India's data centre sector is on course to generate $45.69 billion in total revenue by 2033, according to a report released by KPMG in India on Monday, 25 May 2025. The projection underscores a structural shift in the country's digital infrastructure landscape, driven by AI-led workloads, accelerating cloud adoption, 5G rollout, and tightening data localisation mandates.

AI-Optimised Infrastructure Leading the Charge

The AI-optimised segment of the data centre market — valued at approximately $588.6 million in 2024 — is projected to reach $3.55 billion by 2030, expanding at a compound annual growth rate of 35.1%. This growth is being propelled by the surge in GPU-intensive computing workloads that conventional infrastructure was never designed to handle.

Traditional air-cooling systems, the report notes, are proving inadequate for modern AI deployments. Facilities built for the next generation of workloads require specialised liquid cooling systems and high-density power distribution — a significant capital and engineering upgrade from legacy designs.

Regulatory Push: DPDP Act as a Structural Catalyst

The Digital Personal Data Protection (DPDP) Act 2023 is emerging as a key structural driver, accelerating demand for local data residency infrastructure and compliant data processing architectures. Operators are now required to invest in facilities that meet evolving regulatory standards — making compliance capability a competitive differentiator, not merely a legal obligation.

This comes amid a broader global trend of data sovereignty legislation reshaping where and how cloud and AI infrastructure is deployed. India's regulatory framework is, in effect, creating a captive market for domestic data centre capacity.

The Execution Challenge

The KPMG report is pointed in its diagnosis: the sector's primary constraint is no longer demand — it is the growing complexity of delivering scalable, compliant, and operationally integrated infrastructure. The market is shifting away from fragmented service provider models toward what the report calls an integrated lifecycle partner approach, combining planning, construction, deployment, operationalisation, and maintenance under a single accountability framework.

KG Purushothaman, Head of Digital Solutions and National Leader for Artificial Intelligence at KPMG in India, said: 'India's data centre industry is moving into a new phase of accelerated growth driven by AI-led workloads, cloud adoption, and evolving data localisation requirements.' He added that the market will require integrated execution models combining engineering capabilities, AI readiness, regulatory understanding, and operational accountability.

Unaise Urfi, Partner for Digital Solution, Strategy and Insights at KPMG in India, noted: 'Execution capability will become as important as infrastructure capacity creation,' adding that organisations will increasingly require integrated partnership models for seamless, scalable, and coordinated infrastructure delivery.

ESG and Sustainability in Focus

Environmental, social, and governance (ESG) considerations are increasingly influencing investment decisions in the sector. Operators are under growing pressure to integrate renewable energy, optimise power usage effectiveness, and adopt sustainable infrastructure models. With data centres among the most energy-intensive facilities in the digital economy, the industry's ability to demonstrate green credentials is becoming a prerequisite for institutional investment.

What Comes Next

As hyperscalers, domestic cloud providers, and enterprise operators accelerate capacity buildout, the pressure on land, power, and skilled talent is expected to intensify. The next phase of India's data centre growth will be defined not by how much capacity is announced, but by how much is delivered on time, in compliance, and at scale.