India's data center capacity to touch 10.5GW by FY2031
What's the story
India's data center capacity is projected to increase nearly six-fold, from 1.8GW to around 10.5GW by fiscal year 2031, according to a report by Morgan Stanley. The surge is mainly driven by the growing adoption of artificial intelligence (AI) and data localization policies. AI workloads alone could account for some 6.8GW of the projected capacity, the investment bank said in its report.
Growth factors
Investment cycle in data centers
The report also highlights that the rising demand for low-latency processing, stricter localization norms, and increasing compute intensity are major contributors to this growth. Geopolitical shifts and India's regulatory push are fueling a multi-year investment cycle in data centers. Morgan Stanley estimates an industrial capital expenditure pipeline of roughly $60 billion linked to incremental data center capacity covering land, power systems, cooling infrastructure, and networking equipment.
Investment requirements
Need for investment in power ecosystem
The report indicates that the power ecosystem will need over $20 billion of investment to support energy-intensive facilities. The operators are increasingly moving toward renewable energy and storage solutions. Policy measures such as data localization stipulations, infrastructure status for data centers, and fiscal incentives are speeding up capital formation and attracting global hyperscalers.
Capital allocation
Impact of Middle East conflict on India's capex
Morgan Stanley estimates that about 60% of the incremental capital expenditure in India through 2030 will be allocated to energy transition, data centers, and defense. The report predicts an incremental cumulative capex of $800 billion over the next five years in these sectors due to the Middle East conflict. India's investment rate is expected to touch 37.5% of GDP in FY2030.