MUMBAI: The country’s data centre capacity is expected to jump nearly four times to reach the 4-gw mark by FY30 from 1.2 gw in fiscal 2025 on the back of increasing adoption of artificial intelligence (AI) and the tremendous cost competitiveness that the country enjoys in building them.
According to a report by CareRatings, the data centre capacity per million Internet users remains significantly lower in the country at 1.2 mw per million users, compared to the world average of 5 mw.
This massive capacity addition will involve operators pumping in close to Rs 1.5 trillion between fiscals 2026 and 2030, taking the overall investment that this capacity augmentation will demand to around Rs 4 trillion, the report said.
The report attributes the massive expansion to the high digitization that the economy already enjoys, coupled with the cost competitiveness in building data centres along with the increasing adoption of AI as the key growth drivers.
Despite these advantages, the country’s share in the global data centre market was only around 4% in 2025 with a capacity of 1.2 gw, which is likely to reach 4 gw by 2030, the report said, adding the domestic co-location data centre capacity has registered major growth since FY21 and doubled to 1.2 gw by FY25. The global data centre capacity stood at 30 gw as of end 2025.
Capacity growth so far has been complemented by high absorption levels with utilisation above 90% on average during this period. Going forward, strong demand is expected to support steady absorption.
The agency said with continued capacity growth and sustained absorption levels, the industry is expected to witness a compounded revenue growth of around 24% during FY26–30 and operating margins are likely to remain broadly stable at 40–42%.
According to Puja Jalan, a director with the agency, the industry is in an upswing with high capex, fundraising capability of strong sponsors and large equity investments which lead to an annual revenue growth rate of 24% between fiscals 2026 and 2030 on a margin of 40-42%.
Over the past few years, the data centre cost saw an increase of 50-70% led by higher land prices, adoption of advanced cooling technology and investment in renewal energy.
Digital transformation is catalysing economic growth and driving large-scale data creation. The share of mobile subscribers (77%) and Internet penetration (67%) as of 2025 is closer to the world average of 70% and 73%, respectively. The country has attained digital parity with the world average, despite a low data centre share of 4%.
The country enjoys tremendous cost competitiveness in constructing and operating data centres with the construction cost 30–40% lower than in China and the US, while lower land prices and competitive electricity tariffs add to the list of advantages.
According to Tej Kiran, an associate director at the agency, global AI investments have crossed nearly $1 trillion in the past five years. While data centre demand is currently driven by enterprise IT and cloud storage, AI-led workloads are expected to power the next phase of growth over the next five to seven years, with the pace of adoption here being linked to the timely scaling of high-performance graphics processing unit (GPU) availability.
The report concludes that the global macroeconomic disruptions due to the Iran war are unlikely to adversely impact the industry or heighten project execution risks in the medium term but could potentially add to the demand prospects in the long term.