APRIL 20248TOP STORIESINDIA'S DATA CENTER REQUIREMENT TO GROW 2X IN THREE YEARS: CAREEDGEThe Indian data center industry is experiencing significant growth, with capacity expected to double over the next three years, from around 0.9 Gigawatts (GW) in 2023 to nearly 2 GW in 2026. This expansion presents substantial investment opportunities, with an estimated capital expenditure (capex) requirement of Rs 50,000 crore in the next three years, according to a study by CareEdge Ratings.Despite generating 20 percent of global data, India currently holds only a 3 percent share of the global data center capacity. However, with the highest mobile data usage globally in terms of exabytes per month, India's data center industry is poised for substantial growth.The rating agency anticipates that factors such as data localization initiatives, tax incentives, and cost-saving incentives offered by states will attract robust investments in the sector.Puja Jalan, Associate Director at CareEdge Ratings, emphasized the need to address project execution challenges, particularly related to land availability, equipment procurement, and vendor management, to ensure the successful implementation of planned capacity additions.The cost per MW of setting up data centers has also been increasing, reaching levels of Rs 60-70 crore per MW from an average of Rs 40 - Rs 45 crore per MW.The growth in data center capacity in India has been accompanied by increased absorption rates, rising from 82 percent in 2019 to 93 percent in 2023. Additionally, industry players' revenues have grown at a nearly 25 percent compound annual growth rate (CAGR) from 2016-17 to 2022-23.Maulesh Desai, Director at CareEdge Ratings, highlighted the importance of incorporating renewable energy and low-carbon technologies into data center operations to ensure cost competitiveness and sustainability. Desai also expects the entry of new players with diverse expertise to reduce the market share held by the top five players in terms of capacity from over 90 percent to around 75 percent. On Wednesday, global brokerage firm Morgan Stanley revised its GDP growth estimates for India upwards for FY25 to 6.8 percent from the earlier projection of 6.5 percent, citing continued traction in industrial and capital expenditure activity. The forecast for FY24 GDP growth remained at 7.9 percent.According to the company's report, GDP growth is expected to hover around 7 percent in the March 2024 quarter, with Gross Value Added (GVA) growth at 6.3 percent, leading to an estimated GDP growth of 7.9 percent for FY24.Morgan Stanley anticipates that the growth in FY25 will be broad-based, with narrower gaps between rural-urban consumption and private-public capital expenditure. The report suggests that the economic cycle will see more years of steady expansion driven by improvements in productivity growth, ensuring benign macroeconomic stability. It further forecasts Consumer Price Index (CPI) inflation to remain at 4.5 percent in both FY25 and FY26, indicating stability in price levels. Additionally, the current account deficit is expected to be at 1 percent of GDP in both FY25 and FY26.The upward revision of India's GDP growth forecasts by Morgan Stanley reflects confidence in the country's economic resilience and sustained growth momentum. The positive outlook is supported by ongoing industrial and capital expenditure traction, signaling favorable conditions for economic expansion in the coming years. MORGAN STANLEY REVISES PROJECTION OF INDIA'S GDP FROM 6.5 PERCENT TO 6.8 PERCENT
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