Taking flight: India’s data centres in 2024

AI, DPI, and data-driven digitisation of the country’s economy make data centres a key driver of tech investment, positioning them for substantial growth

On October 31, 2022, Sunil Gupta, the chief executive and co-founder of Yotta Data Services, met members of the press at the opening of one of the firm’s data centres. While one would imagine the opening of a data centre for a company that deals in data centre operations is regular fare, the announcement was a significant one—this data centre campus in Greater Noida was one of the first such hyperscale facilities in northern India.

Yotta’s move signalled what many at the time had predicted—the time had come for data centres to shoot for the stars. The company’s data centre, back in October 2022, saw only one of six planned buildings being inaugurated. Just one building had a capacity of 28.8MW of IT load and took investments of Rs 6,500 crore. Once all six buildings are up and running—the second one is close to completion now, the Greater Noida data centre would have a total capacity of 160MW. The company has committed an investment of Rs 39,000 crore in the next five years.

By 2026, India is likely to add nearly 700MW of data centre capacity—requiring up to 8.8 million square feet, or over 200 acres of land, in the process.

The company, however, is not an outlier. Over the past few months, the rise of tech legislation in the country, proliferation of generative AI leading to massive data demand and digitisation of every sector further accelerating data volumes, suggest that in 2024, India’s data centre market will lay the foundation for what could be its greater growth phase to date.

PROJECTING THE DEMAND

Real estate consultancy JLL India’s half-yearly data centre sector update, published last on November 23, stated that in three-and-a-half years until the end of calendar year 2026, India is likely to add nearly 700MW of data centre capacity—gobbling up 8.8 million square feet, or over 200 acres of land, in process. For this, JLL predicted capital expenditure of USD 4.4 billion—around Rs 37,000 crore—within this stipulated time.

Going by industry norms, this would just be investments towards land and real estate—taking IT equipment expenditure into account, data centres may take up total cumulative investments that are near a benchmark figure of Rs 2 lakh crore. In 2024, a chunk of this will contribute to bringing India’s active data centre capacity to nearly 1318MW, as per JLL.

All of this suggests prolific demand for data centres in the country, thereby placing operators in this sector at the cusp of meteoric growth. Seizing this opportunity, companies are now deliberating on strategies to fuel this growth.

DIVERSIFYING BETS

Pretty much every data centre operator in India has announced capacity expansion plans and investments for the India market. Media reports quoting Abhijit Dubey, Global Chief Executive – Data and Infrastructure Services conglomerate, NTT Limited indicate that the company is working on doubling its operational data centre capacity from 16 working centres by March this year. The company has also announced a USD 2.5-billion investment plan for India, which includes data centres, subsea cables and more.

On August 10, California-headquartered data centre firm Equinix announced a USD 42 million (~Rs 350 crore) investment outlay to expand its latest scaled data centre operation in Mumbai, called MB4. In June 2022, the company also announced a USD 86-million investment to establish a larger data centre facility in Mumbai itself, called MB3, which is expected to become operational in mid-2024. While MB3 will have 4,150 total cabinets in terms of server capacity, MB4 is projected to house 700 such cabinets.

Speaking to a business newspaper, Sumit Mukhija, Chief Executive Officer, ST Telemedia Global Data Centres (GDC), in which Tata Communications holds a minority stake, said that the company plans to invest USD 1 billion (~Rs 8,300 crore) by 2027 to expand its presence. The company’s announced data centre capacity is nearly 300MW, with 100MW under construction. The Singapore-headquartered company has nine such facilities in the country.

More firms are seeking cloud-based services to automate business processes—and use data for both core and supplementary business functions.

Similarly, Sridhar Pinnapureddy, Founder and Chairman of homegrown data centre major CtrlS, has indicated that the company plans to invest USD 2 billion in six years, to add 300MW in the operational capacity of its data centres. At the moment, CtrlS has a capacity of 234MW operational across seven cities in India. Media reports also indicate that Yotta is imminently planning investments of Rs 16,000 crore (~USD 1.9 billion) to fund their data centre expansions.

FACTORS FUELLING GROWTH

JLL’s November 2023 report pegged five clear reasons to fuel growth for data centres in India, “Increasing digital growth, Digital Public Infrastructure (DPI), 5G rollout, new applications of Artificial Intelligence (AI) and Machine Learning, (and) data protection laws and state incentives.”

Looking at each avenue, it is clear why the quantum of investment in India from data centre operators is steadily increasing. Digital growth in India was accelerated in the country by the COVID-19 pandemic, which led to digitisation of India’s payments infrastructure, onboarding of local shops into the e-commerce fold, and the inception of the Open Network for Digital Commerce (ONDC) to further take this forward.

In the banking and financial services sector, the digitisation of the Know Your Customer (KYC) process, as well as the complete digitisation of lending, credit and all financial services procedures has significantly boosted demand for data centres and outsourced IT services.

The proliferation of the Unified Payments Interface (UPI) is a key contributing factor in this regard. Digitised payments through UPI have ensured that contactless digital payments crossed 10 billion monthly transactions in September last year. With increasing proliferation, demand for data centres has been reinforced as more individuals from India’s billion-plus population demographic continue to migrate online.

The rollout of 5G services is further accelerating this. With 5G, more enterprises, especially in the manufacturing sector, are coming on board with the demand for smart factory automation, while consumer 5G services are also seeing increasing demand for data through telecom network operators as streaming services continue to replace traditional satellite-driven broadcast platforms. The advent of satcom services in 2024 is expected to further drive data demand forward, thereby rationalising data centre investments in the country.

The big market mover of 2023 was, however, AI. With the advent of generative AI, an increasing number of companies are betting on the use of structured enterprise data for business intelligence. More firms are seeking cloud-based services, which in turn use data to automate business processes—and use data for both core and supplementary business functions.

All of this is tied together with the rise of data legislation in the country. India, in August last year, notified its first dedicated technology law—the Digital Personal Data Protection (DPDP) Act. Coupled with the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, India now has a robust set of regulations that mandate how data is handled and operated across the country. In the wake of these regulations, as well as the impending Digital India Act that could be legislated later this year, more companies are expected to localise operational data in the country.

Data localisation, therefore, could be the pivotal focus point of data centre operators increasingly betting on market expansions in the country. Just between the five data centre operators quoted above, planned investments of USD 7.8 billion (~Rs 65,000 crore) have been announced by foreign and domestic companies alike). This quantum is only likely to increase further, and 2024 would be a pivotal platform for these initiatives to take off.

By Vernika Awal

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