India’s data center market is expected to grow from $4.5 billion in 2023 to $11.6 billion by 2032 at a compound annual growth rate (CAGR) of 10.98%, according to India’s Economic Survey 2024-2025.
Data centers are crucial for artificial intelligence (AI) because they provide the immense computational power, storage, and fast networking needed to train and deploy advanced AI systems. India’s data center market is witnessing significant growth, fuelled by the infrastructure expansion and a rising demand for digital services.
“India benefits from lower construction costs, owing to its well-established IT and digitally enabled services ecosystem, as well as relatively affordable real estate with a median of US$6.8 million per megawatt (MW) in 2023, compared to US$9.17 million in Australia, US$12.73 million in Japan, and US$11.23 million in Singapore,” the Economic Survey pointed out.
India’s Economic Survey, which examines national trends and aids in determining resource allocation, was presented by India’s Finance Minister Nirmala Sitharaman in Parliament on January 31. It was published one day prior to the announcement of India’s Union Budget, an annual financial report outlining the government’s planned spending, expected revenue, and expenditure for the upcoming fiscal year.
India’s colocation data center capacity reached 977 MW in 2023, the Economic Survey stated. A capacity of 258 MW was added in the year, reflecting a 105% year-on-year growth. The total capacity under construction for 2024-2028 is 1.03 gigawatt (GW), with an additional 1.29 gigawatt planned, the survey informed.
India is set to host the world’s largest data center in terms of capacity, a development expected to significantly accelerate the progress of AI in the country.
Billionaire Mukesh Ambani’s Reliance Group is acquiring Nvidia’s (NASDAQ: NVDA) AI chips and constructing a data center in Jamnagar, located in Gujarat, the home state of Prime Minister Narendra Modi. This new facility is expected to have a total capacity of three gigawatts. In comparison, the largest current data centers have capacities under 1 gigawatt.
India’s electronics market still only 4% of global market
According to the Economic Survey, initiatives such as Make in India and Digital India, along with improved infrastructure, ease of doing business, and various incentives, have boosted domestic manufacturing and drawn foreign investments.
“However, India’s electronics market represents 4% of the global market. The industry has largely focused on assembly, with limited progress in design and component manufacturing,” the survey pointed out.
“Over the long term, India must position itself as a strategic partner in high-value sectors like biotechnology and semiconductors. Strategic technology partnerships provide opportunities for enhanced cooperation in key areas like space, semiconductors, quantum technologies and advanced telecommunications,” the Economic Survey said.
Recently, India and Singapore teamed up to enhance the semiconductor ecosystem for advanced manufacturing. At the same time, India and the United States are forging strategic partnerships in the semiconductor supply chain while collaborating on AI and advanced computing.
These partnerships come as India aims to become a leading force in semiconductor production. Prime Minister Modi has set ambitious targets to grow the electronics sector from $155 billion to $500 billion by 2030 as part of the country’s broader push to achieve self-sufficiency in manufacturing. The Ministry of Electronics & Information Technology (MEITy) reports that this rapid expansion aims to reduce dependence on imports. With global demand for semiconductors rising, India’s growing semiconductor infrastructure is expected to spur innovation, create jobs, and position the country as a key player in the global digital economy.
The Economic Survey stated that India has drastically reduced its dependence on smartphone imports, with 99% now manufactured domestically. In FY24, the country produced approximately 33 crore (3.3 billion) mobile phone units, with over 75% of the models being 5G enabled. The key drivers of growth have been the large domestic market, the availability of skilled talent, and low-cost labor.
India’s moment to lead in global manufacturing
The Economic Survey stated that high-income countries have lost a significant part of their share in the global manufacturing space during the last decade. This was largely gained by upper- and middle-income countries, mainly because of China’s strength. The share of lower middle-income economies did not, in general, increase. Yet, India managed to improve its share in the pie and global presence.
“However, with 2.8% of the global share in manufacturing, compared to China’s 28.8%, India has a large opportunity to climb up the ladder,” the survey said.
“More so in the light of the IMF’s (International Monetary Fund) observation that manufacturing production is increasingly shifting towards emerging market economies, particularly China and India. India stands a good chance of benefiting from the trends in global industrial diversification,” the survey added.
Recently, global manufacturing has been facing a range of challenges, including persistent supply chain disruptions, political instability, pressure to reduce emissions and move towards renewables, increased logistics costs and other effects of regional conflicts. As a result, the global manufacturing output rose modestly by 0.4% only in the third quarter of 2024, compared to a stronger growth of nearly 1% in the previous quarter, the survey stated.
“Hence, in a rather unsupportive global environment, it calls for lasting, coordinated efforts from all tiers of government, the private sector, the skilling ecosystem, academia and research and development (R&D) institutions, as well as financial stakeholders to enable India to realise its ambition as a manufacturing powerhouse,” the Economic Survey added.
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