India’s data centre industry is experiencing rapid growth. Capacity is expected to reach 1.8GW by 2027, driven by digital transformation, favourable government policies and AI adoption.
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Sources: Worldometer, Statista, Crisil Ratings, Cushman & Wakefield
For investors and operators, the market presents significant opportunities, including access to a large and growing customer base, tax and infrastructure incentives offered by various states and increasing localisation requirements across regulated sectors.
Challenges remain - particularly around land acquisition, regulatory complexity across jurisdictions, evolving data protection laws and compliance with sector-specific obligations. Navigating these hurdles effectively is essential to capitalise on India’s strong long-term growth potential in the data centre sector.
Spotlight on key drivers
A shift to self-generation of power and renewables
India's regulatory landscape is increasingly supportive of renewable energy use within the data centre sector.
Several Indian states offer exemptions or concessions on electricity duties and transmission charges to incentivise adoption. As a result, data centre operators are investing in captive solar and wind projects to ensure a more stable and cost-effective power supply. These initiatives also help operators navigate grid constraints and reduce dependence on state utilities. The ability to self-generate power is becoming a key strategic consideration in site selection and long-term infrastructure planning.
Going ‘green’
More Indian states are introducing supportive measures. With global demand for sustainable and green energy on the rise, improved access to affordable renewables will enhance India’s attractiveness as a data centre hub.
Several state-level policies actively incentivise this shift. For example, Odisha’s 2022 data centre policy offers reimbursement of transmission and wheeling charges for power drawn from captive renewable sources. While there are no legal mandates requiring the use of green energy, the regulatory environment strongly encourages it. Coupled with growing pressure from customers and investors to meet global ESG standards, these measures are positioning India as a compelling destination for sustainable data centre investment.
Maturing telco and data regulatory landscape
India’s regulatory landscape for data centres is set for major change.
These regulatory changes may present new compliance challenges, but they may also drive demand for onshore data storage solutions and create new growth opportunities in the sector.
- The scope of 'telecommunication services' is expected to broaden under the Telecommunications Act 2023 (Telco Act), potentially including colocation services (which traditionally sit outside telecom regulation), imposing new licensing and compliance obligations. This won’t be confirmed until the delegated legislated is released.
- The hotly anticipated Digital Personal Data Protection Law 2023 (DPDP Law) will introduce new data protection requirements across the board.
- Targeted data localisation requirements in sectors like financial services and telecommunications are prompting companies to expand local storage capacity.
'India’s data centre industry is experiencing strong growth due to digital demand, cloud adoption and government incentives. Although the regulatory framework is still fragmented, recent laws are improving compliance, especially regarding data sovereignty and user privacy.
Cloud service providers and new entrants should prepare for clearer regulations focusing on local data storage and cybersecurity. Aligning with these trends will give operators a long-term advantage in a formalising market.'
Trilegal Partner Jishnu Sanyal
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Unlocking opportunities and navigating challenges