Booming Data Centre Industry in India: A Golden Opportunity

Artificial Intelligence set to propel data centre industry’s rapid growth in India

June 04, 2024
  • Jitesh Karlekar

The robust growth of India’s Data Centre (DC) industry during 2024-26 is set to drive significant demand for the real estate market, with forecasts of 10 mn sq ft requirement by 2026. This expansion will need investments of USD 5.7 billion in investment. The increasing adoption of Artificial Intelligence (AI) technologies across diverse sectors will drive a new growth phase. As AI continues to widen its reach, demand is expected to be in the range of 650-800 MW during 2024-26.

During the second half of 2023, there was a 12% increase in absorption to 81 MW compared to 72 MW during the same period last year. This growth can be attributed to CSPs gaining momentum after a brief hiatus during the first half of 2023. There was a lower supply addition of 75 MW during H2 2023 as the available supply from the first half was utilised to meet the demand, resulting in tighter vacancy levels of 5.5%.

India's focus on AI is evident through the India AI mission, aimed at fostering innovation, upskilling the workforce, and ensuring responsible and ethical deployment of AI technology. With a large user market, talented workforce, and thriving startup ecosystem, India presents a significant opportunity to emerge as a global data hub, driven by sustainable practices. The country's DC sector expanded from 350 MW in 2019 to 854 MW in 2023, in line with the increasing digital usage trends.

Growth of AI creates unprecedented demand for data centres

Artificial intelligence (AI) could be understood as a machine (computer) with human-like thinking and decision-making capabilities. AI includes various disciplines like natural language processing, machine learning, computer vision and robotics. Currently, Generative AI which has prominence is a type of artificial intelligence that can create or generate new content, such as images, texts, or even music, that is similar to what it has been trained on.

AI necessitates the use of high-performance computers, state-of-the-art hardware, and vast volumes of data to efficiently operate. AI works by recognizing patterns and structures in the data it's trained on, and then uses that information to generate new output or make predictions. To accomplish this, it relies heavily on the support of data centres, which provide the digital resources required for AI's advancement and evolution.

The training phase of AI requires high-performance computing and large datasets. These demanding needs have triggered a significant increase in the demand for data centre services.

As AI technologies become more sophisticated and more data is generated, this demand is only projected to grow.

The continuous rise in AI's processing power and data usage requires the construction of new data centres. These centres must be equipped to handle not only the energy demands of the AI's high-speed servers but also the necessary cooling requirements to maintain these servers' performance.

As AI continues to evolve, with multiple disciplines such as machine learning and deep learning experiencing rapid growth, it is projected to place even more demand on data centres. These facilities will need to scale both their capacities and capabilities to meet these future needs.

With the ever-increasing demands of AI, we can also expect a parallel growth in the storage capacity of data centres. Current predictions indicate that storage in data centres could grow from 10.1 zettabytes in 2023 to 21.0 zettabytes by 2027, representing an average annual growth rate of 18.5% 1 during this period. This highlights the escalating role of data centres in the burgeoning field of AI.

India – the untapped global data hub potential

With its large consumer market, skilled talent pool, and third-largest startup ecosystem, India is well-positioned to become a global data hub. Further bolstering this potential is the country's growing focus on sustainable energy resources, which can provide the necessary power for the data centres.

India is projected to be the third-largest economy globally by 2027, with a GDP forecasted at USD 5 trillion. The digital economy is expected to constitute around 20% of this GDP, highlighting the crucial role of digital technologies in India's economic growth.

India's AI mission is designed to foster an environment conducive to innovation. It aims to encourage the development of computational capabilities, upskill the workforce, and promote technological self-reliance. More than this, it also seeks to ensure the ethical and responsible deployment of AI, while democratising the benefits of AI across all societal levels.

A clear indication of its importance is the global partnerships the Indian data centre industry has formed, along with the entry of international colocation players. Additionally, submarine cable systems, essential for improved connectivity, are anticipated to increase over the coming years.

India boasts a wealth of skilled resources and offers the lowest construction costs for data centres worldwide. With government incentives, India is an ideal location for global data centre operations.

Long-term investment plans by hyperscale for self-build facilities further underline India's potential as a reliable global data hub. These factors collectively demonstrate that India possesses the dynamics necessary to become a key player in the global data centre industry.

[1] IDC, Revelations in the Global Storage Sphere, July 2023

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