Image Credit: Freepik.com
The Indian data centre industry is poised for a massive expansion, with its capacity set to more than double to 2-2.3 GW by fiscal 2027, according to CRISIL Ratings. The surge in demand is driven by accelerated digitalisation across industries and rising adoption of cloud storage solutions.
Generative AI to Fuel Medium-Term Growth
The growing penetration of Generative Artificial Intelligence (GenAI) is expected to play a significant role in boosting demand for data centres. CRISIL highlighted that GenAI, which demands higher computational power and lower latency than traditional cloud computing, will act as a catalyst for industry growth.
Stable Financial Outlook for Data Centre Operators
The rating agency predicts that the industry will maintain healthy and stable cash flows, ensuring steady credit profiles for operators. This financial stability, coupled with state-level incentives and data localisation policies, is expected to attract significant investments in the sector.
Driving Factors Behind the Boom
The report identified two primary factors driving demand for data centres:
1. Digital Transformation: The rapid shift of enterprises to digital platforms, including cloud services, has gained momentum since the COVID-19 pandemic.
2. Surge in Internet Usage: The accessibility of high-speed internet has fueled increased consumption of social media, OTT platforms, and digital payments.
CRISIL noted that mobile data traffic recorded a compound annual growth rate (CAGR) of 25% over the last five years, with usage rising to 24 GB per month by fiscal 2024 and projected to grow to 33-35 GB per month by fiscal 2026.
Investment and Infrastructure Needs
“To meet the growing data centre demand, an investment of ₹55,000-65,000 crore is required over the next three fiscals, primarily towards land and building, power equipment, and cooling solutions,” said Manish Gupta, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings. Gupta explained that infrastructure costs account for 25-30% of overall capital expenditure, with operators building facilities based on anticipated future tie-ups.
Expansion Driven by Hyperscalers
Capacity additions are being propelled by the expansion plans of existing players and the entry of new ones. Hyperscalers—large-scale data centres catering to businesses with extensive digital infrastructure needs—are a significant driver of this growth.
The Indian data centre industry’s upward trajectory underscores the increasing reliance on digital platforms and advanced technologies, paving the way for sustained growth in the years to come.
