Data Center Market Insights: India Dynamic, Fast-growing and Full of Opportunity

Rajeev Kumar Sinha, Vice President of Sales at Digital Edge India, shares his insight into the fast-growing Indian data center market, its challenges and opportunities.

In April of this year the United Nations reported that India had officially overtaken China as the world’s most populous country, with a total population of 1.428 billion people. To put that number into context, we’re talking about a population almost double that of the EU and the US combined.

Sheer population size coupled with an impressive increase in mobile internet use are clear indicators that the Indian data center market is poised for significant growth. For illustration, in 2020 India’s mobile phone internet user penetration rate stood at 54%. Today, four years later, it’s at 75% and by 2031, penetration is predicted to stand at over 90%, or almost 1.3 billion people at current population levels. But how can the data center industry effectively tap into this growing market demand?

The Indian Data Center Market Today

The data center market in India can be summarized by one word: ‘More’. Compared to just years ago there are now many more internet users, with much more data being processed, requiring more storage and more data center capacity. This is coupled with a more supportive governmental and regulatory environment, including relatively low industrial power tariffs and some state governments offering  subsidized land and streamlined approvals. All these factors combine to indicate a strong increase in data center capacity investments in the future.

On the customer side, the global hyperscalers such as AWS, Microsoft Azure, and Google Cloud dominate the Indian data center market and will likely continue to for some time. All these key players are actively looking to scale up capacity in India to meet current and future demand. Alongside these global companies you have domestic enterprise clients as well as India’s home-grown unicorns, with a significant portion being either within the financial or telecommunication sectors, further fueling data center demand.

What Factors are Driving Growth of the Indian Data Center Market?

In summary, it’s clear that the Indian data center market is experiencing rapid growth and transformation. Here are four of the key drivers I see shaping that market demand:

Digitalization and Cloud Adoption: The rapid increase in internet access, primarily via mobile devices, has triggered a shift towards digital services and cloud computing. Following the Covid-19 pandemic and in response to this digitization, many Indian businesses are moving their operations online, which in turn boosts data center demand.

Rapid Innovation in AI: With the rise of AI applications, data center demand will accelerate to accommodate these high-power density deployments. We are now moving from conversational to organizational AI, and to match organizational capability, demand for data center processing and computing will increase dramatically. Navi Mumbai in particular has the potential to become an AI hub due to its sizeable land banks and cheap power resources.

Local and Global Players: The dynamic and healthy market mix of local enterprise clients and global hyperscalers, as well as regional and local data center providers, leads to a diversity which is driving competition and innovation in the local market.

Government Initiatives: Programs like ‘Digital India’ and other supportive policies have encouraged investments in the country’s digital infrastructure, including 683,000 km of optical high speed internet cables being laid since the policy’s launch in 2015. The government is also offering incentives such as tax benefits and subsidies, as well as the previously mentioned low industrial power tariffs and land costs.

Strategic Location: Last but not least, India’s geographical position between the Middle East and the Southeast Asian region makes it a natural and crucial hub for data transfers, reducing latency and improving connectivity between these two fast emerging regions.

What are the Main Challenges in the Indian Data Center Market?

Still a comparatively nascent and developing market, India is characterized by constant change. This means that data center providers must have a deep understanding of the market and local experienced teams on the ground if they are to thrive.

In addition, they must plan ahead while being nimble and able to adapt to meet ever evolving customer needs. In particular data center providers need to be able to offer scalability within their infrastructure to cater to the predicted rapid growth in demand. Finally, data center providers must have access to land in strategic locations, including both edge locations and larger sites for more sizeable hyperscale or AI deployments, in order to accommodate the dynamic and growing needs of their customer base.

Another challenge relates to fierce competition within the sector, with plenty of players building large campuses across India, meaning data center providers must continuously innovate and differentiate to stay relevant. At the same time, the growth means that more human capital is needed – talent with the skills and experience to design, build and operate data centers in India. Players in the industry must either attract scarce talent, or develop and nurture it, to stay ahead in the game, especially in the hyperscale data center segment.

Furthermore there’s the issue of sustainability, including energy supply and water scarcity which can present operational difficulties. While the Indian government is very supportive of improving digital infrastructure throughout the country, environmental regulations are gradually getting stricter, requiring data center operators to invest more proactively in energy efficient, sustainable facilities.

How is Digital Edge Positioned in the Indian Data Center Market?

Digital Edge entered the Indian data center market in January 2023 with the establishment of a joint venture company in Mumbai, comprising of Digital Edge India, the National Investment and Infrastructure Fund of India, and AGP DC InvestCo Pte Ltd  (“AGP”), with a vision to develop a pan-India portfolio of hyperscale data centers. This means that from market entry we have been  supported by strong partners with unparalleled connections, resources and knowledge of the Indian market.

At Digital Edge India, we also have very experienced staff on the ground, who understand the Indian data center market intimately and have the crucial know-how to plan, build and operate data centers in India. Furthermore, we are supported by our strong knowledge culture and by the extensive expertise and experience we have amassed from building and operating data centers across the Asia Pacific region.

Digital Edge Navi Mumbai – Our First Indian Data Center

Following our establishment, we secured a large plot of freehold land (approx. 50 acres) strategically located in Navi (new) Mumbai, which is India’s biggest data center hub with easy access to power and fiber connectivity. In May this year we started the construction of the first phase of our 300MW campus which will be one of the largest data center facilities in Asia once complete. Designed to cater to hyperscale, high power density deployments, this campus will leverage Digital Edge’s cutting-edge data center engineering.

The state-of-the-art Navi Mumbai campus will start operations with a phased approach, with the first phase, known as BOM1, going live in Q2 2025 with an initial 18MW of data center capacity, followed by a further 48MW of capacity coming on stream in  2026. We are also actively planning for future phases of the site, giving us the scalability, flexibility and know-how to best meet the changing and evolving needs of hyperscale customers in the Indian market.

In conclusion, the Indian data center market is poised for significant growth, with a strong focus on expanding capacity and improving infrastructure to meet the rising demand. And at Digital Edge, we are well positioned to leverage the opportunities in this exciting and dynamic market. If you would like to know more about our Navi Mumbai campus or about the Indian data center market in general, feel free to reach out to me at rajeev.sinha@digitaledgedc.com.