India’s data centre industry is on the cusp of massive expansion, with artificial intelligence (AI) and digital transformation expected to drive investments worth up to $23 billion over the next five years.
India is rapidly positioning itself as a global hub for data centre infrastructure, fueled by the accelerating adoption of artificial intelligence (AI), cloud computing, and digital services. According to a report by Avendus Capital, the country’s data centre ecosystem could unlock investment opportunities worth approximately $23 billion by 2030.
This surge reflects the growing demand for high-performance computing infrastructure required to process vast volumes of data generated by AI-driven applications and digital platforms.
Artificial intelligence is playing a pivotal role in reshaping the data centre landscape. As enterprises increasingly integrate AI into their operations, the need for advanced computing capabilities is rising sharply.
The report estimates that India may deploy between 650,000 and 700,000 graphics processing units (GPUs) over the next few years. GPUs are critical components that enable high-speed data processing and power AI workloads, making them essential for modern data centres.
This rapid expansion of AI infrastructure is expected to significantly boost demand for data centre capacity across the country.
India’s data centre capacity is projected to grow at a compound annual growth rate (CAGR) of over 26% in the next five years. This robust growth trajectory underscores the increasing importance of digital infrastructure in supporting economic development.
The country’s built data centre capacity is expected to rise sharply from approximately 1.6 gigawatts (GW) last year to around 5 GW by 2030. This expansion will be driven by a combination of factors, including increased internet usage, digital transformation across industries, and the proliferation of cloud-based services.
Data centre developers in India currently have an active project pipeline exceeding 3 GW. To execute these projects, the sector will require capital investments of about $25 billion over the next five years.
This pipeline includes nearly 1 GW of dedicated AI data centre capacity, highlighting the growing emphasis on specialized infrastructure designed to handle AI workloads.
The scale of planned investments reflects strong confidence among investors and developers in the long-term growth potential of India’s digital ecosystem.
Mumbai is expected to remain the dominant hub for data centre development in India. The city is projected to account for nearly half of the country’s total installed and upcoming data centre capacity over the next five years.
Several factors contribute to Mumbai’s leadership position, including its strategic location, robust connectivity, access to submarine cable landing stations, and well-established business ecosystem.
As a result, Mumbai continues to attract significant investments from both domestic and international data centre operators.
The rapid growth of data centres is not limited to India. Globally, data centre infrastructure has emerged as a major driver of investment and economic activity.
According to the United Nations Conference on Trade and Development (UNCTAD), data centres accounted for more than one-fifth of global greenfield project values in 2025. Announced investments in this sector exceeded $270 billion, reflecting the critical role of digital infrastructure in the modern economy.
The surge in AI computing demand and data-intensive services is intensifying global competition, as countries strive to attract investments in this high-growth sector.
Recognizing the strategic importance of data centres, the Indian government has introduced several policy measures to encourage investment. One of the most notable initiatives is the announcement of a tax holiday extending until 2047 for eligible foreign cloud service providers operating through India-based data centre infrastructure.
This incentive is aimed at attracting global technology companies and boosting domestic capacity. By reducing the cost of operations, the policy is expected to enhance India’s competitiveness as a preferred destination for data centre investments.
In addition to AI, the increasing adoption of cloud computing and digital services is fueling demand for data centre infrastructure. Businesses across sectors are migrating to cloud-based platforms to improve efficiency, scalability, and cost-effectiveness.
The growth of e-commerce, fintech, streaming services, and digital governance initiatives is further driving the need for reliable and scalable data storage and processing capabilities.
As digital consumption continues to rise, data centres will play a crucial role in supporting these services and ensuring seamless user experiences.
While the outlook for India’s data centre sector remains highly positive, the industry also faces certain challenges. These include high energy consumption, land acquisition issues, and the need for robust regulatory frameworks.
However, these challenges also present opportunities for innovation. For instance, the adoption of renewable energy sources and energy-efficient technologies can help address sustainability concerns.
Moreover, advancements in cooling technologies and modular data centre designs can enhance operational efficiency and reduce costs.
Conclusion
India’s data centre sector is poised for unprecedented growth, driven by the rapid adoption of AI, cloud computing, and digital services. With an estimated $23 billion investment opportunity by 2030, the industry is set to become a cornerstone of the country’s digital economy.
As infrastructure expands and government support strengthens, India is well-positioned to emerge as a global leader in data centre development. The coming years will be crucial in shaping the future of this dynamic and rapidly evolving sector.