India becoming a global hub for data centers, from a digital follower

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Indian data center

India is becoming the largest and fastest-growing market for digital consumers. It is witnessing a massive digital transformation in recent years. The Indian government has launched initiatives like the National eGovernance Plan and the Digital India initiative to boost the digital capabilities of the country. According to a report by ASSOCHAM and EY, the Indian data center market stood at US$ 1.3 billion in 2016 and US$ 4.4 billion in 2020 and is anticipated to grow to US$ 8.0 billion by 2026. 

The number of technologies that require data (like Big Data and the Internet of Things) is growing quickly. This means that there is a lot more demand for data storage, which is causing the Indian data center market to grow. Currently, India has over 132 data centers across the nation. 45% of these are located in Mumbai. Chennai is emerging as the next big hub for data centers in India. 

This news will discuss how the Indian Government plans to transform India into the leading country in the data center market.  

Role of the Government in expanding the Indian data center market 

  • The digital citizen-centric applications like E-Aadhaar, e-Parivahan, Digi Locker, Crime and Criminal Tracking Network and Systems (CCTNS), e-Courts, GSTN, etc. by the Government of India are generating massive volumes of data. 
  • The government is trying to get people to use online payment systems for all financial transactions. This is creating a need for more data centers to store all the data that is being generated. For example, only 21 banks had subscribed initially when the Unified Payment Interface (UPI) was launched in April 2016. This has increased to 330 banks as of June 2022.  
  • The Data Protection Law proposed by the Government in 2021 advocates data localization according to which a mirror copy of sensitive personal data (SPD) and critical personal data (CPD) that are already available with foreign entities, be mandatorily brought to India timely. Hence, increasing the demand for data storage. 
  • In the last few years, many fast-paced reforms implemented by the government as part of the Digital India initiative have turned India into one of the world’s fastest-growing large economies. 
  • The Finance Minister of India, during the annual budget of 2022, announced the infrastructure status of data centers. This is expected to promote investments to make India a data center hub amidst the ever-growing global data traffic. By classifying data centers in the infrastructure sector, the Government can cater to the increasing internet demands of the population. The operators can now take credits of a longer tenure at cheaper rates. They can acquire foreign funding from the external commercial borrowing route and borrow money from the India Infrastructure Financing Company. 

Not only the central government, but the state governments too have an important role to play in the growth of the Indian DC market.  

  • The Uttar Pradesh government, in its state cabinet meeting, cleared proposals to set up four data center parks with an investment of over Rs 15,950 crore. This will result in the creation of about 4000 jobs directly or indirectly as well! The data center parks will be set up under its Data Center Policy 2021. 
  • Tamil Nadu is providing power incentives to data center investment above INR 500 Crore and at least 30% energy consumption through renewable sources. It is also offering conditional concession in stamp duty and land fee. 
  • Telangana government announced a 50% rebate on building fees and concession on land fee, preference to start up/ SMEs for data center services, 25% reimbursement on internet charges capped at INR 250,000 per year for the first three years of operation, concessional fuel price for backup power sources, exempt from the purview of statutory power cuts. 

In addition to these, other Indian states like Haryana, Karnataka and Odisha have also launched their Data Centre Policies to boost data center investment. 

What’s ahead? 

The Indian data center market is witnessing strong growth mainly because of the availability of large hyper-scalers that have started outsourcing their storage requirements to third-party data center providers. Currently, Indian corporate tycoons and foreign investors are investing in Indian data centers in Tier 1 cities to cater to the increasing demand as the preliminary IT boom was restricted to Tier 1 cities like Delhi, Bangalore, Mumbai, Chennai, and Hyderabad. While several of the Tier 1 cities are reaching a saturation point, Tier 2 and Tier 3 cities are becoming coveted destinations for IT/ITeS investments owing to new infrastructural developments.  

Source: Indian Smart Data Centers and Cloud Infrastructure report 

Read next: How Indian cities are becoming hotspots of the data center industry – report by JLL

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