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Why India is Well Poised to Become the Next Data Center Hub

data center

The pandemic accelerated the digital transformation journey for most industries with internet usage going up to unprecedented levels and businesses embracing technology to bring stability and business continuity during uncertain times. Enterprises increasingly moved to the Cloud, and this shift is expected to continue and grow well into the future. Data centers come with undeniable advantages of cost, efficiency, and scalability, enabling a robust digital infrastructure needed to support a growing digital economy.

According to a report by property consultant, JLL titled – ‘2020 India Data Center Market Update’, the capacity of the data centre industry is expected to grow from 375 MW in H1 2020 to 1,078 MW by 2025, registering a CAGR of 21% (MW indicates IT design power load).

With the rise in data volumes and growing digital consumption, multi-tenant, hyper-scale data centers will become essential, and increasing use of technologies like artificial intelligence (AI), machine language (ML), and Internet of Things (IoT) will speed up demand for robust IT infrastructure. The arrival of 5G, IoT-linked devices, data localization, and cloud adoption is also likely to push demand.

India is fast emerging as a location of choice for data center players as the sector witnesses heightened interest from policymakers and regulators to investors, operators, and enterprises.

Indian government’s vision and support

 The Government of India aspires to turn India into a ‘Global Data Hub’ and has brought in various policies and reforms to reach this goal. An ambitious incentive scheme worth up to Rs 12,000 crore has already been submitted for inter-ministerial consultations and is expected to be sent for Cabinet approval soon. This will be a big encouragement for companies to set up data centers in the country.

The government is targeting an investment of Rs 3 lakh crore in the next five years as part of the hyper-scale data center scheme and is planning to provide between 3% and 4% of capital investment as an incentive to companies, along with real estate support and faster clearances.The government’s push for data localisation and introduction of Data Protection Bill clearly outlines the need for big investments in data center infrastructure.

Tech at play as data centers expand

As enterprises depend on data center operators to provide them with maximum uptime, data security, operational efficiency, infrastructure scalability, as well as complete reliability 24×7, technologies like AI and ML will increasingly be used for smart data management and operations.These technologies don’t just make data centers operationally and economically feasible, the technologies employed by select data center maintenance companies also help predict failure or operational bottlenecks, increase energy efficiencies, and strengthen cybersecurity.

Data centers are power guzzlers, believed to be one of the largest contributors to the greenhouse effect. It is becoming imperative for operators today to consider on-site power generation using renewable energy options like solar, wind, or natural gas.Data centers need to implement energy-efficient cooling systems, servers, power supplies and optimize their power management to offset their huge carbon footprint.While progress is being made in terms of hardware and green energy, cooling plays a big part in the sustainability aims of data centers and AI/ML can play a key role by managing and optimizing energy flows.

States upping their game

 Many state governments are introducing favorable policies to support and advance the data center ecosystem. Policies pertain to land regulations and power, incentives and concessions, faster approvals, good fiber connectivity, etc.

Mumbai and Chennai are expected to drive 73% of the sector’s total capacity addition during 2021-23, while other cities like Hyderabad and Delhi NCR are emerging as new hotspots, according to a JLL report. While pre-commitments by global cloud players continue in Mumbai and Pune.

Chennai’s data center capacity is expected to grow by 2.5 times to 133 MW by 2023. The Tamil Nadu government is working to come out with a separate policy for data centers to strengthen the ecosystem.Backed by favorable policies, regulatory incentives, and competitive construction costs, Hyderabad is also emerging as a data center hub, expected to add 66MW during the 2021-23 period.

Over the next three years, the Indian data center business is going to be a 6 million square feet greenfield development opportunity, that will require an investment of $3.7 billion, according to industry experts.Proximity to customers, availability of skilled workforce, submarine cable connectivity, geographic location, power, fiber connectivity, and general construction and operations will remain key criteria for site selection for data centers.

Future outlook

Data centers provide the digital infrastructure that is essential for a digital economy. Post pandemic as digitalization saw a massive surge, so did the demand for data centers, with industry analysts predicting a ten-fold growth of the sector in the next 5 to 7 years.But this opportunity cannot come at a cost to our environment, hence growing sustainably, keeping their carbon footprint low will be a key focus area for operators.

India’s technology services industry can achieve $300-350 billion in annual revenue by 2025 if it can exploit the fast-emerging business potential in cloud, artificial intelligence (AI), cybersecurity, and other emerging technologies, according to a report by industry body Nasscom and global consulting firm McKinsey.

The Indian government’s acknowledgment of data centers as “essential infrastructure” and recognizing their critical role in achieving its Digital India vision is encouraging for the sector. The new data center policy, which is also being finalized by the government, will help set up a national framework that offers simplified rules and improved ease of doing business towards garnering more investments.

(The author Mohammed Atif is Business Development Director at India, Park Place Technologies and the views expressed in this article are his own)

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