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Poojitha Jayadevan
Staff Writer

Where India’s data centre industry will witness massive growth

News Analysis
Mar 23, 20224 mins
Data Center

Mumbai, Chennai, Delhi, and Kolkata have the potential to be the destinations of choice for data centre providers. And other regions of India are vying for their share.

server room / data center
Credit: scanrail / Getty Images

India’s data centre industry is growing, driven by enterprises’ race for digital transformation and the government’s digital initiatives. Computing capacity could cross the 1GW mark by 2023, double the 499MW identified in the first half of 2021 by a recent report from Nxtra by Airtel and Jones Lang LaSalle. Other factors contributing to the growth of the industry in India include demand for data storage, privacy regulations, and operators wanting to serve other markets from India.

The telecom industry in India is making rapid progress towards the launch of 5G technology, with three operators already starting field trials, and when their 5G networks go live demand for data—and the data centres that provide it—will increase. In addition, India is expected to become a global data centre hub due to its natural resources, strategic location close to Asia-Pacific markets, competitive costs, skilled IT staff, and large domestic market.

Preferred Indian cities for data centres

Mumbai is data centre providers’ first choice because of its central location and role as a hub for the banking, financial services, and insurance industries. It has reliable power, has few natural hazards, and is close to landing stations for the submarine cables connecting India to the rest of the world. The region accounts for 45% of the 499MW inventory.

Chennai is emerging as a an alternative exchange hub for data centres in APAC. The presence of global banking, financial services, and insurance companies, a strong manufacturing base, and lower setup costs make Chennai the second choice for data centre operators. Chennai is also an integral part of the global submarine cable infrastructure, so global enterprises looking for an alternative location for their critical infrastructure or disaster-recovery sites in Asia-Pacific are considering Chennai. The city has skilled IT and non-IT resources and has the highest internet speed among cities in India.

These coastal cities have the advantage of access to a dense network of submarine cables offering low latency links to global business centres. Of the 20 cable landings in India, Mumbai has 11, Chennai has six, and Kochi, Trivandrum, and Tuticorin have one each.

Emerging choices for Indian data centres

The national capital region is receiving increased attention from data centre providers too. Regulatory incentives and the potential for high demand for capacity from government organizations make Delhi an interesting choice.

Providers who are finding it difficult to set up data centres in Mumbai can also consider Pune as an alternative due to its proximity to Mumbai. Its landlocked location provides protection from coastal flooding and storms.

Bangalore takes the lead when it comes to on-premises data centres run by major global companies and domestic IT firms.

Kolkata is expected to emerge as an important location as the city is will have a new cable landing station in the next few years.

Government support for Indian data centres

The government’s granting of infrastructure status to data centres in the latest Union Budget will help accelerate expansion, as it make it easier to obtain long-term credit for their construction. This is a great help in what is a very capital-intensive industry.

The Centre introduced a policy in favour of data centres in 2020, and state governments are following suit.

Tamil Nadu aims to be the data centre destination of choice for domestic and foreign investors. Its policy includes strategies around power, land, and connectivity infrastructure, and the state provides incentives to data centre developers and operators to boost investment in the state. It has also exempted 50% to 100% of stamp duty for purchase or lease of land obtained from certain state government undertakings (ELCOT/SIDCO/SIPCOT) and provides a 100% subsidy of electricity tax on power purchased from the state utility.

The state’s electricity generating capacity includes 50% from renewable energy, making Chennai a sought-after location for global cloud and data centre players racing to meet their sustainability goals.

Telangana has had a data centre policy in place since 2016, exempting them (with a few exceptions) from the purview of the Telangana pollution control act, statutory power cuts, and inspections under certain acts. Hyderabad will soon see the launch of a couple of data centres with Microsoft setting up its fourth—and largest—data centre in the country and Web Werks preparing a 120,000 square-foot colocation space to support IT loads of up to 6MW.

These government policies have added momentum to the growth of data centres in India. The data centre industry will be an essential part of India’s transformational and digital story that are expected to provide jobs, community development, and a cyclic economy, the Nixtra report concludes.