Data centers: Boosting India's economic expansion beyond infrastructure

India’s data center industry is currently experiencing a meteoric rise, with it projected to grow from approximately $7.44 billion in 2023 to an estimated $9.27 billion by 2027, reflecting a compound annual growth rate (CAGR) of 5.84%. Fueled by an increasing number of internet users and businesses transitioning to online operations, cities like Mumbai and Chennai were already seeing a high concentration of data centers. With the rapid advancement, we are also seeing the emergence of Bengaluru, Hyderabad, and Noida as the new hubs for data centers, catering to the nation’s demand for data accessibility and processing. Additionally, the rise of artificial intelligence (AI) and cloud computing is significantly accelerating this growth. India's data center sector is projected to attract investments totaling $5.7 billion by 2026, driven by increasing AI demand, according to a JLL report. Our government's push for a Digital India and stringent data localization policies, is also causing a ripple effect, enabling economic growth and development across the country. 

All this is also making a significant impact on India's economy. Take for instance employment. The data center space is extremely dynamic and agile – it is in constant demand for a skilled workforce. Establishing a data center demands adept construction workers and technicians to bring the vision to reality. Once it’s up and running, it would need manpower to fill IT, management, and security roles, alongside experts in data management, cybersecurity, and data analysis, to name a few.

A data center setup also involves significant capital investment in land acquisition, construction, and implementing state-of-the-art technology. These investments not only boost the local economy but also drive infrastructure development in surrounding areas – like improved power supply, and enhanced connectivity. Such developments have a much wider impact, benefiting local communities and contributing to regional economic development.

Data centers also help local and national governments benefit from an inflow of property taxes, business taxes, and other fees from these facilities. This steady income from taxes helps fund public services and infrastructure projects, which further stimulates economic growth. On the other hand, government incentives to attract data center investments create a win-win situation, where increased economic activity leads to higher tax collections.

These contributions are not just numbers on a balance sheet—they are real benefits that are transforming communities and enhancing the economic landscape.
Beyond their immediate impact, data centers are also driving indirect economic benefits that are equally transformative. 

Data centers make advanced technology accessible to businesses across India, especially small and medium-sized enterprises (SMEs). They can offer affordable and scalable data storage and processing solutions, allowing SMEs to adopt new technologies without large upfront costs. This access helps businesses improve their operations, innovate, and compete globally, contributing to economic growth.

Today India is the world's third-largest startup ecosystem with over 1.25 lakh startups and 110 unicorns. Advanced data centers are critical for supporting them. Startups, particularly in tech, rely on data storage, processing, and analysis. Data centers provide the necessary infrastructure for these startups to develop and launch new solutions. Having high-performance computing resources within the borders lowers the barriers to innovation, leading to new products and services that drive economic growth.

With the ease of accessibility to data centers, industries like e-commerce, fintech, healthcare, and entertainment – which heavily rely on robust data infrastructure – can continue growing and expanding into new potential markets, providing consumers with greater access to goods and services. Additionally, the availability of local-data centers also helps in promotion of cloud-based tools and services, setting the path for a cloud-centric future.

The added reliance on cloud-based workflows and data centers, would indirectly demand the need for additional investments in the cybersecurity domain. This would in turn help safeguard other aspects of security within an organization, such as operational technology, IoT etc., eventually translating to fewer instances of cyberattacks and ransomware attacks. 

Rise in data center investments can also indirectly help create solutions that are better for our planet. With data centers always striving to become more efficient in their energy consumption, it unlocks a critical avenue for innovation in the domain of energy efficiency as well as cooling technologies, that can extend to industries beyond the data center sector.

Lastly, edge data centers located closer to end-users play a crucial role in extending these benefits even further. By processing data locally, edge data centers reduce latency and improve the performance of applications, which is vital for industries like autonomous vehicles, telemedicine, and smart cities. This local processing power supports real-time decision-making and enhances user experiences, driving innovation and creating new economic opportunities in diverse sectors.

The future of the data center industry in India is as promising as it gets. With the technology continuing to evolve and integrate cutting-edge technologies such as artificial intelligence and quantum computing, data center’s role in fueling economic expansion will become even more pronounced. Ultimately, it is poised to help secure India’s position as a global leader in data storage and processing - a dream that’s not necessarily far-fetched! 

Rohan Sheth

---

Rohan Sheth, Vice President, Colocation & DC Build at Yotta