India to double third-party data centre capacity by March 2028: ICRA

India will double its third-party data centre capacity to 2,500 megawatts (MW) by the fiscal ending March 2028, compared to 1,250 MW as of March 2025, credit ratings agency Icra said in a report on Thursday. The Rs 90,000 crore investment spread over the next three years will support this growth, the report added.

The overall data centre space in India has drawn interest from players both old and new, with plans to develop and deliver 3–3.5 gigawatts (GW) capacity over the coming decade. Companies have committed investments to the tune of Rs 2.3–2.5 lakh crore towards this venture.

Major players, including Sam Altman’s OpenAI and Mukesh Ambani-led Reliance Industries, have shared plans in the recent past to open data centres in India.

Policy advantage

The policy environment for data centres remains favourable, ICRA said, citing the Digital Personal Data Protection Bill, infrastructure status accorded to the facilities, and special incentives from the central and state governments. States, including Maharashtra, Telangana, Odisha, and Tamil Nadu, are actively attracting data centre investments through targeted subsidies and exemptions.

“The recent draft proposal of the ministry of electronics and information technology (MeitY) to provide 20-year tax exemption policy, if implemented, could be a game-changer for India’s data centre growth prospects,” said Anupama Reddy, vice president and co-group head, corporate ratings, ICRA.

The policy offers input tax credits on capital investments, like construction and electrical systems, to lower upfront costs and improve project viability.

Focus on new locations

Mumbai continues to dominate the Indian data centre landscape, contributing more than half of the current operational capacity, according to ICRA. The city ranks 21st globally among the top cities for data centre capacity.

However, data centre developers are moving away from metros and large cities due to the high energy demands of the facilities. As ET reported in July, Sify Technologies, CtrlS Datacenters, ESDS Software Solutions, RackBank and others are shifting from traditional locations, such as Mumbai, Chennai and Noida, to cities offering better returns, like Nagpur, Raipur, Chandigarh, Jaipur, Ahmedabad, Lucknow and Kochi.

“The emergence of edge data centres (smaller, decentralised data centres located closer to end-users and devices) is also gaining traction, propelled by low latency (the delay between a user action and the corresponding system response) and high-speed requirements, particularly in sectors such as banking, healthcare, agriculture, and defence,” the ICRA note read.

Eco-friendly compute

With growing capacity, power-hungry data centres in India are increasing reliance on renewable energy, ICRA said. Green power currently fulfils 15–20% of data centre energy requirements in the country, the agency mentioned.

ICRA said it expects this share to increase to 30–35% by the financial year 2028 to meet ESG mandates and the need to diversify power sources.