India's digital infrastructure is on the cusp of significant expansion, with third-party data center (DC) capacity expected to double by FY2028. This growth is fueled by a robust investment pipeline of approximately ₹90,000 crore (Rs 900 billion) over the next three fiscal years, from FY2026 to FY2028. According to a report by credit ratings agency ICRA, this near-term investment is part of a larger, long-term vision, with industry players announcing development plans totaling 3.0-3.5 GW to be built over the next 7-10 years, representing a colossal investment of ₹2.3-2.5 lakh crore (Rs 2.3-2.5 trillion). This underscores the sector's critical role in India's ongoing digital transformation.
The projected doubling of capacity will see India's third-party data center facilities reach 2,400-2,500 MW by FY2028, a substantial increase from the 1,250 MW in FY2025. This expansion is driven by increasing data consumption and favorable policy initiatives. India currently accounts for approximately 3% of the global DC capacity of 42 GW, with the United States contributing around 50%. With the upcoming investments and growth, India's share is expected to rise.
Mumbai currently dominates the Indian DC landscape, contributing to over 50% of the current operational capacity. The city ranks 21st globally among top cities for DC capacity. Its strategic location, reliable power infrastructure, and proximity to cable landing stations make it a preferred destination for data center operators. However, developers are also looking at new locations outside of the metros due to high costs.
Edge data centers are also gaining traction, driven by the need for low latency and high-speed requirements in sectors like banking, healthcare, agriculture, and defense. These smaller, decentralized units are located closer to end-users.
Furthermore, Indian data center operators are increasingly focusing on renewable energy sources. Green power currently meets 15-20% of their overall power requirements, and ICRA expects this share to increase to 30-35% by FY2028, driven by ESG mandates and the need to diversify power sources.
Government policies are also playing a crucial role in facilitating scalability in the data center sector. The Digital Personal Data Protection Bill, the granting of infrastructure status to data centers, and incentives from central and state governments are all contributing to growth. Several states, including Maharashtra, Telangana, Odisha, and Tamil Nadu, are actively attracting investments through subsidies and exemptions.
A draft proposal by the Ministry of Electronics and Information Technology (MeitY) to provide a 20-year tax exemption could be a game-changer for India's data center growth prospects. The policy aims to provide input tax credits on capital investments like construction and electrical systems, lowering upfront costs and improving project viability.
Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA, believes this long-term incentive is expected to attract significant domestic and global investments.
The data center space in India has attracted significant interest from both existing and new players. Companies have announced plans to develop and deliver 3–3.5 gigawatts (GW) of capacity over the coming decade, with committed investments reaching ₹2.3–2.5 lakh crore. Major players like Sam Altman's OpenAI and Mukesh Ambani-led Reliance Industries have recently shared their plans to open data centers in India.
