India Forward — 17 September 2025
Will India become a leading global datacenter market?
India must scale its digital infrastructure while balancing its energy, water and climate goals.
By Soon Chen Kang and Ankita Chauhan
Highlights
India’s digital landscape is undergoing an unprecedented transformation, which is spurring significant investments in infrastructure and supporting the expanding digital economy. This transformation is a key driver of datacenter growth in India.
According to S&P Global Commodity Insights estimates, India is expected to become the second-largest market for datacenter electricity demand in Asia-Pacific over the next two years, surpassing Japan and Australia.
A supportive regulatory environment and subsidies from central and state governments are important in driving local datacenter demand. The country has introduced policies that improve data security and incentives that lower energy costs and offer uninterrupted power supply to attract datacenter investments in India.
India’s digital landscape is undergoing an unprecedented transformation, characterized by rapid growth in data consumption through increased internet penetration, digital transactions, e-commerce, online services and social networking sites. The adoption of advanced and emerging technologies such as cloud computing, AI and the internet of things is stimulating this growth. The transformation is driving significant investments and development in digital infrastructure, such as datacenters, supporting the expanding digital economy.
What is causing a surge in datacenter investment in India?
India’s IT load capacity totaled 1.4 GW as of the second quarter of 2025, according to S&P Global Market Intelligence 451 Research. This is expected to double in the next two years, with another 1.4 GW of new capacity under construction. Local and global technology firms have announced investments of more than $32 billion in the last two years to expand datacenter infrastructure in India.
Over 95% of the datacenter capacity increase in India in the next five years is expected to come from leased facilities, retail and wholesale, and the rest from hyperscalers for dedicated AI infrastructure.
Why is datacenter electricity demand in India expected to grow almost fivefold by 2030?
The total IT load of datacenters in India, including retail colocation and wholesale datacenters, has doubled in the last four years. According to S&P Global Commodity Insights, datacenter electricity consumption is estimated to be about 13 TWh, constituting 0.8% of India’s total electricity demand at the end of 2024. It is served mainly through the grid and complemented by captive and third-party contracts.
Based on pipeline projects and investment announcements for datacenter expansion, more than 5 GW of additional IT load capacity is expected to be operational by 2030. With growing interest in hyperscalers and large-scale datacenter capacity, S&P Global Commodity Insights expects India’s datacenter power demand to grow almost five times to 57 TWh by 2030, registering annual average growth of about 28%. This rapid datacenter growth in India will result in datacenters’ share of electricity demand more than tripling to about 2.6% in 2030 from 0.8% in 2024.
Despite strong growth drivers, there is uncertainty regarding the scale and efficiency the industry is likely to achieve. S&P Global Commodity Insights and S&P Global Market Intelligence 451 Research are closely monitoring developments in the segment to enhance and fine-tune power demand projections. The high-case scenario represents a fast-track adoption of hyperscalers, and the low-case scenario represents infrastructure challenges leading to slower capacity growth.
India to become second-largest market for datacenter electricity demand in APAC
India is among the five leading markets in Asia-Pacific for datacenter electricity demand, with 13 TWh of power demand in 2024. Asia-Pacific has the highest power demand growth globally due to industrialization, urbanization and electrification. Datacenter demand growth in the region is driven by global factors such as increasing digitalization and local factors such as policy, support measures and infrastructure readiness.
India’s power demand is expected to grow at a 5.3% annual average rate, with datacenter demand as one of the country’s high-growth consumer segments. According to S&P Global Commodity Insights estimates, India is expected to become the second-largest market for datacenter electricity demand in Asia-Pacific over the next two years, surpassing Japan and Australia. Federal and state policy will mainly drive this growth, leading to a spate of investment announcements around key industrial and technical hubs in the country. These will be near major urban centers that have existing infrastructure, proximity to key demand centers for IT and IT-related services, and an available trained workforce.
Subsidies, localization mandates drive investments
Datacenter investments in India have escalated primarily due to a growing focus on digitalization and technological advancements. However, a supportive regulatory environment and federal and state government subsidies have also played an important role in driving local datacenter demand.
Central government policy aims for ease of business and data security
In 2018, the Reserve Bank of India mandated storing financial data within India. This regulation ensures that sensitive financial data is securely stored and locally processed. In 2020, a draft national datacenter policy was introduced to create a stable ecosystem for computing infrastructure. The draft policy proposed a datacenter incentivization scheme and setting up datacenter economic zones to, among other things, provide fiscal and nonfiscal incentives for the sector.
This was followed by the classification of datacenters as key infrastructure through their inclusion in the Indian government’s Harmonized Master List for Infrastructure Sub-sectors in 2022 and the Digital Personal Data Protection Act governing data localization laws in 2023. Lastly, India launched the IndiaAI Mission in 2024, with an outlay of $1.2 billion for the procurement of graphics processing units (GPUs). Implemented using a public-private partnership model, it offers access to GPUs at a rate as low as $1.36 per GPU hour. These initiatives and regulatory measures are expected to multiply computing infrastructure demand over the next decade.
As part of the IndiaAI Mission, two rounds of GPU tenders have been completed in 2025. Over 34,371 GPUs have been awarded, with about half already installed as of mid-2025. Once fully operational, these GPUs are estimated to provide about 2 TWh of additional annual electricity demand, or about 10% of the estimated power demand from datacenters in 2025.
State policies offer subsidies, guarantee uninterrupted power supply
Major financial and technology hubs such as Maharashtra, Telangana and Karnataka account for about 70% of India’s operating datacenter capacity. These states offer a mix of capital expenditure and operating expense subsidies as well as infrastructure to attract datacenter investments.
Key incentives include land and building costs subsidies, single window clearances and waivers on electricity duties. These are crucial, as energy costs account for approximately 65% of datacenters’ operating expenses. For example, Maharashtra categorizes datacenters under the industrial consumer sector instead of commercial, allowing them to pay about 40% less in retail electricity tariffs. Similarly, datacenters in Karnataka that use renewable energy sources for at least 30% of their total power are eligible for the lower-cost industrial tariff and a cash incentive for higher renewable consumption. Uttar Pradesh, on the other hand, charges higher commercial category tariffs at the time of writing, despite having an attractive datacenter policy.
Other incentives, such as guaranteed power supply, backup power options and waivers on renewable energy procurement, are in place to attract investments to these states. For example, Tamil Nadu offers 40%-50% waivers on cross-subsidy surcharges and full waivers on additional surcharges for renewable procurement by commercial and industrial consumers.
Water stress in key urban centers could result in operational challenges
Water availability is a growing concern, especially in urban centers such as Mumbai, Bengaluru and Chennai, where most datacenters are located. Datacenter expansions are planned around these cities, which are already facing water stress, especially during summer. With high water demand from datacenters for cooling needs estimated at about 25.5 million liters per year for a 1 MW load, according to data from the Uptime Institute, the computing infrastructure in these cities may face operational disruption risks without government intervention. India needs a datacenter policy that accounts for water use in addition to other critical infrastructure support for land and electricity.
Evolving supply mix with emphasis on supply reliability and sustainability
At present, datacenters’ main source of power is electricity supplied by the grid through state power distribution companies. The grid is dominated by conventional fuels, with coal-based power constituting more than 70% of total electricity generation. While a few states offer dual-grid power connectivity to ensure a continuous energy supply, datacenter operators use diesel generator sets and uninterruptible power supply or inverter systems as backup power solutions. Additionally, datacenter operators with sustainability targets increasingly emphasize carbon offsets and clean energy procurement.
Renewable energy is a key pillar of India’s energy transition strategy. The country is looking to more than triple its renewable and energy storage capacity to reach about 500 GW by 2030. Although the share of renewable energy in the generation mix is targeted to increase to 32% by 2030 from 13% in 2024, continued reliance on coal-based generation is expected in the medium term due to renewable energy’s intermittent nature, high storage costs and infrastructure constraints.
The majority of datacenter operators are expected to double down on customizing their energy procurement strategies to meet sustainability targets. This will be supported by multiple procurement options in the market, with open access to the transmission and distribution grid for self-procurement by commercial and industrial consumers, as well as state-level waivers to promote renewable energy.
Procurement strategies to revolve around higher share and firm supply from renewables
S&P Global Commodity Insights has recorded more than 3 GW of renewable procurement deals announced by datacenter operators for live and pipeline projects. Datacenters constitute about 15% of the total corporate renewable announcements in India, while the materials and manufacturing sectors command the majority, comprising two-thirds of volumes recorded.
Datacenter operators are adopting a mix of strategies, including directly procuring electricity from renewable sources and establishing captive power plants that utilize various technologies. For example, Yotta Data Services Pvt. Ltd.’s datacenter in Panvel, which is about 40 km south of Navi Mumbai and has an IT load of 33 MW at full build-out, plans to meet its electricity demands through a natural gas-based power generation plant and solar photovoltaics. Globally, datacenters are exploring nuclear-based small modular reactors for a carbon-free, reliable electricity supply.
Long-term procurement strategies are preferred over short-term solutions, including the purchase of green energy attributes to offset emissions. As a next step, voluntary targets to meet 24/7 demand from renewable energy sources are expected to increase. The demand for a round-the-clock supply of renewable electricity is expected to be met through strategies including direct power purchase agreements, where oversize wind and solar capacity is complemented by energy storage to meet a higher share of consumer load. Market mechanisms such as contracts for difference or virtual power purchase agreements are also gaining popularity.
Sufficient renewable energy capacity available to meet additional demand from datacenters
S&P Global Commodity Insights estimates that 15-30 GW of additional renewable capacity will be needed to meet projected datacenter power demand over the next five years, less than 10% of the total renewable capacity additions projected during this period. This can be easily managed, as India has significant untapped renewable potential and favorable economics for solar and wind. Battery storage is already competitive in hybrid models, with renewables being compared to conventional sources.
A key factor will be timely grid expansion, which has a lead time two to three times higher than that of renewable generation projects. India has announced dedicated green energy grid corridor plans to create renewable energy zones. However, execution delays due to challenges in acquiring permits and right-of-way pose a challenge. Another risk factor in the direct procurement of renewables is regulatory uncertainty due to frequently changing state regulations and expiring renewable energy waivers.
The shift to renewable energy will support the sustainability goals of the sector’s service providers. This transition is essential for continued datacenter growth in India.
In conclusion, India appears ready to absorb projected datacenter growth, boasting power demand and supply options, renewable resource availability, and a mature and cost-competitive market. In the short to medium term, datacenters are expected to rely on grid electricity and clean energy procurement contracts. However, in the long term, the sector is expected to move toward a larger share of corporate renewable contracts and other market-based mechanisms as AI affects datacenter demand and sustainability targets become more stringent.
Looking forward
With over 5 GW of additional IT load expected by 2030, significant datacenter growth in India is on the horizon. The country is on track to become the second-largest datacenter electricity consumer in Asia-Pacific.
The IndiaAI Mission and GPU tenders will support the adoption of hyperscale datacenters. Still, a focused policy is needed to boost investment in hyperscalers to make India an AI infrastructure hub. Continued support through federal and state policies will attract more domestic and international investments, mainly toward retail- and wholesale-leased datacenters.
The shift to renewable energy procurement will support the sustainability goals of the sector’s service providers. S&P Global Commodity Insights expects to see procurement strategies that mix renewable energy with other technologies, such as small modular reactors and natural gas, to decarbonize energy consumption. Energy storage with renewables will also be adopted to ensure 24/7 clean power.
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This article was authored by a cross-section of representatives from S&P Global and in certain circumstances external guest authors. The views expressed are those of the authors and do not necessarily reflect the views or positions of any entities they represent and are not necessarily reflected in the products and services those entities offer. This research is a publication of S&P Global and does not comment on current or future credit ratings or credit rating methodologies.
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