Data centres are fast becoming the backbone of the digital economy. Every digital act—streaming a film, storing files in the cloud, using a banking app, or querying an AI model—depends on servers that process and store information. India wants to reduce dependence on foreign multinationals and position itself as a global hub. That ambition has gathered momentum with the draft National Data Centre Policy, which offers a 20-year tax holiday for developers that meet targets on capacity addition, energy efficiency, and job creation.
The policy, now under consultation, aims to place India at the centre of cloud infrastructure, AI modelling, and digital services at a time when global demand for storage and computing power is soaring. To ease high upfront costs, it proposes extending input tax credit on GST to capital assets such as construction materials, cooling systems, and electrical equipment. Companies leasing or operating at least 100 MW of capacity may also be granted permanent establishment status, giving them greater operational certainty.
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Global Landscape and India’s Position
The world’s data centres are unevenly distributed, shaped by access to power, land, connectivity, and political stability. The US remains dominant, with clusters in Silicon Valley, Northern Virginia, and Dallas, home to hyperscale facilities of Amazon, Microsoft, Google, and Meta. In Asia, Singapore, Hong Kong, and Tokyo lead, while Indian cities like Mumbai, Chennai, and Hyderabad are expanding rapidly with strong government backing.
At a basic level, data centres house servers, networking, and storage in controlled environments. But their real significance lies in enabling the speed, reliability, and scalability of digital services. For businesses, they ensure seamless applications and customer access. For governments, they underpin e-governance, national security, and public service delivery.
Land and Power: The Sticking Points
The key question is whether global players will place their next billion-dollar bet on India. Land remains a sticking point. Proximity to industrial corridors, IT hubs, and manufacturing clusters is crucial, but uncertainty in land allocation undermines investor confidence. The policy’s encouragement for states to earmark land banks for data centre parks is a step forward, but foreign operators facing persistent frictions may see it as inadequate.
Energy is an even bigger challenge. Data centres are power-hungry, and credibility rests on guaranteed uptime. The draft policy rightly stresses coordination with the Ministry of Power and allied agencies, but the real differentiator will be seamless integration of renewable energy. India must reconcile its green commitments with cost competitiveness if it is to attract investment.
Building an AI and Cloud Ecosystem
Beyond power and land, India must align data centres with the broader AI and cloud ecosystem. Developers should be nudged to co-locate AI research centres and global capability hubs alongside server farms. Locating data centres in Tier-II and Tier-III cities would also signal that India is building an advanced digital marketplace, not merely offering server space.
India’s strongest card is its talent pool. A young, digitally skilled workforce offers unmatched scale. But this edge will last only if training keeps pace with specialised demands in data centre operations, energy management, and cybersecurity. Incentives should be linked to training outcomes, not just capacity addition. This will reassure investors that India can sustain growth without hitting a skills bottleneck.
Perhaps the most formidable challenge is regulatory credibility. Capital-intensive projects need stable rules for 15–20 years, but investors fear midstream changes. While India has improved its tax and regulatory framework, the government must balance flexibility with credibility. Without that assurance, no fiscal incentive will suffice.
India’s data centre industry has grown at a compound annual growth rate of 24% since 2019, according to JLL. It is expected to add 795 MW of new capacity by 2027, taking the total to 1,825 MW. Occupancy rates of 75–80%, as reported by CBRE, suggest a market ripe for expansion. With the digital economy booming, demand will only intensify. The question is whether policy and infrastructure can match the urgency for next-generation digital infrastructure.