India’s data centre capacity is projected to grow fourfold to 4 GW by 2030, driven by rapid digitisation, cost competitiveness, and the rising adoption of Artificial Intelligence (AI). Currently, India accounts for around 4% of the global data centre market, with a capacity of 1.2 GW in 2025, which is expected to expand significantly over the next five years.
Cost Advantage Strengthens India’s Position
The cost of constructing and operating data centres in India remains significantly lower than in many global markets. Construction costs are approximately 30–40% lower than in countries such as China and the United States, supported by relatively affordable land prices and competitive electricity tariffs. These advantages, along with supportive government policies, position India as an attractive destination for hyperscalers and global cloud providers.
Artificial Intelligence: The Key Growth Driver
Artificial Intelligence is emerging as a major catalyst for data centre expansion. AI applications require high-performance computing and large-scale data storage, leading to increased demand for advanced infrastructure. Traditionally, data centres supported enterprise IT systems and cloud storage; however, with the rapid adoption of AI training and inference workloads, the demand mix is steadily shifting towards more compute-intensive requirements.
Capacity Expansion and Investment Outlook
India’s data centre co-location capacity has doubled to 1.2 GW over the four-year period from FY22 to FY25. According to CareEdge Ratings, this capacity is expected to quadruple by FY30. The agency estimates an investment of ₹1.5 lakh crore for capacity expansion between FY26 and FY30.
In addition, tenants are likely to invest 1.5 to 2 times this amount in IT equipment, taking the overall investment potential to nearly ₹3–4 lakh crore.
CareEdge Ratings director Puja Jalan said that the sector is witnessing strong momentum, supported by high capital expenditure, robust fundraising capabilities of major players, and increasing equity investments in Indian data centre companies. She added that the industry is expected to record a revenue CAGR of 24% during FY26–30, with steady-state margins ranging between 40% and 42%.
Infrastructure Challenges And Readiness
Power costs account for 70–75% of a data centre’s operating expenses. With the rise of AI workloads and higher rack power density, overall power demand is expected to increase significantly. This will also necessitate advanced cooling technologies, particularly at a time when water scarcity is becoming a growing concern in several major cities.
India in the Global Context
Digital transformation continues to drive economic growth and large-scale data generation. When compared with global peers, India’s digital penetration levels are broadly aligned with global averages. As of 2025, mobile subscriber penetration stands at 77% and internet penetration at 67%, close to the global averages of 70% and 73%, respectively.