New Delhi, May 2: A recent report indicates that India’s data center capacity is projected to increase nearly sixfold, reaching approximately 10.5 gigawatts (GW) by the fiscal year 2031. This growth is attributed to the rising adoption of artificial intelligence (AI) and data localization policies.
According to the investment bank Morgan Stanley, AI-related operations alone could account for around 6.8 GW of this capacity. Additionally, the need for faster data processing, stringent data localization regulations, and increasing computing demands are driving this surge.
The report highlights that changing global conditions and India’s policies are encouraging significant investments in the data center sector for many years to come.
To enhance data center capacity, an investment of about $60 billion is anticipated. This figure encompasses land acquisition, power systems, cooling infrastructure, and networking equipment.
Furthermore, the report states that operating these energy-intensive data centers will require over $20 billion in investments within the power sector. Companies are increasingly turning to renewable energy and storage solutions.
According to the report, regulations like data localization, the designation of data centers as infrastructure, and government incentives are rapidly boosting investments, attracting global companies to India.
The report notes, “Strategically, storing data within the country enhances digital sovereignty, reduces dependence on foreign infrastructure, and positions India as a regional hub for global tech companies.”
However, the report also points out challenges associated with such rapid expansion, including the availability of affordable and reliable electricity and India’s reliance on imports for high-end computing hardware.
Morgan Stanley estimates that by 2030, approximately 60% of new investments (capex) in India will be directed towards energy, data centers, and defense sectors.
The report further suggests that these sectors could see an additional investment of around $800 billion over the next five years, with India’s investment rate potentially reaching 37.5% of GDP by the fiscal year 2030.
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