India’s Data Center Sector: Market Outlook and Regulatory Frameworks

Posted by Written by Melissa Cyrill Reading Time: 11 minutes

India’s data center sector is set for growth, driven by a thriving digital economy, widespread internet access, and the transition to 5G networks from 4G. The government is prioritizing stable data center infrastructure to ensure uninterrupted internet access, data security, and cloud computing. To encourage investments, incentives have been introduced, a draft policy is in place. Meanwhile, emerging regulatory frameworks require data localization, which will impact demand in the data center market.

Market outlook

The Indian data center sector is currently in a dynamic phase, marked by impressive growth and substantial government support. In 2023, India’s data center market is forecasted to achieve revenues of approximately US$7.44 billion, with network infrastructure emerging as the dominant segment, valued at US$5.09 billion. In 2022, the data center capacity in India was at 637 MW.

India is ranked the 13th largest data center market in the world with 138 data centers. Additionally, 45 new data centers with a combined 13 million square feet and 1,015 MW of capacity are scheduled to be developed by the end of 2025.

Data center businesses in India are positioned for consistent annual expansion, with an expected compound annual growth rate (CAGR) of 5.84 percent, propelling the market size to an estimated US$9.27 billion by 2027.

The substantial growth potential in India’s data center sector is fueled by the demands of the IT sector and global capability centers (GCC), the expanding digital economy encompassing social media, e-commerce, digital transactions, online gaming, and streaming services, as well as the shift towards hybrid workplaces. This presents significant investment opportunities for businesses providing top-tier data center infrastructure and services.

Koushan Das, Manager, Business Intelligence Division at Dezan Shira & Associates, notes: “India’s surging data consumption and increasing demand for information technology solutions are rapidly growing, yet the country still maintains one of the world’s lowest data center densities. This makes it a high growth priority for the Indian central and state governments, which means foreign investors and data center enterprises will be able to tap greenfield market opportunities and incentives.”

There are currently 759 million active internet users in India, accessing the internet at least once a month. Per research from industry association IAMAI and market data analytics firm Kantar, this active internet user base in India will expand to reach 900 million by 2025. In comparison, there were 307.34 million internet users in the United States in 2022. Meanwhile, over 73 percent of China’s population (1.05 billion people) have access to the internet.

According to the Ericsson Mobility Report published June 2023, India is projected to lead global data consumption, reaching 62GB per user per month by 2028. This surpasses even developed markets like the U.S., Western Europe, South Korea, and China.

Government support

To entice investment and accelerate India’s current rate of data center expansion, the Indian government is formulating a data center policy. Incorporating data centers under the Essential Services Maintenance Act (ESMA), creating Data Centre Facilitation Units (DCFU), creating Data Centre Economic Zones, and creating a special category code for data centers under the National Building Code of India are all part of this plan.

What is a data center?

A data center refers to a designated space within a building or a set of architectural configurations designed to accommodate computer systems and their associated components, including networking and storage systems.

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Data center segments in India

The Indian data center market is categorized into two main segments: captive and outsourced (including colocation and hosting), and further divided by IT infrastructure type, which includes servers, storage, and enterprise networking.

S. No.

Data Center Segments in India


IT infrastructure




Storage systems


Network infrastructure


Electrical infrastructure


UPS systems




Switches & switchgears




Other electrical infrastructure


Mechanical infrastructure


Cooling systems


Rack cabinets


Other mechanical infrastructure


Cooling Systems


CRAC and CRAH units


Chiller units


Cooling towers, condensers, and dry coolers


Other cooling units


General construction


Core & shell development


Installation & commissioning services


Building & engineering design


Fire detection & suppression systems


Physical security


Data center infrastructure management (DCIM)


Tier standard


Tier I & Tier II


Tier III


Tier IV

What is a data center tier?

When organizations contemplate migrating their critical business applications and services to a data center, they assess the ‘tiering standard’ as a measure of the data center’s hosting capabilities in terms of quality and reliability.

The concept of data center tiering, pioneered by the Uptime Institute, groups data centers into four distinct tiers: Tier 1, Tier 2, Tier 3, and Tier 4. These categorizations serve as benchmarks for gauging a data center’s comprehensive availability and system redundancy. Tier 4 stands out as the highest level of reliability in data center infrastructure.

  • A Tier 1 data center features a single power and cooling path with minimal redundant or backup components. It boasts an expected uptime of 99.671 percent (equating to approximately 28.8 hours of downtime annually).
  • A Tier 2 data center also includes a single power and cooling path, but it incorporates some redundant and backup components. Its anticipated uptime stands at 99.741 percent (translating to around 22 hours of downtime annually).
  • A Tier 3 data center is distinguished by multiple power and cooling pathways and the capability to update and maintain systems without interrupting operations. It achieves an expected uptime of 99.982 percent (equivalent to approximately 1.6 hours of downtime annually).
  • A Tier 4 data center is designed to be entirely fault-tolerant, boasting redundancy at every level of its infrastructure. This level of robustness results in an expected uptime of 99.995 percent (equivalent to just 26.3 minutes of downtime annually).

The growth of continuous business services, such as digital commerce, digital entertainment, and social media is shifting demand away from Tier 1 and Tier 2 facilities. With a focus on long-term financial and operational sustainability, most enterprises opt for Tier 3 data centers. Further, according to industry players, big cloud service providers have their own checklist for performance and efficiency, and don’t necessarily go by tier standards.

Key players in the data center sector in India

Capital inflow in the data center industry is coming from various sources—pure-play data center companies like NTT, CtrlS, Equinix, Nxtra by Airtel, and NxtGen; hyperscalers like Amazon Web Services (AWS), Microsoft, Google, and Colt DCS; and infrastructure players like Adani Group (AdaniConneX), and Hiranandani Group (Yotta Infrastructure).

Singapore-headquartered ST Telemedia (STT) presently oversee the largest raised floor space and essential IT capacity in India, boasting 27 facilities spanning nine cities and a total IT load exceeding 300MW. Google has an operational data center in Mumbai, while in 2021, Microsoft erected a data center in Maharashtra.

AWS, in addition to its existing data center in Mumbai, is in the process of setting up a second one in Hyderabad. Also, AWS manages a total of 17 CloudFront edge locations across India. These include four in Hyderabad, four in New Delhi, three in Bangalore, three in Mumbai, two in Chennai, and one in Kolkata.

GPX specializes in the development and operation of cutting-edge, carrier-neutral Tier 4 data centers situated in emerging, rapidly expanding commercial hubs strategically positioned along undersea cable systems such as FLAG, FALCON, EIG, SEA-ME-WE, IMEWE, MENA, AAE, and upcoming cables like PEACE (2022), 2AFRICA (2023), and IEX (2024).

In 2012, GPX inaugurated South Asia first Tier 4 data center in Mumbai, followed by a second one in February 2019. On September 1, 2021, Equinix expanded its global footprint by successfully acquiring GPX Global Systems, Inc.’s India operations.

Major Vendors in India’s Data Center Sector

IT infrastructure providers

Data center construction contractors & sub-contractors

Support infrastructure providers

Data center investors

New entrants

Arista Networks



Amazon Web Services (AWS)






BAM Digital Realty


DEC Infra

Alfa Laval



Cisco Systems

DSCO Group

Bloom Energy


Chindata Group

Dell Technologies

Emerge Engineering

Blue Box by Swegon

Nxtra by Airtel

Colt Data Centre Services


Nikom InfraSolutions



Digital Edge

Hewlett Packard Enterprise

Larsen & Toubro

Climaveneta (Mitsubishi Electric)

NTT Global Data Centers


Hitachi Vantara



Reliance Jio

Lumina CloudInfra

Huawei Technologies


Delta Electronics

ST Telemedia Global Data Centres

MetaEdge Platforms


Sterling and Wilson (Shapoorji Pallonji Group)


Sify Technologies


Juniper Networks

Turner & Townsend

Fuji Electric

Web Werks

Princeton Digital Group


Tata Projects

HITEC Power Protection

Yotta Infrastructure

VueNow Infotech



Johnson Controls





Kirloskar Oil Engines (KOEL)










NetRack Enclosures










Riello Elettronica















Schneider Electric


















Source: Research and Markets Report, July 2023

Data center hubs in India

India has over 132 data centers distributed across the country, with Mumbai accounting for 45 percent of them. Chennai, while ranking a distant second per an IBEF report, is rapidly emerging as the next prominent data center hub.

Other prominent data center hubs in India are Bengaluru, Hyderabad, Noida (Delhi-NCR), Pune, and Kolkata. Since the majority of data centers in India are situated in Tier 1 cities, there are huge untapped prospects for Tier 2 and Tier 3 cities. Tier 2 cities are also expected to increase investments in edge data centers to ensure seamless customer digital experience in these rapidly growing markets.

Mumbai is the prime hub for data centers in India, attracting demand from BFSI (banking, financial services, and insurance), media, and IT/ITeS sectors. To support this, the Maharashtra government offers incentives for integrated data center parks and includes data centers under the purview of the Essential Services Maintenance Act, 1968. According to Mordor Intelligence, the Mumbai data center market was 411.9 MW in 2022. It is projected to grow at a CAGR of 13.44 percent from 2023 to 2029, reaching a substantial capacity of 1,491.38 MW.

Foreign investment

According to an industry stakeholder, the Indian data center sector has witnessed an influx of US$14 billion in investments over the past five years. This figure is projected to surpass US$23 billion by 2025, according to analysis by investment banking firm Avendus Capital. The firm predicts that data centers will be the largest segment of real assets investments in India with an expected 40 percent CAGR to reach 1,700 MW capacity by 2025. Developers in India expect demand to exceed 3,000 MW by then.

Understanding the colocation model

The colocation model is prevalent globally, with over 75 percent of data center service providers operating in this space. In India, most new entrants in the data center sector are adopting the colocation business model or offer carrier-neutral colocation solutions. The colocation model is where data center providers offer the physical infrastructure, including building, power, cooling, racks, and security, while customers (enterprises) bring their own IT hardware and expertise. Under this model, data centers charge customers based on the space they occupy and the power they consume, similar to renting an apartment and paying monthly rent and electricity bills.

Some of the colocation service providers in India are Equinix, AdaniConneX, Yotta, STT GDC India, CtrlS, and ESDS.

In 2022, India witnessed a substantial growth in data center colocation capacity, exceeding 150 MW. Mumbai accounted for 60 percent of this expansion, while Chennai contributed 30 percent of the total capacity increase. That year, the combined operational colocation capacity of data centers in India surpassed 900 MW, encompassing a total gross built-up area of over 9 million square feet. This concentration was primarily in Mumbai and Chennai, due to the presence of landing stations for submarine cables responsible for international internet traffic transmission.

Regulatory frameworks that apply to data centers in India

Draft Data Centre Policy dated November 2020

To enable India’s effective data center expansion, the Ministry of Electronics and Information Technology (MEITY) unveiled the draft Data Centre Policy in 2020. The policy provides standards for authorization and operationalization of data centers besides various structural and regulatory measures. It specifies deadlines for the construction of data centers and data center parks. In addition, the policy lays forth rules for the formation of joint ventures and partnerships in the construction of data centers.

State policies

Several states, including Karnataka, Tamil Nadu, Uttar Pradesh, Odisha, Telangana, Maharashtra, and West Bengal, have introduced data center policies in recent years to attract investments, recognizing the growth opportunities in this sector.

  • Karnataka Data Centre Policy 2022-2027
  • Tamil Nadu Data Centre Policy 2021
  • Uttar Pradesh Data Centre Policy 2021
  • Odisha State Data Centre Policy 2022
  • Telangana Data Centre Policy
  • West Bengal Data Centre Policy 2021
  • Maharashtra IT-ITES Policy, 2023

These state policies provide clear guidelines, regulatory standards, and incentives for data center set up in their respective jurisdictions. The policies can include provision of uninterrupted electricity supply, access to renewable energy, fuel subsidies, infrastructure status as data centers have specific design and construction requirements, basic infrastructure for SME providers of servers and racks, subsidies and financial incentives for manufacturing data center stacks in the state jurisdiction, rebate on building fees, land at subsidized costs, subsidy on lease rentals, preferential government procurement given to start-ups and SMEs, R&D grants, patent filing cost and partial internet cost reimbursements for start-ups and SMEs, etc. A significant portion of the state budget, such as by the Government of Telangana, is allocated for setting up data centers and IT Parks.

ESG compliance

Data center operators are placing significant emphasis on Environmental, Social, and Governance (ESG) measures. New projects are being executed with enhanced specifications and adhere to high-quality environmental, health, and safety (EHS) standards.

Data center players like Nxtra by Airtel have an ESG manager and prioritize sustainability strategies in their operations, which they consider to be a value proposition for clients.

According to industry players, there is a growing demand for a highly targeted approach to incorporating sustainability into every facet of data center development, spanning from design and construction to ongoing operations. This call for sustainability is resonating both on a global scale and within the context of India. In fact, increasingly, businesses are seeking technology partners with a strong sustainability focus.

India, while ranking third globally in terms of greenhouse gas (GHG) emissions, is taking a pioneering role among emerging economies in the pursuit of net-zero GHG emissions by actively promoting clean energy initiatives. Over the past decade, India has witnessed an impressive 50-fold surge in installed solar power capacity, leading to a total installed renewable capacity of 160 GW, encompassing wind, hydel, and biomass power generation.

The government has set forth an ambitious target to escalate this capacity to 500 GW by 2030 as part of its overarching plan to achieve net-zero carbon emissions by the year 2070. Data center players are advised to play close attention to India’s regulatory and compliance standards related to sustainability.

Digital Personal Data Protection Act, 2023

The Digital Personal Data Protection Act, 2023 (DPDP Act, 2023) imposes more requirements on businesses to invest in local data centers and data processing operations. At its core, the DPDP framework aims to establish a higher level of accountability and responsibility for entities, such as internet companies, mobile apps, and businesses concerning the collection, storage, and processing of citizens’ data in India. Emphasizing the “Right to Privacy,” this legislation aims to ensure that these entities are more transparent and answerable when handling personal data, putting the privacy and data protection rights of citizens at the forefront.

Harmonized Master List of Infrastructure sub-sectors dated October 2022

Data centers were given ‘infrastructure’ status and listed in the Harmonised Master List of Infrastructure sub-sectors in October 2022 as a result of the Finance Minister’s declaration in the 2022 budget address. This should make it easier for banks to finance such projects.

Storage of payments system data: RBI guidelines

In accordance with guidelines from the central bank, RBI, payment service providers are required to ensure that all payment system data they oversee is stored within India for a minimum duration of six months. Additionally, any sharing of this data with foreign regulators must only occur after obtaining prior clearance from the RBI, when deemed necessary. These regulations have been introduced with the primary objective of reducing the risk of data privacy breaches involving sensitive payment and customer information.

Draft National E-commerce Policy, 2019

The Department for Promotion of Industry and Internal Trade (DPIIT) released a draft National E-Commerce Policy with the aim of enabling India to benefit from digitization by developing a governance framework for different stakeholders and strategies for data localization, consumer protection, and promoting MSMEs and start-ups. The e-commerce ecosystem has six main components, which are covered by this policy: data, infrastructure, development, e-commerce marketplaces, regulatory challenges, boosting the domestic digital economy, and e-commerce-based export promotion.

TRAI recommendations

The Department for Telecom Regulatory Authority of India (TRAI) has released a draft of regulatory framework recommendations. These recommendations encompass the necessity for the Central Government to define both fiscal and non-fiscal incentives tailored for the data center sector. Additionally, they advocate for the implementation of a time-bound single-window clearance system. These proposed recommendations are aimed at fostering the growth of the data economy in India, particularly in the areas of data centers, content delivery networks, and interconnect exchanges.

With inputs from Harshwardhan Sharma.

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