Policy initiatives that could fuel Data Centre growth in India

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Highlights of the read:

  • Humongous data growth is disrupting established business models
  • Data Centres are at the core of this disruption ever serving the critical role of data enabler for enterprises
  • Driven by the rise in data consumption rates India, too witnessed growth in Data Centre infrastructure
  • While Data Centre industry is witnessing unprecedented growth there is a need have certain policy initiatives in place that can fuel this growth

In this article we talk about certain initiatives that the India government is taking to enable setting up Data Centre infrastructure in the nation:

  • Enabling ease of doing business
  • Enabling ecosystem for Data Centre architecture
  • Promoting indigenous technology development
  • Devising an institutional mechanism for policy governance

While digital transformation has been at the top of mind for all, the pandemic has accelerated the pace of its adoption. With the fourth industrial revolution, the way technology drives businesses forward has changed a lot.

The rapid development of digitalization contributes to the ever-growing global data sphere. The global data volume is likely to reach 149 zettabytes by 2024, according to Statista. Not only the Indian economy will be highly impacted by this humongous data growth that disrupts established business models but will be primarily based on innovations like artificial intelligence, big data, and 3D printing, among others.

The Indian Data Centre industry is expected to be valued at $3.3bn by 2024[1]. To unlock this huge potential newer data centres are to be set up across the country. However, in 2020, India has witnessed a new Data Centre infrastructure setup, whether it is for edge or collocation, primarily driven by the rise in data consumption rates (~13% rise in 2020)

Some of the development that took place in this space:

  • Yotta Infrastructure (Hiranandani Group), plans to build 3 Data Centre parks with 11 hyperscale facilities with a combined capacity of 60,000 racks in the next 5-7 year
  • Adani Group entered into a partnership with Digital Realty (U.S.) to build large Data Centre parks in Andhra Pradesh over the next 20 years
  • Colt (U.S.), announced an upcoming IT-Hyperscale 100MW Data Centre facility in Mumbai
  • Real estate investment co. ‘Ascendas-Swingbridge Group’ has pledged an investment of USD 1 billion in new Data Centre facilities across India in the next five years.

The market is likely to become more competitive with the new set of entrants such as STL coming into space with specialised capabilities in containment, power, and active and passive peripheral as well as designing and managing complete Data Centre build-outs.

Enabling a strong Data Centre infrastructure in the country

India is likely to witness at least 28 large hyperscale Data Centres constructed over the next three years.[2] These will span over 16+ mn sq. ft. with at least 1,400+ MW of IT power capacities, equalling nearly 0.6 mn sq. ft. and 50 MW per facility on an average per hyperscale Data Centre. In the light of the expected 5G rollout this year, tier-1 cities are likely to Data Centre development. There will increased demand for colocation facilities from tier-2 cities owing to the growing data consumption.

The need for Data Centre infrastructure is further necessitated by the data localization provisions of the proposed Data Protection Act and for the protection of the digital sovereignty of the country in an increasingly connected world.

While Data Centre sector is witnessing growth certain impediments need to be addressed such as lack of infrastructure status, complex RoW processes, high cost of power, absence of norms for building data centres, limited submarine cable connectivity, and high OpEx and CapEx. Keeping that in mind the government must provide infrastructure status to Data Centres and make investments in the same capacity as is done for building infrastructures in the nation.

In Union Budget 2020, the FM showed interest in bringing out a policy to enable the private sector to build Data Centre parks throughout the country. The Ministry of Electronics & Information Technology (MeitY) has released the Draft Data Centre Policy, which aims to simplify setting up Data Centre infrastructure in the country. This policy framework is coined around including regulatory interventions, investment promotion, and incentivization mechanisms along with the institutional mechanism required for the governance. The policy also aims to strengthen the Atmanirbhar initiative by identifying opportunities related to domestic manufacturing of Data Centre equipment.

The main features of this policy include:

Enabling ease of doing business – For a robust and sustainable growth of Data Centre infrastructure in the country, certain reforms need to be made. These include providing infrastructure status to the Data Centre sector, simplifying clearance procedure for setting up Data Centre Infrastructure in the country, setting up pre-provisioned Data Centre parks, and schemes and guidelines for incentives in this sector.

Enabling ecosystem for Data Centre architecture – It is very important to create a congenial, competitive, and sustainable operating environment for the long-term growth of the Data Centre sector in the country. Some of the key focus areas are – provisioning of uninterrupted power supply, encouraging the use of renewable energy, efficient utilisation of energy through innovative techniques for reducing carbon emissions, and recognizing Data Centres as a separate category under the National Building Code.

Setting up Data Centre economic zones

The Indian government proposes to set up at least four Data Centre Economic Zones (DCEZ) in the country, as a Central Sector Scheme – DCEZ Scheme. These economic zones are likely to create an ecosystem of Hyperscale Data Centres, cloud service providers, IT companies, R&D units and other allied industries.

Promoting indigenous technology development

The aim is to promote local manufacturing and encourage the use of locally manufactured hardware and software products. Through this, the government also aims to encourage joint ventures between foreign investors and domestic companies, promote R&D in the Data Centre ecosystem and promote adoption of global standards.

Devising an institutional mechanism for policy governance

The government is looking to set up an Inter-Ministerial Empowered Committee (IMEC) under the Chairmanship of Secretary, MeitY, with participation from various Central Ministries and State Governments. The body will make key decisions related to various measures defined under this policy.

Going forward, in the Union Budget 2021, the government must undertake a mid-term evaluation of the policy and then propose any amendments, if required. The vision is to establish a sustainable Data Centre architecture in the country and encourage domestic and foreign investments in the sector.


[1] https://inc42.com/features/union-budget-2020-will-focus-on-data-centres-boost-tech-economy/

[2] http://www.businessworld.in/article/India-Data-Centres-Draw-396-Million-Investment-in-2020-So-Far-Report/19-11-2020-344307/

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