India's Data Centre Capacity Projected to Exceed 2-2.3 GW by 2027
Click to start listening
New Delhi, Dec 23 (NationPress) The capacity of India's data centre sector is projected to more than double to 2-2.3 GW by the fiscal year 2026-2027, driven by the increasing digitalisation of the economy as businesses enhance their investments in cloud storage and consumer demand for data escalates, as per a CRISIL Ratings report published on Monday.
According to the report, the demand will be further fueled by the growing penetration of Generative Artificial Intelligence (GenAI) in the medium term.
To support this robust demand, there will be a rise in incremental capital expenditure (capex), with a higher reliance on debt financing, leading to a moderate uptick in debt levels. However, the report indicates that capacity growth will lag behind demand, minimizing offtake risks. Consequently, the industry anticipates strong and stable cash flows, which will help maintain the credit profiles of the stakeholders.
The analysis by CRISIL Ratings encompasses industry players holding about 85 percent of the market share based on operational capacity.
Data centres provide essential computing and storage infrastructure, influenced by two main factors. Firstly, companies are rapidly transitioning their operations to digital platforms, including the cloud, a trend that has accelerated following the Covid-19 pandemic. Secondly, the enhanced accessibility of high-speed data has sparked a significant increase in Internet usage, including social media, over-the-top (OTT) services, and digital payments, as highlighted in the report.
Mobile data traffic has experienced a compound annual growth rate (CAGR) of 25 percent over the past five financial years, reaching 24 GB per month at the end of fiscal 2024, with expectations to rise to 33-35 GB by fiscal 2026, according to the same report.
Alongside ongoing demand, the rapid evolution of GenAI, which necessitates higher computational power and reduced latency compared to conventional cloud computing functions, will also act as a catalyst for data centre demand in India, the report further states.
According to CRISIL Ratings senior director Manish Gupta, an investment between Rs 55,000-65,000 crore will be essential over the next three fiscals, primarily for land, construction, power equipment, and cooling solutions. Data centre operators typically invest in infrastructure—land and buildings—which constitutes 25-30 percent of total capex—with an eye on future partnerships. While this strategy could expose incremental capacities to utilisation risks, robust demand is anticipated to drive capacity utilisation to between 80-90 percent within a year or two.
Capacity expansions are motivated by the growth strategies of existing players as well as the entrance of new competitors. These expansions are largely driven by substantial demand from hyperscalers. Hyperscalers usually possess significant bargaining power due to their large capacity requirements, enabling them to secure competitive pricing, often 10-20 percent lower than that offered to other clients. Therefore, effectively balancing the increase in capacity utilisation with pricing remains crucial for achieving returns on data centre investments, the report concludes.
