India’s Data Centre Capacity Crosses 1.6 GW, AI & Cloud Services Drive Growth: Report

New Delhi, Jun 2 (KNN) India’s data centre sector has entered a strong expansion phase, with total live capacity exceeding 1.6 gigawatts (GW) by the end of 2025, up from about 296 megawatts (MW) in 2016, reflecting a five-year compound annual growth rate (CAGR) of nearly 30 per cent, according to a report by Knight Frank India.

The report titled ‘India Data Centre Market Update 2025: Tracking Capacity, Demand and Supply Pipeline’ noted that the growth is being driven by rising demand from artificial intelligence (AI), cloud services, and increasing digitalisation. 

The sector added 371.5 MW of live capacity in 2025, following a substantial addition of 361.6 MW in 2024, continuing a trend of steady capacity expansion.

AI and Cloud Drive Demand

The report highlights that AI-led workloads are emerging as a key growth driver. AI-related data centre leasing reached 348 MW in 2025, with overall colocation demand crossing 2 GW. Nearly one-fifth of total demand is now linked to AI applications, reflecting rapid adoption across industries.

Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India said, “The Indian data centre sector is no longer merely expanding — it is structurally transforming into one of the foundational pillars of the country’s digital economy.” 

“AI-led workloads, hyperscaler investments, sovereign data requirements and cloud adoption are collectively accelerating demand for high-density digital infrastructure across India. What distinguishes the current cycle is the sheer depth of the development pipeline and the strategic diversification into emerging corridors beyond traditional hubs,” Baijal added.

Mumbai Leads, New Hubs Emerge

The report highlighted that Mumbai remains the largest data centre hub, accounting for around 47 per cent of total capacity, supported by strong connectivity and infrastructure. Chennai and Hyderabad have also seen rapid growth, driven by favourable policies, lower costs and increasing investments by global technology firms.

Other cities such as Bengaluru, Pune and the National Capital Region continue to expand as specialised markets, while Tier-II cities are emerging as new destinations for large-scale data centre development.

Rising Investments and Policy Support

India’s data centre ecosystem is attracting significant investments, with commitments exceeding USD 100 billion. Government initiatives, including data localisation rules and incentives for digital infrastructure, are supporting long-term growth, the report noted.

Major global and domestic players are expanding their presence, while large-scale projects in cities such as Visakhapatnam and Jamnagar indicate a shift towards geographic diversification.

Challenges Remain

The report emphasised that despite strong growth prospects, the sector faces challenges related to power availability, infrastructure readiness and regulatory approvals. Delays in transmission capacity and environmental clearances continue to affect project timelines.

Sustainability concerns, including high energy and water usage, are also prompting operators to adopt more efficient technologies and cooling systems.

(KNN Bureau)