- The India data centre market is predicted to generate more than USD 4.5 billion in revenue by 2029
- Demand is driven by government initiatives, the country’s growing e-commerce sector, and increased smartphone usage, among other factors
- Many opportunities exist for foreign investors, but those entering the market must be aware of the challenges
Data storage demand in India is rising due to the increasing usage of cloud computing, big data analytics, and IoT as well as government initiatives, such as Digital India. As the country tries to keep pace, it is seeking assistance from overseas firms. Asian Insiders India Partner, Pawan Bhatnagar, explains why the India data centre market has become an attractive market to foreign investors.
A number of overseas companies are active in the India data centre market. Well-known players, including Apple, Amazon, and IBM, were among the first movers. The likes of Google, Equinix, and several others have since joined them.
Each one faced regulatory hurdles to get their data centre projects up and running but are now reaping the rewards of the investment. Importantly, this is likely only the first wave. The sector shows immense promise with demand growth to continue for the foreseeable future.
That is due to a rapid escalation of cloud adoption, e-commerce expansion, the increasing use of smartphones, and the need for data security and compliance. Government initiatives are also driving demand. Digital India and the increasing development of Smart Cities rely heavily on data-driven technologies.
At present, businesses are increasingly focusing on Tier 3 and Tier 4 data centres. The lower downtime, disaster recovery, and onsite assistance facilities available have become critical for many firms.
India data centre market overview
Last year, India’s data centre market generated nearly USD 2 billion in revenue. Projections place the sector’s compound annual growth rate (CAGR) at nearly 19 percent which would see revenue surpass USD 4.5 billion by 2029.
The current market size is approximately 2000 megawatts (MW). Estimates have this more than doubling by the decade’s end. Even then, demand could still outstrip supply, given the country’s expansive storage needs.
South India is expected to evolve into a global data centre hub with capacity expanding by as much as 65 percent by 2030. Chennai, Bengaluru, and Hyderabad are transforming into prominent technology powerhouses. These cities feature a high concentration of IT and software companies which should fuel demand in this part of the country.
Opportunities for foreign investors
While India has several local firms in the data centre space, projected growth and some existing market gaps provide plenty of opportunities for overseas investors. Capacity expansion, either in the form of new facilities or expanding existing ones, will continue to be a pressing need.
Elsewhere, foreign companies boasting cutting-edge technologies like AI, machine learning, and automation are now sought after as operators explore ways to enhance data centre efficiency and security.
Like other countries in Asia, Edge data centres are a priority in Tier 2 and Tier 3 cities that are found beyond the country’s sprawling metropolitan areas. Demand here is growing, and companies have begun setting up operations here due to lower operating costs.
Green data centre solutions should also have a prominent role across the sector since sustainability is an area of emphasis for India. Firms capable of providing renewable energy sources and energy-efficient technologies for data centres will find ample opportunities.
Finally, foreign companies providing specialised services and expertise to help Indian data centres comply with evolving data localisation regulations should explore how they can assist the market.
Challenges and what’s next
As mentioned earlier, the foreign firms who were among the first movers in the India data centre industry all faced obstacles. Hurdles were eventually overcome, although it did take longer for market entrance than initially planned in some cases.
Even though improvements have been made, a handful of challenges remain for overseas investors that must be addressed during market entry planning. These include the following:
Bureaucratic red tape – A complex regulatory framework requires multiple permits and licenses, which can slow down the entrance process.
Infrastructure constraints – Inadequate power supply, unreliable grid connectivity, and limited fibre-optic connectivity are among the infrastructure shortcomings.
Data localisation and security – Some concerns about data protection, privacy, and compliance with Indian regulations exist.
Taxation and compliance – Tax laws, GST implications, and compliance requirements must be worked through.
Land acquisition and availability – Finding suitable land for data centre construction can be difficult.
Talent shortages – The competition for skilled data centre operation professionals is high.
Connectivity and latency issues – Limited international connectivity, high latency, and packet loss can cause problems.
Despite these seemingly unfavourable conditions, overseas players are stepping up their investment in India’s data centre market as the positives far outweigh the negatives. Additionally, steps are being taken to improve the operating environment.
Government initiatives are looking at ways to simplify regulatory frameworks and create single-window clearances. Additionally, States are offering incentives for data centre investments. Infrastructure improvements are also ongoing as upgrades are made to power supply, connectivity, and transportation networks.
Final thoughts
The India data centre market is one brimming with potential. As data usage in the country soars, so does the need for storage facilities. Given growth forecasts, the upside for companies entering India is huge.
And the demand won’t solely be for facilities in metropolitan areas. Tier 2 and Tier 3 cities are showing a great deal of promise. Meanwhile, firms equipped with technologies or knowledge in efficiency, security, data localisation, and green energy solutions are sought after as well.
However, entering the Indian data centre market is not advisable without a partner based domestically. Even as work is done to reduce and eliminate obstacles, overseas companies may still face challenges that require an in-depth understanding of the local situation.
Asian Insiders can guide you through the regulatory and compliance hurdles and provide on-the-ground support. This ensures your organisation hits the ground running.
Want to know more about investment opportunities in the Indian data centre market? For a no obligation call, please contact Jari Hietala, Managing Partner: jari.hietala(at)asianinsiders.com or Pawan Bhatnagar, India Partner: pawan.bhatnagar(at)asianinsiders.com