The 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% of global data, India currently holds only a 3% 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% in 2019 to 93% in 2023. Additionally, industry players' revenues have grown at a nearly 25% 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% to around 75%.
