India’s data centre industry is entering a major expansion phase, with capacity expected to rise fivefold over the next five years. The growth could require around US$45 billion in investment, opening opportunities across power, infrastructure, construction, connectivity and technology.
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According to a report by ANI, a partner of TV BRICS, India’s data centre capacity is forecast to reach around 10 GW over the next five years, up from about 2 GW today for facilities operating on a colocation model. The rapid expansion reflects growing demand for cloud computing, digital services and data storage.
What is a colocation data centre?
A colocation data centre allows a company to house its own servers and networking equipment in a facility operated by a third-party data centre provider. The operator provides the physical infrastructure needed to keep the equipment running. This includes power, cooling systems, security, connectivity and fibre-optic infrastructure.
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The business or cloud service provider generally owns the servers and other IT equipment while paying the data centre operator for the space and supporting infrastructure. This model allows companies to expand their computing infrastructure without having to build and operate an entire data centre themselves.
Why is India attracting data centre investment?
India is increasingly positioning itself as a regional data centre hub, supported by several cost and policy advantages. Electricity costs and capital expenditure are estimated to be 25–40% lower than in competing markets. Tax incentives, including long-term tax holidays for cloud service providers, could also encourage further investment by hyperscalers.
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Hyperscalers are large technology companies that operate extensive networks of data centres to deliver cloud, computing and digital services at scale. India’s data localisation requirements are another important factor. Regulations requiring certain types of data to be stored or processed within the country encourage businesses to maintain their digital infrastructure locally.
Hyperscalers drive most of the demand
Hyperscalers currently account for around 60% of demand in India’s data centre market, making them the largest customer segment. The banking, financial services and insurance (BFSI) sector follows with around 15% of demand.
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This demand is already putting pressure on existing infrastructure. Data centre utilisation rates in India are estimated at around 95–97%, leaving limited spare capacity in many facilities. As cloud adoption, digital payments, online services and enterprise technology use continue to grow, operators will need to add significant capacity to keep pace.
India could reach 10 GW of capacity
Analysts expect India’s colocation data centre capacity to grow rapidly. If the forecast materialises, India will become one of the world’s fastest-growing data centre markets. The expansion will require substantial investment not only in data centre buildings and servers but also in the infrastructure that supports them. Power generation and transmission, cooling systems, fibre networks, land and construction will all play a critical role. The projected US$45 billion investment requirement therefore points to a much larger opportunity than the data centre facilities themselves.
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For India, the next five years could mark a shift from building digital infrastructure to building it at a national scale. The key question will be whether power, land, connectivity and supporting infrastructure can expand quickly enough to keep up with demand.
Indrani Priyadarshini is a journalist and editorial professional specialising in technology, artificial intelligence, smart cities, green energy, and digital transformation. With over four years of experience in tech journalism and digital media, she is known for turning complex industry developments into clear, engaging, and insightful stories. Her expertise spans reporting, editorial strategy, digital publishing workflows, and in-depth coverage of emerging technologies shaping the future.
