As India focuses on its long-term vision to boost digital infrastructure, the country is set to see third-party data centre capacity doubling to 2,400-2,500 MW by FY2028, up from 1,250 MW in FY2025. This growth will be driven by a robust investment pipeline of around ₹90,000 crore over the next three years (FY2026-FY2028), according to the rating agency ICRA. 

India currently accounts for around 3% of the global DC capacity of 42 GW, with the United States contributing around 50%. Estimates suggest that industry players have ambitious plans to boost capacity, with projections indicating that 3.0-3.5 GW will be built over the next 7-10 years, translating into approximately ₹2.3-2.5 lakh crore worth of investment. This clearly suggests the sector is going to play a critical role in India's ongoing digital transformation, says ICRA. 

Among the top data centre hot spots, Mumbai continues to dominate the Indian DC landscape, contributing to over 50% of the current operational capacity and ranking 21st globally among top cities for DC capacity. Its strategic location, reliable power infrastructure, and proximity to the cable landing stations make it a preferred destination for data centre operators. 

In the coming years, says ICRA, India’s share in the global market is expected to rise, driven by increasing data consumption and favourable policy initiatives. The emergence of edge DCs (smaller, decentralised DCs located closer to end-users and devices) is also gaining traction, propelled by low latency and high-speed requirements, particularly in sectors such as banking, healthcare, agriculture, and defence.

Indian DC operators are also focusing on renewable energy, with green power currently meeting 15– 20% of their overall power requirements. ICRA expects this share to increase to 30-35% by FY2028 in response to ESG mandates and the need to diversify power sources. 

In terms of policy, the environment remains supportive, it says, adding that Maharashtra, Telangana, Odisha, and Tamil Nadu are actively attracting DC investments through targeted subsidies and exemptions.

“The recent draft proposal of the Ministry of Electronics and Information Technology (MeitY) to provide a 20-year tax exemption policy, if implemented, could be a game-changer for India’s data centre growth prospects. By offering input tax credits on capital investments like construction and electrical systems, the policy aims to lower upfront costs and improve project viability. This long-term incentive is expected to attract significant domestic and global investments, enabling developers to scale operations with greater confidence,” says Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA.

Despite positive prospects, as competition heats up with the entry of new players, ICRA says pricing flexibility is getting increasingly constrained, which will exert a drag on the profitability and return metrics for the incremental business.