A clutch of studies are predicting that India will double its data centre capacity over the next two years, making it well-placed to become a global hub for AI innovation and cloud storage. Crisil Ratings has said India’s capacity would double to 2.0-2.3 gigawatts by 2026-27 on the back of sharp growth in generative artificial intelligence, which requires a lot of processing power. Icra has predicted the capacity would double by 2025-26, with nearly Rs 55,000-crore investments in the pipeline. India currently has about 150 data centres led by big tech companies such as Amazon Web Services, Microsoft Azure and Google. In recent years, computing and data storage demand has been driven by businesses rapidly shifting to digital platforms, a trend exacerbated by the Covid pandemic. Rising use of social media, digital payment and OTT streaming have also boosted the demand manifold.
Official policy is lending a hand, too. For instance, the Reserve Bank has decreed that all data related to monetary transactions be stored in India. Similarly, market watchdog Sebi has mandated that all entities under its purview, including the stock exchanges and mutual funds, locally park their data. Another incentive for investment here is that India offers one of the lowest rates for real estate and skilled manpower. Crisil’s estimates that India’s cost of Rs 45 crore for developing 1 megawatt of data capacity is the cheapest in the world, comparable to China at Rs 56 crore, and Japan and the US at Rs 95 crore.
This discussion has to be viewed through two prisms. First, the IT and business process management sector in the country contributes a substantial 8 percent of GDP and employs nearly 7 million skilled people. Second, the industry’s skew is entirely towards exports—with offshore orders earning $200 billion and domestic deals accounting for just $50 billion. The growth of data centres catering to local clients may help correct this skew. Overdependence on foreign markets, especially in turbulent times, is risky. The incoming Donald Trump administration is working overtime to reverse immigration flow into the US. The US’s H1-B work visas offer Indians a quota of 65,000 jobs a year. The scheme, with Trump’s so-called MAGA supporters baying for its reversal, is now under a cloud. Data centres could thus be a good cushion for such future shocks.