India’s data center industry is gearing up for explosive growth, with third-party capacity expected to double to 2,400-2,500 megawatts (MW) by fiscal year 2028, up from 1,250 MW in fiscal year 2025. Rating agency ICRA points to massive investments of nearly Rs 90,000 crore pouring in from fiscal year 2026 to 2028 to fuel this boom.
This expansion forms part of a bigger plan, as industry leaders eye building 3.0-3.5 gigawatts (GW) of data center space over the next seven to 10 years. That push could cost Rs 2.3-2.5 lakh crore, highlighting how crucial data centers are to India’s digital transformation.
Mumbai leads the pack in India’s data center scene, handling more than half of the country’s current operational capacity and ranking 21st worldwide. ICRA credits the city’s strong power grid, prime location, and easy access to undersea cable landing stations for drawing in top operators.
Right now, India makes up just 3% of the world’s 42 GW data center capacity, while the U.S. dominates with 50%. But India’s slice should grow fast, thanks to skyrocketing data use and helpful government policies.
Smaller edge data centers—compact setups closer to users—are picking up steam, especially in fields like banking, healthcare, agriculture, and defense. These help deliver quicker, more reliable services where it matters most.
Operators are also going green, with renewable energy covering 15-20% of their power needs today. ICRA predicts that figure will jump to 30-35% by fiscal year 2028, driven by environmental, social, and governance (ESG) rules and the push to diversify energy sources.
Government support is supercharging this growth. The Digital Personal Data Protection Bill, infrastructure status for data centers, and incentives from states like Maharashtra, Telangana, Odisha, and Tamil Nadu are pulling in big money through subsidies and tax breaks.
Anupama Reddy, vice president and co-group head of corporate ratings at ICRA, calls a proposed 20-year tax exemption from the Ministry of Electronics and Information Technology a potential game-changer for India data centers. “By offering input tax credits on key investments like construction and electrical systems, this policy cuts upfront costs and boosts project success,” she said. “It should draw huge domestic and international funding, giving developers the confidence to expand boldly.”
Still, fiercer competition is shaking things up, limiting how much operators can charge and squeezing profits. To counter that, companies are securing loans that stretch 12-18 years, keeping their finances solid even with higher debt. ICRA forecasts leverage ratios of 4.5-5.0 times in the coming years, alongside debt service coverage ratios of 1.5-1.7.
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