Will India’s AI Boom Make Data Centres its Next Strategic Infrastructure Asset?

KUALA LUMPUR, 21 JULY 2026 —

Overview: .India's AI boom is transforming data centres from mere supporting infrastructure into a strategic national asset, attracting over $126 billion in planned investment.Global hyperscalers including Google, Microsoft, AWS, and domestic operators are rapidly expanding AI-ready facilities to meet soaring demand for cloud computing and AI workloads.While the investment pipeline is strong, long-term success will depend on solving challenges related to power, water, land, skilled talent, and project execution..Five years ago, data centers barely registered on India's strategic infrastructure radar.

With cumulative investment commitments now exceeding $126 billion and a development pipeline already two to three times the existing supply, the question has shifted from whether India can build a data center industry to whether it can execute quickly enough to claim its share of the global AI infrastructure buildout..A Market That Has Already Crossed an Inflection Point.The raw numbers tell a story of rapid acceleration.

India's total data center capacity crossed 1,700 MW in 2025, supported by a record 440 MW of new supply, a 160% jump from 2024, according to CBRE. In 2026, capacity is projected to grow by another 30% year-on-year, with approximately 500 MW of fresh supply expected to come online.

Annual capacity additions have roughly doubled since FY23, when India had 778 MW, reflecting the transition from enterprise colocation as the dominant use case to AI-first hyperscale buildouts that require far greater power density and physical scale.The market's financial trajectory matches this pace. IBEF projects the sector will reach $22 billion in value by 2030 at a 14-15% CAGR.

KPMG identifies a $46 billion opportunity in AI-optimised data centers alone by 2033, growing at a 35.1% CAGR, a figure driven by three simultaneous forces: the explosion in AI workloads, accelerating enterprise cloud adoption, and India's Digital Personal Data Protection Act, which restricts cross-border data transfers and effectively requires global companies handling Indian user data to build physical infrastructure inside the country.Also Read: Airtel Nxtra Plans to Raise $1 Billion to Expand India’s Data Centre Network.Why Global Hyperscalers Are Choosing India at This Scale.The scale of hyperscaler commitments to India in the past eighteen months is without precedent in the country's infrastructure history.

Google announced a $15 billion investment in AI data centers in Andhra Pradesh in October 2025, combining compute infrastructure with renewable energy procurement and fiber connectivity. Microsoft followed in December with a $17.5 billion commitment through 2030, building on an earlier $3 billion program. Amazon Web Services has pledged $35 billion by 2030 to build AI infrastructure and expand digital exports.

At the domestic level, Adani Group's AdaniConneX joint venture has announced $100 billion in renewable-powered hyperscale capacity through 2035, while STT GDC India, currently the country's largest operator with over 400 MW of capacity and 30-plus projects, was recently valued at close to $14 billion by Singtel and KKR, underscoring how rapidly this sector is moving from niche infrastructure into a mainstream institutional asset class.India's attractiveness rests on a set of structural advantages few countries can match simultaneously.

More than 900 million internet users generate vast volumes of data that increasingly require local processing under data sovereignty laws. Average monthly wireless data consumption has crossed 25 GB per user. The country accounts for nearly 20% of global AI-related development activities, with AI hiring growing by 33% year-on-year. And software engineers are available at roughly $20,000 per year, a fraction of the equivalent costs in the United States, Europe, or Singapore.

KPMG's Unaise Urfi summarized the investment logic directly: "Data infrastructure has moved into the boardroom. Capacity decisions are now tied to growth strategy, compliance risk, and operational resilience.".Policy Has Shifted From Neutral to Active Enabler.India's regulatory environment has moved from passive observation to active facilitation of data center growth.

The Union Budget 2026-27 extended a 20-year tax holiday to eligible foreign cloud providers through 2047, alongside 25-35% capital incentives for green technology adoption in data center construction and a 15% safe harbor margin to reduce transfer pricing disputes.

Tax certainty of this kind is estimated to lower the weighted average cost of capital for data center projects by 200-400 basis points, directly improving project returns and accelerating deployment decisions by operators who might otherwise wait for regulatory clarity.

Morgan Stanley separately noted that total capital expenditure is set to rise 11.5% year-on-year in FY27, with data centers explicitly among the beneficiaries of the budget's infrastructure push.The government's draft National Data Center Policy, when finalized, is expected to streamline land, power, and environmental approvals, a process that has historically been the primary bottleneck between announcement and first rack going live.

Multiple states have introduced their own incentive frameworks: Telangana, Maharashtra, Andhra Pradesh, Tamil Nadu, and Uttar Pradesh are leading inflows at the state level, while tier-II cities including Ahmedabad, Visakhapatnam, Patna, and Bhopal are seeing growing developer interest driven by lower land costs, 5G rollout, and lower-latency requirements for edge AI applications..The Gap Between Announcements and Operational Reality.Despite the headline momentum, a significant execution gap exists between what has been announced and what is physically operational.

Less than 20% of announced capacity from the roughly 30 large projects launched between March 2025 and April 2026, collectively adding around 3.5 GW of planned capacity, is currently live, according to CRN Asia's analysis. Most large, multi-phase campuses carry commissioning timelines extending to 2028 and beyond.

Ellenox's June 2026 AI Infrastructure Cycle India report captures the tension clearly: India's data center capacity has quadrupled in five years, yet GPU availability remains import-dependent, AI workloads are scaling at 25-35% CAGR while frontier talent grows at only around 15% CAGR, and despite 1.25 lakh vacant industrial plots, infrastructure-ready land with confirmed power access remains genuinely scarce.Mumbai continues to account for over 50% of India's operational data… (AI-assisted rewrite, based on the original source)