Cloud and new tech shift, localisation law drive data centre push in India

The Indian Data Centre (DC) industry is expected to more than double to 1,007 Mw by 2023 from its existing capacity of 447 Mw, says a JLL report

Increased cloud adoption, data localisation demand, and adoption of new technologies such as 5G, IoT is driving the data centre (DC) demand in India. The Indian DC industry is expected to more than double to 1,007 Mw by 2023 from its existing capacity of 447 Mw, said a report from JLL. Mumbai and Chennai are expected to drive 73 per cent of the sector’s total capacity addition during 2021-23, while other cities like Hyderabad and Delhi NCR will emerge as new hotspots.

With increased data consumption by both enterprises and consumers, which received an additional push due to the pandemic, the government too has given its support for the growth of this industry. Rather the Government of India’s draft Data Centre Policy aims to make India a ‘global data centre’ hub by conferring infrastructure status to the industry.

Sharad Sanghi, CEO, NTT, India believes that other than the consumption moving to clouds, and the hyperscalers' entry into India, adoption of DCs has a business case for enterprises as it makes them focus on core technology. “The recent advent of 5G and edge computing is just adding up to the demand for DCs,” he added.

For instance, he added that edge computing will further add to the demand as DCs will now move to small cities. “There are two types of DCs one that are core DCs, which may be located in the metros and will have the storage and compute application and two, as demand on bandwidth grows it makes sense to put the content closer to other users, which reduces latency issues. This is what is making many to take data centres closer to users, this will take off in the coming years,” said Sanghi.

NTT, the world’s third largest DC Player, is also ramping up its presence in India. Last year the company said it would invest a total of $2 billion in ramping up their presence in India. “Of this $1.5-1.6 billion is being invested in acquiring land parcels and building DC parks, the remaining $400 million will be used for under-sea cable connection to DCs in Chennai, Mumbai and Kolkata. We are also setting up renewable energy plants across the country. We have already set up 62.5-Mw plant in Maharashtra, 20 mw Karnataka and we are looking to augment that by another 100mw by setting up plant in Maharashtra,” he added.

The current demand for DCs is just the tip of the iceberg, say industry experts. Industry players believe that the Personal Data Protection (PDP) bill will further give a huge push for DCs in India. The growing consumption of data and future growth in this is driving players in this sector to ramp up their DC footprint in the country.

“If you look at the demand for DCs due to data localization mandates, then the demand is not much. Because data localisation mandate is restricted to certain sectors like banking and finance, pharma and healthcare. The real shift will come when the PDP bill will come into force. Real data consumption happens in media, video-led data and there is no law at this point that mandates that this data should be in India, ” said Sunil Gupta, co-founder & CEO, Yotta Infrastructure Solutions, a 100 per cent subsidiary of Hiranandani Group.

He added that with IoT, AI and ML coming into plat edge computing in Data Centers will also gain traction. “This is being driven by the need of accessing data instantly without a minute delay in buffering. Once you have 5G the real cases of machines and sensors talking to each other in microseconds to a central place in realtime will need access to DCs that will allow this process to take place. The computing has to happen in real-time. That is why we see demand for edge DCs increasing,” he added. The company is also working on creating edge DCs through partnerships. Yotta is planning to have 100 of DCs across India to create the foot print.

Gupta believes that as more and more devices get connected to the internet this will only accentuate the need for DCs. “In the last 5-6 years the size and scale of DCs that are coming in India has changed drastically, especially with the entry of hyper-scalers who are looking for global norms. One of the fall out of this is adopting an environmentally friendly or sustainable way of ramping up DCs, which is making us adopt and create our own renewable-based power,” added Gupta.

The company is fast expanding its footprint. For instance, Yotta Greater Noida DC with 5,000 racks will go live in April, with almost 80 per cent space contractors. Along with this the company will start its Chennai DC park. Going ahead Yotta wants to begin expansion in cities like Kolkatta (20 acre), Pune, Gift City, Gujarat. By 2022, Yotta will have a capacity of 17,200 racks across Mumbai, Delhi and Chennai.

“The growth prospects of India’s DC industry has led to approx $400 million M&A deals over and above the organic investments by operators during 2020, as many operators have announced expansion plans over the next few years. This promising asset class is expected to provide a greenfield real estate development opportunity of 6 million sq ft over the next three years,” said Rachit Mohan, Head, Data Centre Advisory-India Co-Head, Office Leasing Advisory JLL–Mumbai in his report ‘India Data Centre market Update 2020’.

The JLL report further added that rapid growth of the DC industry has meant increasing energy consumption and its impact on the environment. Global cloud players setting up bases in India aim to reduce their carbon footprint and are looking at DCs that provide sustainable energy alternatives. DC operators are tying up for renewable energy power contracts and introducing sustainability measures across the DC operations. “India’s renewable energy capacity at 90 gigawatts accounts for 25 per cent share of the installed power capacity and provides tremendous scope for development of green data centindustry is thus expected to increase its pace of sustainability in sync with global trends,” said the report.