India’s Data Centre Market to Double by 2027, Driven by AI & Digital Growth

India's data centre industry is expected to grow rapidly, driven by increasing internet use, government policies, and AI demand, according to a report by rating agency ICRA. The country’s data centre capacity is projected to rise from 1,150 MW in December 2024 to 2,100 MW by March 2027.

This expansion will require investments of ₹40,000-45,000 crore in 2025-26 and 2026-27. Over the next 7-10 years, total investments in the sector could reach ₹2.0-2.3 lakh crore. Established companies and new players are planning 3.0-3.5 GW of additional capacity. The demand for data centres is increasing due to broadband and mobile internet growth, government initiatives like Digital India, and rising use of cloud services, AI, social media, e-commerce, gaming, and OTT platforms.

ICRA Vice President Anupama Reddy highlighted that AI and machine learning will create huge storage needs, boosting data centre demand. The global trend of large investments in data centres, particularly by hyperscalers, is expected to impact India as well.

Government policies, including the Union Budget proposal for an AI centre of excellence, the Bharat Net project to connect rural areas with broadband, and the Deeptech Fund of Funds, are supporting industry growth.

Mumbai, Chennai, and Hyderabad will lead in data centre development, with 75% of new capacity in these cities. Mumbai, with strong fibre connectivity and landing stations, is the most preferred location for operators. The top five data centre companies in India, which control 75-80% of the market, are expected to see their revenues grow by 18-20% annually in 2025-26.