The capacity of India’s data center industry is projected to more than double, reaching 2-2.3 GW by fiscal 2027, according to Crisil Ratings. This growth is fueled by increased digitalization across the economy and the rising adoption of cloud storage by enterprises. Additionally, the expanding penetration of Generative Artificial Intelligence (GenAI) is expected to significantly boost demand in the medium term. GenAI’s advanced computational requirements and low latency needs provide a strong impetus for data center expansion in India.
Crisil anticipates robust and stable cash flows for the industry, ensuring steady credit profiles for players. Data centers, consisting of large networks of servers for remote data storage and distribution, are poised for growth driven by two key factors:
1. The rapid shift of enterprises to digital platforms, including cloud services, accelerated by the COVID-19 pandemic.
2. Increased access to high-speed internet, which has spurred usage of social media, OTT platforms, and digital payments.
Mobile data traffic has grown at a compound annual growth rate (CAGR) of 25% over the past five fiscal years, reaching 24 GB per month by the end of fiscal 2024. This figure is expected to climb to 33-35 GB by fiscal 2026.
To meet the surging demand, Crisil estimates an investment of ₹55,000-65,000 crore over the next three fiscal years, focusing on land acquisition, power equipment, and cooling solutions. Land and building infrastructure typically account for 25-30% of overall capital expenditure.
“The capacity additions are being driven by the expansion plans of existing players and the entry of new ones,” noted Manish Gupta, Senior Director and Deputy Chief Ratings Officer at Crisil Ratings. “These developments are supported by significant demand from hyperscalers—large-scale data centers catering to businesses with extensive digital infrastructure needs.”
Data localization initiatives and state-level incentives are also expected to trigger further investments, reinforcing the industry’s critical role in India’s digital transformation journey.
