India’s rapidly expanding digital economy is driving a sharp rise in demand for data centres, with the country’s installed data-centre power capacity increasing from around 375 MW in 2020 to 1.57 GW as of August 2026.
The capacity is projected to rise further to nearly 8 GW by 2030, reflecting the growing need for computing power, data storage and high-speed connectivity as digital services, cloud computing and Artificial Intelligence expand across sectors.
The government has been strengthening the policy ecosystem for the sector through infrastructure status, fiscal incentives, semiconductor and electronics manufacturing initiatives, as well as measures to promote cleaner energy and resource-efficient operations.
Data centres powering India’s digital economy
Data centres are secure facilities that house computing, storage and networking infrastructure required to process and manage large volumes of digital information.
They form the backbone of several everyday services, including online banking, digital payments, e-Governance, cloud computing and emerging AI applications.
A modern data centre brings together servers, storage systems, networking equipment, power infrastructure, cooling systems and security mechanisms to ensure reliable and uninterrupted digital services.
Behind a routine digital request—such as checking a bank balance or opening an application—multiple systems work together. Security systems assess the request, load balancers distribute traffic, application servers process it and database servers retrieve the required information before it is sent back to the user.
Investments expected to accelerate sector growth
India’s data-centre sector is attracting significant investment, with nearly USD 70 billion already underway and another USD 90 billion in announced projects.
The National Informatics Centre (NIC) has also established National Data Centres at Delhi, Pune, Hyderabad and Bhubaneswar, along with 37 smaller data centres at various state capitals to support government institutions and digital services.
The government has accorded data centres infrastructure status by including them in the Harmonized List of Infrastructure in the Union Budget 2022-23. The move has facilitated greater access to credit for digital infrastructure and supported investment in the sector.
The Union Budget 2026-27 introduced a tax holiday for eligible foreign cloud service providers until 2047 for notified companies using India-based data-centre infrastructure.
AI and semiconductor ecosystem supporting growth
The expansion of Artificial Intelligence is emerging as a major driver of data-centre demand.
The IndiaAI Mission, with a budget outlay of ₹10,371.92 crore, is aimed at developing a comprehensive AI ecosystem, while the second phase of the Semicon India Programme, approved in July 2026, has an outlay of ₹1,27,500 crore.
The Electronics Components Manufacturing Scheme has also seen its allocation increased from ₹22,000 crore to ₹40,000 crore.
In addition, the PLI Scheme 2.0 for IT Hardware is aimed at strengthening domestic manufacturing of equipment such as servers, attracting investment and reducing import dependence.
Focus on clean energy and efficient cooling
With data centres operating continuously, energy and resource efficiency are becoming increasingly important.
According to the Central Electricity Authority, electricity demand from data centres could reach 17 GW by 2031-32.
The government is promoting renewable and cleaner sources of power through initiatives including the Green Energy Open Access Rules, Green Energy Corridor Scheme and National Green Hydrogen Mission.
The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Act is also expected to support the clean-power ecosystem, including potential applications for emerging sectors such as AI and data centres.
At the same time, advanced cooling technologies such as direct-to-chip liquid cooling, adiabatic cooling, immersion cooling and closed-loop liquid cooling are being adopted to improve resource efficiency.
Standards to improve data-centre efficiency
The Bureau of Indian Standards has developed standards covering key efficiency parameters for data centres, including Power Usage Effectiveness (PUE), Carbon Usage Effectiveness (CUE), Cooling Efficiency Ratio (CER) and Water Usage Effectiveness (WUE).
The Bureau of Energy Efficiency’s Energy Conservation Building Code 2017 and Energy Conservation and Sustainable Building Code 2024 also prescribe energy and water conservation norms relevant to data-centre infrastructure.
As India expands its cloud and AI infrastructure, the government has emphasised the need to balance growth with cybersecurity, data sovereignty, sustainability and responsible technology governance.
The expanding data-centre ecosystem is expected to play an increasingly important role in India’s digital economy, technological self-reliance and the broader vision of Viksit Bharat by 2047.
