India’s data centre industry is poised for substantial growth, with capacity expected to more than double to 2-2.3 GW by 2026-2027. This surge will result from increasing digitalisation and rising cloud storage investments. As enterprises expand their digital operations and consumer data demands soar, the industry will experience rapid growth.
Key factors driving India’s data centre capacity growth
- Digital transformation and GenAI adoption
Two main factors drive demand for data centres: enterprises shifting to digital platforms and the rising influence of Generative Artificial Intelligence (GenAI). As GenAI requires more computational power, the need for advanced data centres with higher efficiency and lower latency will grow, further boosting data centre capacity in India.
- Increase in mobile data traffic and cloud computing
India has seen mobile data traffic grow at a compound annual growth rate (CAGR) of 25% over the past five years. By fiscal 2026, data usage will rise from 24 GB per month at the end of fiscal 2024 to 33-35 GB per month. The increasing demand for cloud computing and OTT platforms also pushes up the need for data centres.
Investment and expansion plans for India’s data centres
India will need ₹55,000-65,000 crore in investments over the next three years to meet rising demand. These funds will mainly go towards infrastructure, including land, buildings, power equipment, and cooling solutions. Operators will rely on debt funding, increasing leverage. However, this will ensure they can meet the growing demand for capacity.
Challenges and future outlook
While demand will rise, India’s data centre industry faces challenges in matching capacity with growth. Capacity additions will trail demand growth, requiring operators to balance ramp-up with effective pricing. Despite this, capacity utilisation will likely stabilize at 80-90% within 1-2 years. The report highlights that utilisation risks will remain, especially in the short term.
India’s data centre capacity has a promising future. Accelerating digitalisation, GenAI developments, and the demand for high-speed internet will propel industry growth. As India’s digital economy evolves, the expansion of data infrastructure will support its future. Investments and the entry of new players will ensure the data centre sector continues to meet the demands of the next generation.
