Mumbai: Mumbai has so far been driving India’s burgeoning data centre market, accounting for 45 percent of the current capacity and scoring over financial hubs such as Hong Kong and Seoul in operational capacity, according to a report by Macquarie.
Overall, the 27 October report estimates, India’s data centre market itself is estimated to double by 2027, but there are key risks to the sector such as water shortage, increased electricity demand, and limited domestic manufacturing capability of the systems required for data centres.
“Data centres consume large volumes of water for cooling. With expansions planned in water-stressed cities such as Mumbai, Chennai and Bangalore, summer shortages could disrupt operations unless alternative cooling technologies or government interventions are implemented,” the Macquarie report said, adding that data centres need about 25 million litres per 1 megawatt load annually.
After Mumbai, Chennai ranks second, accounting for 18 percent of the installed capacity, followed by Delhi NCR, which accounts for 11 percent. According to the report, Mumbai is also in the process of adding another 1.1 gigawatt capacity.
India currently has 1.4 gigawatts of operational data centre capacity with another 1.4 gigawatt under construction, and another five gigawatt in the planning stage. This is expected to double by 2027, based on the capacity under construction, and may even grow five times by 2030 if the pipeline is fast-tracked, the Macquarie report estimates.
In the pipeline are large commitments such as the $15 billion by Google for an AI hub at Visakhapatnam with local partners Adani Connex and Airtel, and IT services company TCS’s plan to enter the data centre space by building up to 1 gigawatt over 5-7 years with an investment of $6.5 billion. Earlier in 2023, Amazon Web Services had announced its commitment to invest $12.7 billion in India’s cloud infrastructure by 2030. Similarly, in January this year, Reliance Industries said it would be setting up the world’s largest data centre at Jamnagar with a capacity of 3 gigawatts.
‘India needs a data centre policy’
The Macquarie report said several factors such as data localisation laws, supportive regulatory environments, subsidies from central and state governments, rising enterprise and cloud adoption, and a surge in mobile data demand and OTT content are driving this capacity ramp up.
In September this year, a study by S&P Global Community Insights had forecast India to become the second-largest market in Asia Pacific when it comes to electricity demand for data centres over the next two years.
Of India’s total electricity demand, in 2024, data centres accounted for 0.8 percent. As per the study, this figure is expected to increase to 1.9 to 3.2 percent by 2030.
Quoting the study, the Macquarie report said, “High performance computing workloads increase energy consumption and heat generation. In tandem, there is a strong thrust for renewable energy, but regional grid reliability varies and outages can impact uptime. Advanced cooling systems help, but require significant investment and are still uncommon in India.”
It added that India needs one strong data centre policy that accounts for the use of water as well as other critical infrastructure such as land and electricity. The Union government’s data centre policy, conceived in 2020, is still in the draft stage and operators typically need 30-40 approvals across multiple ministries, the report said.
Land acquisition too, it said, involves state-specific regulations and the due diligence can be lengthy.
As of now, different states have their own policies for data centres that are varied in the purpose they serve, the incentives they give and the regulatory approaches.
Similarly, the report also cited India’s limited ability to locally source or domestically manufacture the various systems needed for data centres as another major hurdle. As of now, the report said, India imports a significant part of the mechanical, electrical and IT systems needed for data centres.