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29. July 2025
India Unleashes Data Centre Revolution: Policymakers Must Act Fast
India’s data centre market is experiencing rapid growth, with capacity in the top seven cities expanding by over fourfold in just six to seven years. As of April, the country has reached 1,263 megawatts of installed data centre capacity. The surge can be attributed to various factors, including the nationwide rollout of 5G, growing adoption of cloud and AI technologies, improved subsea cable infrastructure, and supportive state-level policies.
However, despite this promising growth trajectory, a maze of regulatory requirements that are not consistent across states poses a significant challenge for developers setting up these resources. The fragmented nature of India’s data centre ecosystem is hindering the growth of this industry, and it is imperative that uniform policies are implemented to address this issue.
Obtaining statutory approvals can be a complex and time-consuming process in India, with developers having to navigate 50 to 60 different clearance processes, many of which are inconsistent. This inconsistency is causing delays and increased costs for data centre projects. “There needs to be a better way to handle this,” said Seema Ambastha, CEO at L&T Datacenter and Cloud Services. “A shorter gestation period helps you start monetising faster. This itself is a big incentive—it’s not just about cash incentives. The ease of doing the build is key. A standardised approach would help so that you don’t have to keep referring to different manuals or policies every time you go to a new state.”
The energy costs associated with data centre operations are also a significant challenge, particularly due to varying power policies across states. Energy costs make up a bigger portion of operational expenses, which are complicated by these inconsistent policies. “This is a nightmare in our country. Some states have a policy for green energy, some don’t. And in some, it’s just not a priority,” Ambastha said. “For the country’s sake, there must be a green energy policy. I don’t see why this should be missing in some states. Power is one of the largest components of your OPEX. A uniform power policy would help significantly.”
The lack of uniform regulations is not only affecting the project timelines but also location decisions. States like Maharashtra and Haryana that offer faster clearances and cost-effective incentives attract more data centre investments, while pan-India scalability remains constrained. “More capacity is being concentrated in a few metro corridors, while pan-India scalability remains constrained,” said an industry veteran who is an expert in legal policy and compliances.
The Draft National Data Centre Policy 2020, proposed by MeitY, offers a strong starting point for addressing these challenges. The policy recommends a single-window clearance mechanism, classification of data centres as essential services, promotion of Data Centre Economic Zones (DCEZs), and a centralised incentive structure. However, building a resilient and scalable digital infrastructure demands more—especially a coordinated effort between central and state governments.
India needs a national framework that defines consistent benchmarks for data centre infrastructure, power usage, and security. A central coordination body, potentially under MeitY, could work with states to align incentives and streamline compliance. “With the right frameworks in place, India can not only meet its domestic digital needs but also emerge as a trusted global data infrastructure hub,” said Nitika Goel, managing partner and CMO, Zinnov.
The benefits of uniform policies extend beyond just economic growth. They would also help to create a level playing field for developers and investors, ensuring that everyone has access to the same opportunities. Moreover, it would facilitate the growth of digital services and AI-driven demand in tier 2 cities like Vizag, Coimbatore, and Jaipur.
Despite having favourable policies on paper, several states lack pre-identified land parcels and basic infrastructure, such as roads, electricity, and fibre connectivity, which are essential to fast-tracking construction. “If a state is serious about building digital infrastructure, they should also earmark land and provide basic infrastructure. This would compress the time to value and make projects more attractive,” said the industry veteran.
The government must take concrete steps to address the regulatory challenges facing this sector. This includes implementing a single-window clearance mechanism, promoting Data Centre Economic Zones (DCEZs), and providing incentives for developers. Moreover, states must work together with central governments to align their policies and create a conducive environment for data centre growth. The Draft National Data Centre Policy 2020 offers a promising starting point, but it needs to be strengthened and implemented effectively.
India’s data centre market has tremendous potential, but it requires urgent attention from policymakers, regulators, and industry leaders. A uniform policy framework is essential to unlock this potential and create a level playing field for developers and investors. By addressing the regulatory challenges and infrastructure gaps, India can emerge as a trusted global data infrastructure hub and reap the benefits of its growing digital economy.
The growth of India’s data centre market has been driven by various factors, including the nationwide rollout of 5G, growing adoption of cloud and AI technologies, improved subsea cable infrastructure, and supportive state-level policies. According to a survey by Nasscom Insights, rapid digitalisation is fuelling this sharp rise along with these factors.
The industry veteran emphasized that “each state effectively functions as a separate regulatory jurisdiction, requiring bespoke legal strategies and localised consultants, adding substantial overhead.” This fragmentation is causing delays and increased costs for data centre projects.