India Data Center Market Outlook to 2028

India Data Center Market Overview

• The India Data Center market is valued at USD 7.2 billion, based on a five-year historical analysis. This market is fueled by the robust growth of digital services, increasing internet penetration, and the rapid adoption of cloud computing solutions across industries. The demand for reliable and scalable data storage solutions is further driven by initiatives to boost digital infrastructure, including government programs supporting data localization. Additionally, the influx of multinational technology firms investing in Indian data centers underscores the markets rising importance.

• The regions with the highest concentration of data center facilities in India include Mumbai, Bengaluru, and Delhi NCR. Mumbai leads due to its advanced IT infrastructure, accessibility to submarine cable landings, and abundant power supply, which attracts large-scale investments. Bengaluru and Delhi NCR are also preferred due to the presence of major tech hubs, government incentives, and reliable fiber optic networks, making these cities favorable for data center development and operations.
• To attract investment, the government introduced policies offering tax breaks and fast-tracked approvals for data center infrastructure. As of 2024, Maharashtra and Telangana led with comprehensive incentive packages for new data centers, enhancing India's attractiveness for domestic and foreign operators.

India Data Center Market Segmentation

By Data Center Type: Indias Data Center market is segmented by data center type into hyperscale, enterprise, edge, and colocation centers. Hyperscale data centers command a dominant market share due to their ability to handle high volumes of data storage and processing requirements, especially for cloud and big data services. Large technology companies are investing significantly in hyperscale facilities to support extensive data and storage operations, solidifying their position as the backbone of India's digital infrastructure.

By IT Infrastructure Component: Indias Data Center market by IT infrastructure includes servers, storage, and networking. Servers hold the largest market share, given the constant need for computing power to support cloud-based services and applications. The trend towards virtualization and hybrid cloud environments further increases demand for server infrastructure, making it the core component of data center facilities.

India Data Center Market Competitive Landscape

The India Data Center market is dominated by a combination of local and global players, which include companies specializing in hyperscale, cloud computing, and colocation facilities. This competitive landscape showcases the influence of both Indian companies and global tech giants investing in data infrastructure.

India Data Center Industry Analysis

Growth Drivers

• Surge in Data Consumption: Data consumption in India has skyrocketed in recent years, largely driven by a population exceeding 1.4 billion, with over 700 million active internet users, according to the Ministry of Electronics and Information Technology (MeitY). The Department of Telecommunications reported that average data usage per user reached nearly 20 GB per month in 2024, fueled by the expansion of affordable 4G services. With internet penetration continuously rising in urban and rural areas, the data load on India's digital infrastructure has increased substantially, justifying significant investment in data centers.
• Rising Cloud Adoption: Indias cloud infrastructure demand has surged, supported by governmental and corporate shifts toward digital transformation. The National Cloud Strategy, led by MeitY, has expanded cloud adoption across public and private sectors, catering to over 1 million businesses. Additionally, approximately 30% of Indian enterprises have integrated cloud technology in their operations by 2024, per the Digital India programme. This rising cloud usage is expected to amplify the need for advanced, high-capacity data centers.
• Government Digital Initiatives: Under Digital India and similar initiatives, the government has heavily invested in digital transformation. As of 2024, over 50,000 village panchayats are connected through the BharatNet project, which aims to provide broadband connectivity to all rural regions. This digital inclusion push not only increases data usage but also encourages data center investments to support large-scale infrastructure.

Market Challenges

• High Operational Costs: Indias data center operators face steep operational costs, especially in power and cooling, due to reliance on traditional energy grids. The Ministry of Power reported that industrial electricity costs average around 7.5 per unit in 2024, impacting data center profitability. Additionally, cooling requirements can account for up to 40% of total operational costs due to Indias tropical climate.
• Power Reliability Concerns: The Indian data center industry contends with power reliability issues, as only 10% of data centers have access to uninterrupted, high-quality power grids, according to the Central Electricity Authority. This dependency on backup generators escalates costs and carbon footprint. Addressing power reliability remains essential for sector growth, especially in Tier 2 and Tier 3 cities.

India Data Center Market Future Outlook

Over the next five years, the India Data Center market is projected to experience robust growth, driven by increasing digitalization, government incentives for data infrastructure, and the burgeoning demand for scalable storage solutions. The market is also expected to witness further investment from global tech companies, which will fuel the expansion of data center capacity, adoption of renewable energy sources, and advancements in edge computing technologies to cater to the growing demand for real-time data processing.

Opportunities

• Expansion of Edge Data Centers: With the push toward 5G, India is experiencing rapid demand for edge data centers, particularly in non-metro areas. Telecom operators, encouraged by TRAI policies, are actively expanding edge infrastructure to support latency-sensitive applications. Nearly 200 new edge locations have been set up in 2024, fostering localized data processing.
• Renewable Energy Integration: Data centers increasingly prioritize renewable energy sources to counteract high electricity costs. The Ministry of New and Renewable Energy reports that nearly 25% of data centers have adopted solar power by 2024, driven by incentives such as tax credits. This transition reduces operational expenses and aligns with the governments renewable targets.