts.
• Support for AI computation: Provide incentives to GPU-as-a-service providers or provide subsidies for GPU clusters. The IndiaAI vision would be expedited by public-private GPU parks.
• Rewards for edge buildouts: Provide incentives for Tier II and Tier III cities to deploy infrastructure that can support edge workloads, which are essential for 5G, smart manufacturing and gaming.

To conclude: It is  a moment of opportunity

Let’s take a moment to reflect. Adding more structures with flashing lights is not the only solution. The goal is to build a national infrastructure that supports all facets of our economy, including retail, healthcare, education and agriculture. If we get it right, India could become a regional hub for computing, storage and innovation in addition to being a digital leader for the nation.

Southeast Asian, African and Middle Eastern countries are actively looking for reliable partners to host and process their data. India can and should be that partner. However, this will necessitate a concerted effort from academia, industry and government. We have to move swiftly, boldly and sensibly. This decade is India’s opportunity – the data centres we build today will define the digital potential
of tomorrow.

Anupam Chaturvedi, Associate Director – Telecom, PwC India, also contributed to this article.