By Mg Phyu Phway
October 17, 2026
India’s digital transformation has emerged as one of the defining drivers of its economic growth, technological advancement, and global competitiveness. As the country advances toward a projected digital GDP of US$1 trillion by 2030, digital infrastructure is becoming as critical to national development as roads, ports, and power networks. The rapid expansion of digital payments, e-commerce, cloud services, artificial intelligence (AI), and online public platforms is fundamentally reshaping the economy, creating unprecedented volumes of data and significantly increasing demand for computing power.
The scale of this transformation is reflected in the growth of India’s technology ecosystem. The domestic IT and business services market reached US$69 billion in FY26, while national IT spending is expected to rise to US$176.3 billion in 2026. The software products industry is projected to surpass US$100 billion by 2030, driven by the accelerating adoption of AI, cloud computing, data engineering, and digital services across sectors. As businesses, governments, and consumers become increasingly interconnected, the ability to process, store, and secure vast amounts of information is emerging as a critical determinant of economic competitiveness.
At the centre of this digital revolution lies a less visible but strategically indispensable asset – data centres. Once regarded as back-end support facilities, data centres have evolved into critical national infrastructure underpinning cloud platforms, digital payments ecosystems, enterprise applications, streaming services, and AI workloads.
Today the rapid expansion of India’s data-centre sector is becoming both a reflection and a driver of the country’s digital ambitions. As demand for cloud services, AI computing, and digital applications continues to surge, data centres are emerging as strategic assets that support economic growth, attract high-value investment, strengthen digital sovereignty, and position India as a leading regional hub in the global digital economy.
The Rise of India’s Data Centre Ecosystem:
India currently hosts approximately 271 operational data centres, with total installed power capacity estimated at around 1.57-1.79 GW. The Council on Energy, Environment and Water (CEEW) estimates that installed data-centre capacity stood at approximately 1.5 GW by mid-2025 and could rise to between 4.5 GW and 6.5 GW by 2030.
Industry forecasts suggest that India’s data-centre capacity could double within the next two years and potentially increase five-fold by 2030, signalling an unprecedented infrastructure buildout.
Geographically, India’s data-centre ecosystem has developed around a handful of strategic urban centres. Mumbai remains the country’s largest data-centre hub, accounting for around 650 MW of installed IT capacity and benefiting from favourable power costs, robust connectivity infrastructure, and proximity to international submarine cable networks. Chennai, Delhi-NCR, Bengaluru, Hyderabad, and Kolkata collectively account for the majority of India’s operational capacity. Together, these six regions host nearly two-thirds of the nation’s data-centre infrastructure, forming the backbone of India’s digital economy.
Mumbai’s emergence as a leading global data-centre destination is particularly noteworthy. With among the lowest construction costs for data-centre infrastructure worldwide and competitive power tariffs, the city continues to attract substantial investment from global technology firms, cloud providers, and infrastructure investors.
AI and Cloud Computing Drive a New Investment Cycle:
Amazon, Google and Microsoft are pouring billions into facilities that advance Prime Minister Narendra Modi’s ambition to host “the whole world’s data”, stretching from Maharashtra in the west to Andhra Pradesh in the south.
Google’s proposed US$15 billion investment for one-gigawatt data centre hub, and hyperscale data-centre ecosystem in Visakhapatnam, its largest outside the U.S. represents one of the largest technology commitments made in India to date and is expected to anchor the development of the proposed AI City initiative.
Reliance Industries has announced plans to invest nearly US$11.4 billion in a 1 GW AI-focused data centre in Andhra Pradesh, while the Adani Group has outlined ambitions to deploy up to US$100 billion over the coming decade across AI-driven data centres integrated with renewable energy infrastructure. At the same time, OpenAI’s partnership with the Tata Group to develop large-scale AI computing capacity highlights India’s growing importance as a destination for advanced AI infrastructure and high-performance computing.
These investments are part of a much broader infrastructure buildout driven by the explosive growth of AI workloads, cloud adoption, digital commerce, and data-intensive applications. Industry estimates suggest India could attract as much as US$200 billion in AI-related infrastructure investment over the coming years, placing the country among the fastest-growing digital infrastructure markets globally.
Beyond creating high-value assets, this investment surge is strengthening India’s ability to host frontier AI models, hyperscale cloud platforms, and mission-critical digital services, while enhancing its digital sovereignty and positioning the country as a leading technology and data hub for the wider Asia-Pacific region.
Building Strategic Infrastructure for the Digital Age:
The impact on employment and economic value creation is also substantial. India’s IT hiring is projected to grow steadily as global technology firms continue expanding innovation and delivery centres. The country’s cloud industry alone is expected to generate approximately 14 million jobs by 2026, reflecting the broader economic opportunities created by digital infrastructure investments. In parallel, emerging segments such as data annotation, AI training, cloud management, and digital engineering are creating entirely new categories of employment and specialised technical expertise.
Sustainability and the Future of India’s Digital Hub Ambitions:
Recognising the strategic importance of data centres, policymakers have introduced measures aimed at supporting industry growth.
Data centres are among the most energy-intensive forms of modern infrastructure, and rising AI adoption is significantly increasing power and cooling requirements. As its data-centre footprint expands, India has made sustainability an increasingly important consideration. The Bureau of Indian Standards has developed frameworks based on internationally recognised ISO/IEC standards for measuring electricity consumption, cooling efficiency, water utilisation, and carbon emissions within data centres. These standards provide operators with common benchmarks for evaluating performance and improving resource efficiency.
The government’s proposed tax holiday until 2047 for foreign companies providing cloud services through India-based data centres represents a significant effort to attract global investment and establish India as a preferred destination for cloud infrastructure deployment. Alongside this, the Digital Personal Data Protection Act, 2023 has established a clearer regulatory framework for data governance, privacy, and cross-border data flows, enhancing investor confidence and reducing regulatory uncertainty.
The Telecom Regulatory Authority of India has also prioritised the development of the data-centre ecosystem through efforts to reduce regulatory barriers and improve infrastructure deployment. Collectively, these initiatives signal a recognition that data centres are no longer peripheral assets but core components of national digital strategy.
India’s data-centre revolution represents far more than an infrastructure story. It reflects the country’s broader transition toward a digitally driven economy where data, computing power, and connectivity are becoming critical engines of growth. As capacity expands and policy support deepens, India is steadily evolving from a major digital market into a regional digital powerhouse capable of serving not only domestic demand but also the wider Asia-Pacific digital economy as host to the ‘the invisible engines powering digital life.’
(The author, Mg Phyu Phway, is a researcher who studies and monitors Asia-Pacific affairs.)
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