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India’s data centre market, valued at $7 billion in 2023, is expected to grow at a compound annual growth rate (CAGR) of 8 per cent to reach $8 billion by 2025, a report showed on Thursday. 

Additionally, the country’s data centre capacity is set to expand from 1,150 MW in 2023 to 1,700 MW by 2025, with a robust growth rate of 22 per cent, according to the report by 1Lattice, a tech-enabled market intelligence firm.

With a growing number of data centres concentrated in Mumbai, Delhi-NCR and Bengaluru, the report outlined how these cities have become central hubs for colocation services, accounting for over 55 per cent of the country’s capacity.

“The surge in data consumption, the rise of emerging technologies, and strong government support are converging to make India one of the fastest-growing data centre markets in the world,” said Abhishek Maiti, Director–Technology and Internet at 1Lattice.

The report also emphasized the critical role of government initiatives like the ‘Data Centre Incentivization Scheme’ and ‘Make in India’ in boosting the data centre sector.

“Investments in infrastructure, technology, and sustainability will be key drivers of this transformation,” said Maiti.

Globally, the data centre market is expected to grow from $227 billion in 2023 to $250 billion by 2025, driven by the global adoption of cloud computing, edge technologies, and AI/ML, reshaping how industries manage and store data.

India has the potential to add another 500 MW data centre capacity over next the four years. The data centre sector doubled from 540 MW in 2019 to 1,011 MW in 2023, making India among the fastest-growing markets globally. The country saw 21 per cent growth in data centre absorption in the first half this year, as demand for edge data centres surged from tier 2 and 3 cities.