Driven by the rising adoption of Artificial Intelligence (AI), India’s data center industry is expected to expand by 791 megawatts (MW) of capacity by 2026. This growth will create a demand for 10 million square feet of real estate, attracting investments totalling $5.7 billion, according to a report released on Friday.
AI and Data Center Industry Growth
The data center industry in India is experiencing unprecedented growth, projected to attract $5.7 billion in real estate investments by 2026. This expansion is driven by the increasing adoption of Artificial Intelligence (AI) and the country’s rapid digital transformation. As AI becomes more prevalent, the demand for data centers is expected to surge, necessitating significant investments in infrastructure and real estate.
Economic Growth and Digital Transformation in India
According to a recent report by JLL Research, India’s data center industry is set to add 791 megawatts (MW) of capacity by 2026. This expansion will require approximately 10 million square feet of real estate space. The report highlights that the demand for data centers in India is expected to be between 650-800 MW during the period from 2024 to 2026.
India is on track to become the third-largest economy in the world, with a projected Gross Domestic Product (GDP) of $5 trillion by 2027. The digital economy is anticipated to contribute around 20% to this GDP. Dr. Samantak Das, Chief Economist and Head of Research & REIS, India, JLL, emphasized that this digital expansion will significantly boost the data center industry. The industry is projected to grow from 853 MW in 2023 to 1,645 MW by 2026, necessitating substantial investments and real estate development.
AI Mission and Data Center Expansion
The Indian government’s focus on AI is evident through initiatives like the India AI mission, which aims to foster innovation, upskill the workforce, and ensure responsible deployment of AI technologies. The data center sector has already seen significant growth, expanding from 350 MW in 2019 to 854 MW in 2023, driven by increasing digital usage trends.
Cloud Service Providers and AI-Led Demand
Cloud Service Providers (CSPs) play a crucial role in this expansion. CSPs offer IT infrastructure systems, primarily for data storage and computing power, accessible via the Internet. These providers have realigned their requirements to accommodate AI-led demand. In Mumbai, for example, the absorption of data center space nearly doubled as CSPs increased their pace of expansion.
Meeting Future Data Center Needs
Rachit Mohan, APAC Lead – Data Center Leasing and Head – Data Center Advisory, India, JLL, highlighted the necessity for new data centers capable of meeting the increased energy, processing, and cooling needs driven by AI. The exponential growth in processing power and data volumes requires advanced infrastructure to support these developments.
Investment Opportunities in India’s Data Center Market
The projected growth in India’s data center industry presents significant opportunities for investors, real estate developers, and technology providers. As the country continues its digital transformation, the demand for robust and efficient data centers will only increase. This expansion is not only critical for supporting AI and other digital technologies but also for positioning India as a global leader in the digital economy.
For Investors and Developers
For investors and developers looking to capitalize on this booming sector, now is the time to explore opportunities in the Indian data center market. With substantial investments required and a clear path for growth, the data center industry in India offers promising returns and strategic advantages.
FAQs on India’s Data Center Growth
What is driving the growth of the data center industry in India?
The growth is primarily driven by the increasing adoption of Artificial Intelligence (AI) and the overall digital transformation of the economy. The demand for data centers is also fueled by the need for advanced IT infrastructure to support the burgeoning digital economy.
How much real estate space will be required for the new data centers by 2026?
Approximately 10 million square feet of real estate space will be needed to accommodate the projected increase in data center capacity by 2026.
What is the expected investment in the data center industry in India by 2026?
The data center industry in India is expected to attract investments worth $5.7 billion by 2026.
How does the India AI mission impact the data center industry?
The India AI mission aims to promote innovation, upskill the workforce, and ensure the responsible deployment of AI technologies. This mission is a key driver behind the increasing demand for data centers, as AI applications require substantial data processing and storage capabilities.
What role do Cloud Service Providers (CSPs) play in this growth?
Cloud Service Providers (CSPs) are essential for the expansion of the data center industry. They offer the necessary IT infrastructure for data storage and computing power, and their increasing demand for AI-led services has significantly contributed to the need for more data centers.
India’s Path to Digital Leadership
India’s data centre industry is set for a remarkable transformation, driven by the rise of AI and the country’s digital economy. With substantial investments on the horizon and a growing need for advanced infrastructure, the sector presents significant opportunities for stakeholders. By capitalizing on this growth, India can solidify its position as a global leader in the digital landscape.
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