How Gulf crisis may boost India's data center industry
What's the story
The recent attacks on data centers in the Gulf by Iran, which considers them legitimate wartime targets for their technical and data support to some US defense suppliers, have disrupted the region's data center ambitions. This may prompt major operators and hyperscalers to consider India as a potential location for expansion.
Growth forecast
Data center capacity in India to reach 4GW by 2030
India's data center capacity is expected to hit four gigawatts (GW) by 2030, driven by large-scale capacity additions in key markets like the Mumbai Metropolitan Region (MMR). According to a report by property consultancy Cushman & Wakefield, data center developers in India could invest nearly $20 billion for expanding their capacities.
Market shift
Hyperscalers and large conglomerates to gain from this shift
The ongoing geopolitical crisis could benefit hyperscalers like Google, Microsoft, and Amazon Web Services, which build significant captive capacities. Pure-play data center players backed by large conglomerates, real estate developers, and big funds such as Blackstone and Brookfield could also gain from this shift. Large data hyperscalers depend on capacities provided by these operators for their computing needs for generative AI applications and cloud services.
Investment prospects
India is a strategic location for data infrastructure
Raghavendra Mirji, business head of energy solutions at Godrej Enterprises Group, said India is increasingly being seen as a strategic location for data infrastructure in the Asia-Pacific region. He cited India's scale of digital consumption, expanding fiber connectivity, and also growing ecosystem of technology companies as reasons why it makes sense for long-term data center investments.
Regional impact
Impact of Iran's attacks on Gulf countries
The Gulf region, especially the UAE and Saudi Arabia, has been a major hub for data centers due to its business-friendly environment, abundant renewable energy resources, and land availability. However, Iran's recent attacks have hurt these countries' data center ambitions. AWS reported damage from Iranian drone strikes at facilities in UAE and Bahrain since the war began.
Competitive edge
How India can benefit from this shift?
Despite Gulf countries having an edge in electricity costs, India remains a cost-efficient location for data center construction. This is due to several factors including production costs and recent government initiatives like tax holidays for data centers. Several states such as Karnataka, Maharashtra, Uttar Pradesh and West Bengal have also announced dedicated policies with incentives like discounted land rates and electricity duty exemptions.