Amazon’s plans to invest $4.4 billion for setting up a data centre in Hyderabad is only the latest indication of the massive opportunity for India to become the data hub of the world. Global tech giants including Microsoft, Google and Oracle have already announced big investments in this area. Even domestic players such as Adani Group, Airtel, Reliance Jio and Hiranandani have rushed into the data centre space in a bid to capture the multi-billion dollar market opportunity.

Data centres become important as the digital delivery of entertainment, healthcare, education as well as goods and services is on the rise. The increased application of new technologies like 5G, cloud computing, the Internet of Things and government initiatives such as Digital India, is driving the growth of digital infrastructure in the country. Data centres also play an important role in ensuring that the user data remains within the country. Data centre capacity in India is expected to double to 1,700-1,800 MW by FY2025 from 870 MW last fiscal, powered by the troika of a data boom, digital adoption and local data storage mandates. This will require investments of over $8 billion. However, there are multiple challenges including unreliable power supply infrastructure; exorbitant land costs, coupled with the non-availability of suitable land parcels in desired cities; non-availability of nationwide high bandwidth low-latency optical fibre cable infrastructure, and the need to acquire multiple regulatory approvals from local authorities. These issues become more prominent when it comes to tier 2 and tier 3 cities. This is resulting in an asymmetrical concentration of DCs within a few States. The divide can widen in the future, jeopardising the roll out of digital services in rural India.

The Ministry of Electronics & Information Technology (MeitY) issued a draft policy in 2020 to give data centres infrastructure status. The proposed policy had envisaged tackling some of the challenges facing the sector including setting up a single window for approvals. A new data centre requires close to 30 approvals from different central and state government departments. MeitY policy also bats for the inclusion of data centres as an essential service under The Essential Services Maintenance Act, 1968 (ESMA) to enable seamless continuity of services even during times of calamities or crisis. These steps should be implemented at the earliest. The TRAI too has suggested fiscal and non-fiscal incentives for the sector. It has also proposed operationalising a data centre specific portal on National Single Window System for various time-bound single window clearances. States lagging in data centres should be supported by the Centre for setting up data centre Parks.

While the land is to be offered by respective States, other incentives, which could include capital and interest subsidy, should be largely borne by the Centre. High bandwidth speeds, stable power supply at low prices, and cutting-edge infrastructure, can bolster India’s rise as a data centre hub.