Author : Tanya Aggarwal

Expert Speak Young Voices
Published on Mar 30, 2024

India, with its burgeoning digital landscape, needs to understand the significance of data centres and make substantial investments to harness their potential

Building blocks of a digital powerhouse: Data centres in India

Data is the bedrock of technological evolution, propelling innovation and societal advancement across sectors. The critical importance of the location and management of this data cannot be overstated. Enter data centres, the keystone of contemporary digital architecture. To unlock the full potential of data and leverage the benefits of emerging technologies, whether in India or any other country, careful consideration of data centre infrastructure is paramount. This article delves into the importance of data centres, India’s growing investments in data centres, the government's initiatives to bolster the digital infrastructure, and the challenges that must be addressed for sustained growth.

Building for the future 

Currently, India has about 151 data centres, ranking 14th in the world. With 880 million users, India has witnessed a surge in data centre investments, reflecting the country's commitment to becoming a digital powerhouse. A joint report by the Confederation of Indian Industry (CII)-Colliers titled “India Data Centers: Entering Quantum Growth” predicts that in the next three years as of August 2023, data centre stock is most likely to double and investments worth US$ 10 billion, a 40-percent rise, are expected to enter the market. Mumbai is expected to house half of the centres, followed by Chennai and Hyderabad. As India continues to make significant strides in the digital landscape, these projections signal a transformative phase in the country's technological evolution, positioning it as a key player in the global digital arena.

Data centres are the nucleus of technological development, therefore to address privacy issues, the security of data centres is vital.

In recent years, the global demand for data storage and processing power has surged, driven largely by advancements in Artificial Intelligence (AI) and machine learning. Data centres are the nucleus of technological development, therefore to address privacy issues, the security of data centres is vital. India, with its burgeoning digital landscape, has recognised the significance of data centres and has been making substantial investments to harness their potential.

Shaping the digital landscape 

Recognising the pivotal role of data centres in shaping the digital future, the Indian government has taken strategic steps to ease access to the digital centre markets. In August 2023, India passed the Digital Personal Data Protection Act (DPDA) that outlines the government’s commitment towards individual privacy. This landmark bill aims to bridge the gap between technological development and a citizen’s right to privacy and impacts all sectors of development, including the data centre industry. The DPDA establishes data centres as data processes, holding them to the same standards, even though data centres do not have access to personal data, which increases accountability on data centres to report any security breaches. It also regulates the cross-border transfer of data and the quality of data centre infrastructure.

The DPDA establishes data centres as data processes, holding them to the same standards, even though data centres do not have access to personal data, which increases accountability on data centres to report any security breaches.

Apart from the DPDA, the government has also proposed the Draft Data Centre Policy in 2020 to streamline regulatory processes and incentivise investments. This policy proposes a framework for structural, regulatory, and approval requisites for the operationalisation of data centres and data centre parks, as well as specific timelines for their construction. Additionally, it also lays out the criteria for joint ventures and partnerships for the development of data centres. At the state level, many of them have formulated their policies to create an enabling environment for data centre development, ensuring a decentralised and widespread digital infrastructure. Several of them have also established data centres as “essential services”, ensuring that they operate year-round. Some states, such as Telangana, have allocated a part of the state budget to setting up data centres and IT parks.

The government acknowledges the necessity of data centres and plays a critical role in their development. However, governmental intervention alone may not suffice. The private sector's support and involvement are equally essential. In recent years, India has witnessed increased participation and investment from private enterprises in the data centre industry, complementing governmental efforts and driving growth. The influx of investments in data centres through easing barriers to entry in the Indian market has yielded positive outcomes for India's economy and digital aspirations. This increased focus on data infrastructure has led to an uptick in foreign direct investment (FDI). Of the US$1.1 billion invested in data centres from the private sector, 93 percent has been through foreign investors. In September 2023, Nvidia announced a collaboration with Reliance to build AI Infrastructure, which will be hosted in AI-ready computing data centres that will eventually expand to 2,000 MW.

India has witnessed increased participation and investment from private enterprises in the data centre industry, complementing governmental efforts and driving growth.

As India positions itself as a global technology hub, the robustness of its data centre ecosystem becomes a crucial factor in attracting international businesses and investors. Understanding the broader impacts of establishing data centres is crucial. Their significance becomes particularly evident when considering India's growing startup and tech ecosystem. The establishment of top-notch data facilities would cultivate a favourable environment for startups, promoting innovation and job creation.

Balancing access and protection

With growth comes certain adverse side effects, which also apply to data. While data fuels development, it also raises concerns regarding privacy and cybersecurity. Addressing these issues is imperative to meet the growing demand for data storage and processing capabilities. The major concern lies with cybersecurity. With the surge in internet usage, data centres become prime targets for cyberattacks. Industries such as healthcare, education, and retail are particularly vulnerable. Robust cybersecurity measures are essential to safeguard sensitive data and ensure the integrity of the data centre ecosystem. Additional issues such as power outages, lack of skilled workforce, and the rising cost of real estate also pose a threat to the development of data centres and India’s technological advancements.

Robust cybersecurity measures are essential to safeguard sensitive data and ensure the integrity of the data centre ecosystem.

While data centres do take these issues into account and operate accordingly, addressing them at a state or national level will also help decrease the disparity between the number of internet users and data centres. India, ranking 14 with 151 centres is far behind the US, which has over 5,000 centres, despite having half the number of internet users. As India strives to meet the escalating demand for data storage and processing capabilities, improving the data centre ecosystem by addressing some of these challenges should see an even bigger increase in investment into the market increased investment in the market

India's digital backbone

India's approach to investing in and developing its data centre infrastructure reflects a commitment to becoming a global technology leader. As the nation navigates the challenges associated with this growth, addressing power outages, privacy concerns, skill shortages, real estate costs, and environmental impact will be crucial. A resilient and robust data centre ecosystem will not only propel India towards its digital goals but will also have a transformative impact on various industries, ensuring a digitally empowered and connected future.

As the nation navigates the challenges associated with this growth, addressing power outages, privacy concerns, skill shortages, real estate costs, and environmental impact will be crucial.

The implementation of the DPDA and increased investments mark significant progress for India. However, it's essential to understand that with emerging technologies and data, development becomes an infinite game, as per game theory parlance. This means there's no fixed end to the impact or evolution of technology. Therefore, it's crucial for key stakeholders, such as governments, entrepreneurs, and businessmen, to grasp the constantly changing nature of this game and adapt accordingly. Capacity building is crucial for driving development, alongside vigilant regulation to safeguard users' interests.


Tanya Aggarwal is a Research Intern at ORF Mumbai

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