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India’s Data Centers: Poised for $5.7 Billion Investment Surge Driven by AI

India’s data center industry is on the cusp of a remarkable expansion, driven by the surging adoption of Artificial Intelligence (AI). A new report by JLL Research forecasts a staggering 791 MW increase in data center capacity by 2026, necessitating an additional 10 million sq. ft. of real estate space and attracting investments of a staggering USD 5.7 billion.

AI a Key Driver of Demand

The report attributes this projected growth primarily to the growing use of AI. As AI applications become more prevalent, India’s data centers are expected to experience a surge in demand, with estimates ranging from 650-800 MW during the period 2024-2026. JLL cites the exponential growth in computing power and its resulting applications as a key factor driving this demand.

Cloud Providers Lead the Charge

Cloud Service Providers (CSPs) are at the forefront of this data center expansion. Recognizing the demand spurred by AI, CSPs have realigned their needs and announced significant investments to scale up their infrastructure.

Expert View: AI Necessitates Advanced Data Centers

Commenting on the report’s findings, Rachit Mohan, APAC Lead – Data Centre Leasing and Head – Data Centre Advisory, India, JLL, stated, “The exponential growth in processing power and data volumes, driven by AI, necessitates the development of new data centers capable of meeting energy, processing, and cooling needs. The anticipated expansion and progression of diverse AI disciplines are projected to create additional demand for data centers, expanding their capacity requirements and advancing their capabilities.”

Increased Absorption in H2 2023

The report also highlights a positive trend in data center absorption during the second half of 2023 (July-Dec 2023). This period witnessed a 12% increase in absorption, reaching 81 MW compared to 72 MW in the same period of 2022. This growth is attributed to renewed momentum from CSPs following a brief pause in the first half of 2023. Notably, Mumbai saw a near-doubling of absorption during this period.

India’s Potential as a Global Data Hub

Dr. Samantak Das, Chief Economist and Head of Research & REIS, India, JLL, emphasized India’s potential as a global data hub, stating, “India is poised to be the third-largest economy, with a projected USD 5 trillion GDP by 2027 with a digital economy contribution of around 20 per cent. This digital expansion is anticipated to propel the growth of India’s data center industry, projected to increase from 853 MW in 2023 to 1,645 MW by 2026.”

Looking Ahead: A Thriving Ecosystem

India’s commitment to AI, evident through initiatives like the India AI mission, combined with a large user base, a skilled workforce, and a thriving startup ecosystem, positions the country to become a leading player in the global data center landscape, while prioritizing sustainable practices.

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