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Inside India’s datacentre boom

India’s datacentre market is expected to surpass $10bn by 2028, but realising its full potential will require innovations in sustainability and improvements in connectivity

India’s datacentre market is expected to grow to $10.9bn by 2028, up 78.7% from $6.1bn in 2023, according to Mordor Intelligence.

The country is home to around 140 datacentres, and is expected to add some 40 more in the next few years, said Biswajeet Mahapatra, principal analyst at Forrester, who noted that investments from global hyperscalers, the increase in fibre coverage, 5G adoption and data localisation policies have been fuelling the growth of India’s datacentre industry.

“Companies, especially those in the financial and e-commerce sectors, are required to store customer data locally, necessitating the expansion of datacentre capabilities,” said Chandresh Dedhia, group chief information officer (CIO) of API Holdings, a digital healthcare platform.

Earlier this year, India’s Digital Personal Data Protection (DPDP) Act that spells out new sovereignty and localisation imperatives for enterprises received the President’s assent, and will be implemented on a date to be decided by the central government. “DPDP regulation necessitates stringent data governance, demanding compliance with data handling practices and reinforcing cyber security measures. This often leads to infrastructure adjustments for enhanced data privacy,” said Dedhia, adding that international companies are also setting up or expanding their datacentres in India to comply with these regulations.

Local firms like NeevCloud, a cloud infrastructure service provider focused on artificial intelligence (AI) workloads, are expanding their datacentre footprint across the subcontinent as well. Currently operating in central India, it plans to set up datacentres in Mumbai, Chennai, Hyderabad and Noida by the end of 2025, according to its founder and CEO, Narendra Sen.

However, there’s room for more growth, as some industry watchers have contended. As India continues its digital revolution, the demand for data storage, processing and management is expected to further surge, said Naveen Vaidyanathan, director of CRISIL Ratings, an analytical company that provides ratings, research, and risk and policy advisory services.

“Data consumption, which is around 20GB per month per internet user, is expected to jump to about 45GB per month by 2027, with the number of users rising as well,” said Vaidyanathan. “While data demand is likely to surge, the datacentre penetration to absorb this remains low. India has over twice the number of active users than that of the US, and about 12 times that of UK, but datacentre capacity per one million internet users stands at 1.2, which is significantly lower than that of China (at 2.3) and the US (at 12.6). This should drive datacentre capacity additions by players.”

Datacentre sustainability

Mike Hicks, principal solutions analyst at Cisco ThousandEyes, noted that datacentres are critical components in the long line of digital supply chains, but connectivity to and from the datacentre needs to be assured. Auxiliary services such as cooling and power generation will also have a direct impact on service availability and performance, he added.

In the past few months, there had been examples of network disruptions and application outages due to datacentre issues. Many of them were reportedly caused by external factors, including heatwaves and other weather-related circumstances. Earlier in February 2023, a power brownout caused several chillers to shut down in a Microsoft datacentre in Southeast Asia, resulting in difficulty for some customers in the region. The disruption lasted more than 30 hours before users achieved full access again. 

With datacentres generating a lot of heat, cooling systems are essential to prevent overheating. Dedhia pointed to the use of advanced cooling technologies such as liquid cooling, free cooling by using external air and artificial intelligence to optimise cooling systems.

“There’s also a trend towards building datacentres in cooler climates to reduce cooling costs,” he added. “Many are shifting towards renewable energy sources like solar and wind to power their operations. Additionally, datacentres are implementing energy-efficient hardware and using AI to manage power usage effectively.”

Apart from sourcing power from multiple sources, which in many cases is a basic requirement for datacentres, most datacentres in India have their own power-generating unit to take care of any sudden requirements or surges, said Mahapatra.

“Many of them are looking at moving into green power generation sources to adhere to the latest ESG [environmental, social and governance] requirements. Tariffs of wind and solar energy are also low, which helps datacentres reduce their costs, while entering into an Open Access Power Purchase Agreement or generating their own electricity.”

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As India experiences very high temperatures in summer, datacentres in the country have to use refrigerants and evaporative coolants to manage their temperatures. “Liquid cooling, immersive cooling and evaporative cooling lead to greater efficiency in datacentres and are used widely in India,” said Mahapatra. “Companies also use battery health monitoring systems, integrated building or facilities management systems, and energy management systems to efficiently manage their energy and facilities requirements.”

NeevCloud, for one, has built India’s first patented liquid immersion cooling system for its Varuna datacentre-in-a-box offering. Traditional datacentres operate on 8-10kWh of rack density, while Varuna’s high-density computing can manage 50-80kWh rack density required by highly intensive workloads such as AI and machine learning, said Sen.

Meanwhile, keeping abreast of developments such as modular datacentre designs, redundant systems, robust network architectures and the use of edge computing to bring data processing closer to users is key for CIOs like Dedhia.

“The continued expansion and evolution of datacentres in India represent both opportunities for leveraging advanced data services and challenges in terms of ensuring efficient, secure, and sustainable operations,” he added.

Mahapatra noted that as India’s datacentre investments continue to grow, the country may even see one or two Indian datacentre players venture into the cloud products and services market to become the Indian hyperscalers of tomorrow.

What will matter, then, is the availability of land at preferred locations, the ability to complete construction within timelines and within budget, timely approvals from relevant authorities, and connectivity, he said.

Vaidyanathan noted that connectivity in India is primarily concentrated in top metros such as Mumbai, the National Capital Region, Chennai, Bengaluru and Hyderabad, driving the bulk of datacentre additions to those cities. “Improving fibre connectivity across locations will be key to further increasing the penetration of datacentres,” he said.

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