Making India a Global Hub for Data Centre and Cloud Solutions

Digital commerce, digital entertainment, and social media use in India have grown at an exponential rate. India's mobile data consumption is already the highest in the world and is steadily rising. To meet the country's expanding needs, data centres must expand rapidly due to the magnitude of India's digital population and the fast-rising trajectory of its digital economy. The recent explosion of data from smartphones, e-commerce, social networking sites, digital education, digital payments, and many other digital business services has contributed to the remarkable expansion of the Indian data centre market. Currently, India has 80+ third-party data centres, with a total count of around 130+ data centres, which is expected to grow in the future years as India tries to become a genuinely digital economy. The rapid growth of internet users, the tremendous emergence of startups, the rapid use of cloud computing, and the government's investment in the IT sector are all significant drivers of digital and economic progress in India. Favourable market factors in India, such as low internet and data plan costs, high demand and low supply, and an immature market, have demonstrated enormous potential growth.

India's data centre industry was worth US$ 4.4 billion in 2020. Furthermore, by 2026, the Indian data centre industry is expected to rise by US$ 8.0 billion. The Indian Public Cloud Services (PCS) market is anticipated to reach US$ 13.5 billion, increasing at a compound annual growth rate of 24% between 2021-26. With the explosion of data-intensive technologies such as Big Data, IoT, the demand for data collection and storage is increasing exponentially, resulting in the growth of the Indian data centre market, which is currently valued at US$ 1.5 billion and is expected to grow at 11.4% CAGR. The digital economy in India is expected to increase from US$ 200 billion in 2017-18 to an outstanding US$ 1 trillion by 2025.

Data Centre and Cloud Solutions Industry in India

A Data Centre is a specialised secure room within a centralised location where computing and networking equipment is concentrated for the purpose of gathering, storing, processing, distributing, or enabling access to massive volumes of data. Cloud service providers store their IT infrastructure in Data Centres to deliver Cloud Computing services to end customers. A cloud service provider is a third-party company that provides a cloud-based platform, infrastructure, application, or storage service. Examples include Google Cloud Services, Microsoft Azure, and Amazon Web Services.

The cloud is the foundation of digital transformation, and the data centres are the foundation of cloud services. Cloud service providers are heavy users of data centre colocation space. Beyond their own build, CSPs are one of the major users of external data centre services. Over the last three years, hyper scalers have consumed over 60% of data centre capacity, and their thirst is only expanding. Additionally, the CSPs require edge data centres to link with carriers and, via the telecom service providers, to businesses and end consumers. For the CSPs to be able to offer the needed level of services, all under 1 millisecond of latency with appropriate redundancy for 99.99% uptime, interconnected data centres in other cities are crucial.

India is the world's 13th largest data centre market, with 138 data centres. And by the end of 2025, it is anticipated that 45 new data centres with a combined 13 million square feet and 1,015 MW of capacity will be built. In 2021, India's data centre industry was estimated to be worth US$ 4.35 billion. It is anticipated to increase by 132% in just six years, to US$ 10.09 billion, by 2027. By the end of 2022, India would have more than 700 million internet users, nearly double the number in the United States.

Source: News Articles

India is also concentrating on boosting electricity capacity through solar, hydroelectric, and wind, which will draw both domestic and global firms to the Indian data centre sector. The government of India is developing a data centre policy to attract investments and increase the country's current rate of data centre expansion. Along with the establishment of data centre economic zones and Data Centre Facilitation Units (DCFU), the incorporation of data centres under the Essential Services Maintenance Act (ESMA), and the development of a distinct category code for data centres under the National Building Code of India are all included in this plan. It also includes plans to use renewable energy sources to reduce carbon footprint. According to Crisil India, data centre capacity in India is predicted to increase by more than double to 1,700-1,800 megawatts (MW) by fiscal 2025, up from 870 MW last fiscal year, due to the data boom, digital adoption, and local data storage laws. In order to achieve this, an investment of more than US$ 4.84 billion (Rs. 40,000 crore) would be necessary.

Note: E-Estimated ; P- Provisional
Source: CRISIL India

The availability of major hyper-scalers who have started outsourcing their storage needs to third-party data centre providers is the main factor driving the healthy growth of the data centre industry in India. Indian corporate tycoons and overseas investors are investing in Tier 1 cities. Most data centres in India are located in Tier 1 cities, leaving market prospects in Tier 2 and Tier 3 cities untapped. Tier 2 cities are projected to invest more in Edge Data Centre use cases to provide inhabitants with a seamless digital experience. Presently, India has more than 132 data centres spread out around the country, with Mumbai operating about 45% of them. Chennai is a distant second, but it is quickly developing as India's next major data centre powerhouse.

Source: News Articles

Emerging technology trends

• Smart data centres

Smart data centres provide the necessary infrastructure, platforms, and computing capabilities to enable organisations to remain agile and embrace change. National Payments Corporation of India (NPCI) plans to establish Smart Data Centres in Hyderabad and Chennai.

• Eco-Smart Future

Servers are stored in a climate-controlled space with carefully regulated humidity and temperature conditions. Since each rack utilises more energy and produces more heat, cooling systems have to work harder to maintain safe and effective operations. Cloud computing can save billions of dollars in energy expenses and millions of metric tonnes of carbon emissions if the cloud data centre is situated in a location that has adequate renewable energy sources. Therefore, India has the potential to become a global powerhouse for green data centres.

• Networking

Networking capabilities within servers are also transitioning from standard Network Interface cards (NIC) to smart NIC, providing for hardware-level processing capabilities.

• Compute

The industry is witnessing a transition towards Graphical Processing Units (GPU) and Programmable Processing Units (PPU) by utilising Field Programmable Gate Array (FPGA), which allows hardware developers to programme these units to a given application and use cases, offering push to AI/ ML.

Investment Landscape

• In May 2023, Adani to invest more than US$ 2.42 billion (Rs. 20,000 crore) to build India’s first integrated data centre and tech biz park in Andhra Pradesh, hosting a 300 MW of data centre capacity.
• Global titans including NTT, Google, Microsoft, and Amazon, as well as L&T, and Hiranandani Group, have plans to build new data centres in the nation or expand their current ones. Around 4,900-5,000 MW of data centre capacity is likely to be built in the next six years, including investments of up to US$ 18.16 (Rs. 1.5 lakh crore).
• One of the top hyper-scalers has plans to invest more than US$ 2 billion in Hyderabad to build two data centres.
• A Japanese corporation has also announced plans to invest over US$ 2 billion in India over the next four years, citing India's booming data centre sector.
• Another factor contributing to the growth of the Indian DC market is the increased demand for colocation data centres in both global and local organisations. As a result, over ten colocation providers will make major investments in the Indian DC market in 2021.
• A major Indian telecommunications company has announced plans to spend US$ 605.29 million (Rs. 5,000 crore) to construct seven hyper-scale data centres, which will triple its capacity and help India establish itself as a regional data centre hub.
• Another major telecommunications company also intended to invest US$ 950 million in the construction of a data centre in Uttar Pradesh.
• The Indian government has proposed an incentive system to stimulate the establishment of data centres. Additionally, the government intends to invest more than US$ 1 billion over the course of the following five years as part of a hyper-scale data centre plan.

Recent Government Initiatives

Key policy areas are as follows:-

• Draft of Data Centre Policy 2020
  • One of the top priorities for the data centre industry continues to be the availability of consistent, affordable, and clean electricity.
  • MeitY will collaborate with the Department of Telecommunications (DoT) to enable reliable and affordable connectivity backhaul.
  • Data centres will be listed as essential services under "The Essential Services Maintenance Act, 1968 (ESMA)".
  • Recognise data centres as a distinct category under the National Building Code.
  • Establishing Economic Zones for Data Centres.
  • Encourage the development, research, and capacity-building of indigenous technologies.

• DESH

Under the supervision of the Ministry of Skill Development and Entrepreneurship (MSDE), the National Skill Development Corporation (NSDC) is establishing a digital infrastructure with regulatory protocols for the education and skill community known as DESH. DESH aims to enable frictionless trade for skill development, deployment, and associated supply-chain and enabling services. It is not a monolithic platform, but rather a unifying framework that will enable many platforms, apps, service providers, and business models to develop with the underlying framework, protocols, and specifications.

• VPMDP

It is a smartphone app designed to transmit district-specific information such as administrative setup, population, educational institutes, health care institutes, agricultural details, tourism, and so on.

• Arogya seva

This patient app is an endeavour to bring health care services to the patient's location in a way that meets his demands. The goal of the e-hospital telemedicine application is to allow remote delivery of healthcare services and clinical information. Patients can connect with doctors using this app from any location.

• mSevanam

The government of Kerela has created a smartphone app to consolidate the online services provided by different government agencies.

• Jagruti

This mobile app is proposed to deliver timely alerts on petitions filed by petitioners in court against district administration.

• Ente ration card

A ration card management system-related Android mobile app developed by the civil supplies department. Kerala's government has improved 19 e-services relating to the ration card administration system.

• Su-Swagatam

This is a smartphone app developed by NIC, Government of India, and launched by the Ministry of Home Affairs. The goal of this app is to assist tourists seeking Indian visas abroad and accessing visa-related services within India during their stay.

Road Ahead
India is undergoing a shift from an emerging to a developed market economy, and technology is expected to play a critical part in this transition. Digital transformation is not only catalysing economic growth across all sectors, but it also serves as the foundation for improved citizen service delivery, enabling social and financial inclusion, increasing productivity, and contributing to the creation of a linked ecosystem. The data processing and storage market is expected to rise from US$ 56 billion in 2020 to US$ 90 billion by 2025. The amount of data collected daily is increasing dramatically in a digitally connected society. Organisations and enterprises rely more than ever on data collection and the associated Information and Technology (IT) infrastructure. As reliance on data grows, so does the demand for robust, dependable, scalable, and sustainable data centres. The government of India is encouraging the data centre business, and in addition to local players, many international data centre, and cloud service providers are establishing their footprints in India.

The Indian government has taken massive steps by launching initiatives such as the National eGovernance Plan (NeGP) and the Digital India initiative to transform and boost the country's digital capabilities, with a focus on leveraging digital technologies in various sectors such as education, healthcare, e-commerce, industrial, and agriculture. The use of cutting-edge technology, such as quantum computing, artificial intelligence, the Internet of Things, etc., has further encouraged data expansion. The introduction of a bigger number of Special Economic Zones (SEZs), Software Technology Parks (STPs), bolstering skills development and an entrepreneurial ecosystem, and providing different tax and non-tax incentives in these cities may help to strengthen India's digital economy. India will be a key hub for the expansion of data centres over the coming ten years since it has the capacity to adopt the multi-cloud era quickly.