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Billions in Investments, Emerging Projects, and Policy Pathways for Economic Growth in India's Data Center Market
- Data Center Association of India (DCAI)
- 13 hours ago
- 4 min read
India's data center sector is experiencing unprecedented growth, driven by the surge in Artificial Intelligence (AI), cloud computing, and digital infrastructure demands. As of 2025, the market is valued at approximately USD 9.79 billion, with projections estimating it to reach USD 21.03 billion by 2031, reflecting a compound annual growth rate (CAGR) of 13.59%. This expansion positions India as an emerging hub in Asia, attracting massive foreign and domestic investments amid a global push for compute capacity. Key drivers include hyperscale facilities for AI workloads, renewable energy integration, and supportive state-level policies. However, the sector faces challenges like power constraints and regulatory fragmentation, which could influence its trajectory.
Recent Investments and Projects
The past year has seen a flood of capital inflows, totaling around USD 67.5 billion committed over the next five years from global tech giants and Indian conglomerates. Notable highlights include:
Microsoft's USD 17.5 billion commitment by 2030 for AI infrastructure, aimed at building sovereign capabilities and supporting India's 1.4 billion population. This aligns with broader AI ambitions and includes partnerships for data centers across key regions.
Amazon's USD 35 billion pledge over five years for AI-driven projects, focusing on cloud and data center expansions in southern megacities like Chennai and Hyderabad.
Google's USD 15 billion investment in an AI-focused data center hub in Visakhapatnam, Andhra Pradesh, in partnership with AdaniConneX and Bharti Airtel. The facility aims for gigawatt-scale computing power, with Adani contributing up to USD 5 billion for clean-energy integration. This marks Google's first AI-centric campus in India, set to anchor long-term digital growth.
Meta's involvement in a 500MW facility near Visakhapatnam, developed with Sify Technologies, further amplifying the region's appeal.
Domestic players are equally active. Reliance Industries is advancing a 1GW data center in Jamnagar, Gujarat, while Tata Group and others are scaling operations. Lodha Developers expanded its Maharashtra investments with an additional INR 1 lakh crore (approximately USD 12 billion), bringing the total to INR 1.3 lakh crore for a data center park expected to create 16,000 jobs and support 1GW+ capacity. Blackstone has committed over USD 20 billion cumulatively, including USD 11 billion in long-term deals signed in 2025.
Colocation providers like Iron Mountain broke ground on an 85MW AI-ready campus in Mumbai in January 2026, partnering with Stirling & Wilson. CtrlS Datacenters signed a November 2025 MoU with NTPC Green Energy for a 2GW renewable energy project to power facilities sustainably. These projects cluster in hotspots like Mumbai, Navi Mumbai, Hyderabad, Chennai, and Pune, where land and power subsidies are drawing operators.
Globally, data centers attracted over USD 270 billion in greenfield investments in 2025, with India emerging as a key destination alongside Brazil and Thailand. Projections indicate India's capacity could double to 2GW by 2026 and reach 4.5GW by 2030, translating to 55 million square feet of real estate and USD 20-25 billion in fresh capital.
Policy Developments
India lacks a fully unified national data center policy, leading to a fragmented landscape where states drive incentives and regulations. The Draft National Data Center Policy 2025 proposes a 20-year conditional tax holiday for operators meeting targets on capacity addition, power usage effectiveness (PUE), and job creation. It aims to streamline approvals and promote data center parks, but industry leaders remain cautiously optimistic, citing the need for clearer implementation.
State policies fill the gap:
Maharashtra: Offers streamlined approvals, power subsidies, and land incentives, targeting INR 20,000 crore in investments.
Uttar Pradesh: Revised in 2022, it provides 25-50% land subsidies, dual power grids for initial parks, and aims for 250MW capacity with INR 20,000 crore investments.
Tamil Nadu: Focuses on AI-ready infrastructure with electricity duty exemptions and CAPEX subsidies up to INR 200 crore.
Karnataka: Targets 200MW with incentives like 100% stamp duty exemptions and power tariff rebates.
Gujarat: Under its IT/ITeS Policy 2022-2027, mandates Tier 3+ standards and offers up to INR 150 crore in CAPEX support plus INR 1 per unit power subsidies.
Rajasthan: Aims for INR 20,000 crore investments through parks and subsidies.
The Union Budget 2026 is expected to prioritize data centers as the backbone of AI goals, addressing execution hurdles like power availability and sustainability. State governments are reinforcing this with data center parks, subsidies, and faster clearances.
Economic Impact
This boom represents one of India's largest single-sector investments, fostering job creation (e.g., 16,000 from Lodha's project alone), real estate development, and export-oriented digital services. It bolsters GDP through tech exports, enhances AI competitiveness, and attracts FDI, with data centers comprising over 20% of global greenfield values in 2025. However, global electricity demand for data centers could exceed 1,000 TWh by 2026, straining India's grid and raising sustainability concerns. Renewable tie-ups, like CtrlS-NTPC, signal a shift toward green energy, but water usage and PUE remain challenges.
From a macroeconomic perspective, this sector could drive a 14% annual capacity growth globally, with India capturing a significant share through hyperscale and edge computing. It also spurs ancillary industries, including law firms advising on deals and construction firms like Stirling & Wilson.
Challenges and Policy Recommendations
Key hurdles include power shortages, high water demands (prompting liquid cooling adoption), and fragmented policies. Without national harmonization, interstate competition may lead to inefficiencies.
Recommendations for Budget 2026 and beyond:
Unified National Framework: Standardize definitions, incentives, and approvals to reduce fragmentation.
Sustainability Mandates: Enforce renewable energy quotas and PUE targets, with incentives for green tech.
Infrastructure Boost: Allocate funds for grid upgrades and dedicated power corridors, targeting 30GW+ growth by 2030.
Skill Development: Invest in training for AI and data center operations to maximize job creation.
Tax and Regulatory Ease: Extend the 20-year tax holiday nationwide and streamline FDI approvals.
Conclusion
India's data center sector is at a pivotal juncture, with 2025-2026 investments signaling its rise as a global AI powerhouse. While economic benefits are immense—driving growth, employment, and innovation—addressing policy gaps and sustainability will be crucial for long-term viability. A proactive Budget 2026 could cement India's position, ensuring equitable and resilient development.
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Renewable Energy Chronicles: The Power Saga
Renewable Energy Society of India | Jan 2025, Vol 1 | ISBN 978‑81‑993949‑6‑4
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