India's Data Center Industry Poised for Expansion
The data center industry in India is expected to experience significant growth in the coming years, driven by the rising adoption of artificial intelligence (AI) and the country's burgeoning digital economy.
According to a report by real estate consultancy JLL, data center capacity is projected to increase by 791 megawatts (MW) by 2026. This surge will be fueled by the increasing demand for AI, which requires significant computing power and data storage.
As AI usage gains momentum, the demand for Indian data centers is expected to reach 650-800 MW in 2024-26. Cloud service providers (CSPs) are adjusting their strategies to accommodate this AI-driven demand and are committing to increased investments to support this expansion.
The report highlights the exponential growth in processing power and data volumes driven by AI, necessitating the development of new data centers capable of meeting energy, processing, and cooling needs. This anticipated expansion and progression of diverse AI disciplines are projected to create additional demand for data centers, expanding their capacity requirements and advancing their capabilities.
During the second half of 2023, there was a 12% increase in data center absorption to 81 MW compared to 72 MW during the same period last year. This growth can be attributed to CSPs gaining momentum after a pause in the first half of 2023. In Mumbai, absorption nearly doubled during this period as CSPs renewed their pace of absorption.
India's projected $5 trillion GDP by 2027, with the digital economy contributing around 20%, is anticipated to propel the growth of the country's data center industry. This digital expansion is expected to increase data center capacity from 853 MW in 2023 to 1,645 MW by 2026. This increase in capacity will require an investment of $5.7 billion and approximately 10 million square feet of real estate.
The report also notes a lower supply addition of 75 MW during H2 2023 as the available supply from the first half was utilized to meet the demand, resulting in tighter vacancy levels of 5.5%.