As states compete for data centers, execution surpasses sops

Power and execution, not policies, now decide India’s data centre race

As Indian states compete to attract data centre investments amid rising demand from cloud computing and artificial intelligence, industry executives say execution on the ground — not policy announcements — has become the key differentiator.

States such as Karnataka, Telangana, Maharashtra, Gujarat, Uttar Pradesh, Odisha, Tamil Nadu, Haryana and West Bengal have rolled out data centre policies and incentives. However, companies say success now depends on how quickly governments can deliver power connections, approvals and infrastructure.

Power remains the biggest requirement

Uninterrupted and high-capacity electricity is the most critical need for data centres, which typically require 40–200 MW or more of power.

“Getting the right kind of power, substations and capacity is extremely important. Power will always remain a major priority where we need government and regulatory support,” said Alok Bajpai, managing director (India) at NTT Data.

Beyond generation capacity, operators need timely access to substations, high-voltage lines and expandable infrastructure. Companies are also increasingly looking for collaboration with state governments on renewable energy and land availability to ensure sustainable growth.

Proximity to customers matters

Apart from power, proximity to customers is another key factor in choosing locations.
“Companies prefer to be closer to their clients. For example, Microsoft has many large customers in Hyderabad, which makes the city attractive,” said Srihari Srinivasan, director and lead for data centre services at Savills India.

Executives warn that without faster approvals and coordination between governments and private players, India could face capacity constraints in the coming years.

Infrastructure execution over incentives

While incentives such as green tariffs, open-access power rules and electricity-duty exemptions help improve project viability, industry leaders say predictability and execution matter more than policy announcements.

“Fast approvals and the ability to operationalise policies on the ground are critical,” said Sharad Agarwal, CEO of Sify Technologies’ data centre business. He added that companies prioritise locations with strong transmission and distribution infrastructure.

According to Surajit Chatterjee, managing director and head of data centres at CapitaLand Investment, factors such as submarine cable landing stations, proximity to enterprises and existing infrastructure play a decisive role in shaping data centre hubs.

Mumbai, Chennai lead capacity additions

Mumbai and Chennai continue to dominate India’s data centre market due to their strong connectivity and customer concentration.

India currently has 1.5 GW of data centre capacity, which is expected to grow to 14 GW by 2035, driven by AI, cloud and 5G adoption, according to a PwC India report.

In the first half of 2025:

• Mumbai accounted for 47% of new capacity
• Chennai added 30%
• Bengaluru contributed 14%, according to Savills India Research

Expansion into smaller cities

While major hubs lead growth, companies are also exploring smaller cities. Datasamudra, part of Teleindia Datacenter, plans a 35–40 MW AI-focused data centre in Mangaluru and 5 MW edge facilities in Mysuru and Hubballi-Dharwad.

Many global players prefer entering India through joint ventures with local partners, as navigating land, power and approvals can be complex. For example, Meta Platforms is reportedly in talks with Sify Technologies to build a 500 MW hyperscale AI data centre in Visakhapatnam.

Big investments announced

Several large commitments were announced recently:

• Infrakey Datacenter Parks signed an agreement with Telangana to build a 1 GW AI data centre with an investment of ₹70,000 crore
• Singapore-based AGIDC committed ₹67,500 crore for an international gateway data centre in Telangana
• Microsoft plans to launch its Hyderabad data centre by June next year as part of its $3 billion India investment
• NTT Data has opened a new campus in Bengaluru and plans to invest over ₹2,400 crore