India must turn policy momentum into outcomes for a data-centric future

India stands at a pivotal, transformative juncture in its digital journey. As we confront the complexities and opportunities of an AI-driven future, the bedrock of our national digital sovereignty unequivocally rests upon one critical infrastructure: datacentres. Today, our conviction in India's trajectory is stronger than ever, not merely due to rising market demand but because of the unprecedented policy momentum reshaping our industry landscape.

Projections indicate the digital economy’s share will grow to 20% of GVA by 2029-30. Key growth drivers include the rapid adoption of AI, cloud services, and the rise of global capability centres (GCCs). Our digital infrastructure will determine how quickly India can leverage AI benefits across sectors.

The strategic power of policy-driven growth

Over the past few years, India has seen a remarkable acceleration in the datacentre capacity. The industry is poised for explosive growth, with capacity projected to surge 77% by 2027, reaching a staggering 1.8 GW. This remarkable expansion comes on the heels of the industry surpassing the 1 GW milestone in 2024, demonstrating a robust 24% CAGR since 2019. This growth has been catalysed by a series of strategic policy interventions at both central and state levels that rightly recognise datacentres as critical infrastructure for India’s global competitiveness.

The recent wave of tax exemptions for datacentre developers represents a watershed moment. These incentives, encompassing electricity duty exemptions, stamp duty waivers, land subsidies, and the proposed GST input tax credits, are not mere financial sweeteners. They are strategic instruments aimed at cementing India’s position as a global data infrastructure hub, capable of supporting the nation’s AI roadmap while strengthening its digital sovereignty.

The draft National Data Centre Policy, 2025 is a timely, forward-thinking blueprint poised to solidify India's position as a global data infrastructure hub. Its comprehensive focus on tailored tax incentives, streamlined single-window clearances, and aggressive green energy adoption aligns seamlessly with India’s digital transformation imperatives and sustainability goals.

From fragmentation to a unified vision

While the momentum is immensely encouraging, we must acknowledge a critical challenge: India currently operates under a "one nation, many laws" framework when it comes to datacentre policies. With at least 13 states having implemented dedicated datacentre policies, this landscape, though reflective of vibrant state participation, demands a unified vision. A harmonised incentive framework with a national directive can reduce investor uncertainty and allow states to develop innovation-friendly policies.

Any strategic discussion on datacentre policy must elevate sustainability to the forefront. The policy framework's emphasis on green energy, storage standards, and innovative solutions like small modular reactors demonstrates that India's datacentre ambitions must align with its climate commitments. Sustainability innovations like AI energy optimisation, liquid cooling, and renewable PPAs will increasingly shape the sector’s operational backbone. Green-certified datacentre capacity has grown at a 15% CAGR, reaching 314 MW as of April 2025, representing approximately one-fourth of capacity across major cities. This is not a trade-off between growth and sustainability; it is the only viable path forward.

Economic multiplier effects

The economic implications extend far beyond infrastructure. Datacentre growth will drive an increase in tech services revenue over the next 3-5 years, spanning cybersecurity, cloud infrastructure, AI-driven automation, and systems integration. Research shows that every megawatt of datacentre capacity creates approximately 2,000 jobs—from cybersecurity experts and cloud infrastructure engineers to AI/ML specialists and sustainability technologists. The expansion into Tier II and III cities subsequently increases the capacity, promising to distribute the economic benefits more equitably across the country, fostering digital inclusion and regional development.

The momentum is undeniable. The government's proactive stance, from the draft National Data Centre Policy, 2025 to wide-ranging incentives, clearly shows India aims to be a global data infrastructure powerhouse.

India is leveraging rapid digitalisation, strategic geography, and policy-backed hyperscale infrastructure growth to power the world’s next wave of cloud expansion. The building blocks are in place. The vision is unequivocally clear. Now, the mandate is for swift, coordinated action by all the key stakeholders to transform this policy momentum into tangible outcomes, definitively securing India's digital sovereignty and its competitive position in the global digital economy.

(The author is founder and CEO, CtrlS Datacenters. Views are personal.)