Behind the headline growth numbers of data centres in India lies a complex web of challenges—from policy fragmentation and power constraints to talent shortages and infrastructure readiness—that could determine how sustainably the sector scales.
While established hubs like Mumbai and Chennai continue to dominate nearly 65–70% of India’s data centre capacity, according to S&P Global, emerging locations illustrate both the promise and the bottlenecks of the next growth phase.
However, momentum alone is not enough. Data centres are among the most capital-intensive infrastructure assets, and investors remain cautious in the absence of policy clarity.
“Power density, liquid cooling, high-speed interconnects, and GPU supply chains have become strategic bottlenecks, not operational issues,” AS Rajgopal, MD and CEO of NxtGen Cloud Technologies, told AIM.
Unlike states like Tamil Nadu, which have policy frameworks in place to attract digital infrastructure investments through subsidies, tax breaks, and single-window clearances, several regions still lack a formal data centre policy or a single-window clearance system.
“Karnataka was one of the first states to roll out a data centre policy, but the implementation on the ground is taking a lot of time,” Surajit Chatterjee, MD and country head, data centre, CapitaLand, noted. “Various departments haven’t been aligned on what a data centre asset class actually needs.”
He pointed to Tamil Nadu’s investment promotion body, Guidance Tamil Nadu—a dedicated IAS-led unit reporting directly to the state’s Industries, Investment Promotion & Commerce Department—as a model worth emulating. “They act as the interface between the investor and the government and coordinate across departments. That makes a big difference,” he added.
Power, Connectivity, and Clearances
Among the most pressing challenges is power, in terms of both availability and scalability. Data centres require uninterrupted electricity on a massive scale, with the International Energy Agency estimating that electricity consumption from data centres reached 415 TWh, or about 1.5% of global electricity consumption, in 2024.
“Power is the nerve of data centres,” Chatterjee said. “More scalability is needed—not just brown power, but green power as well.”
Grid upgrades, substation expansion, and last-mile telecom connectivity are equally critical.
In Bengaluru, for instance, data centres remain clustered in areas like Whitefield, where future expansion will require upgrades from 220 kV to 400 kV and even 765 kV substations—projects that demand coordination across multiple departments.
NTT recently launched a data centre campus in Devanahalli, Bengaluru.
“Currently, the IT load is around 65 MW,” Alok Bajpai, managing director of NTT Data India, told AIM. “The first building is about 22–23 MW. If we replicate that, we reach around 65–70 MW. But if AI customers come in and want higher density, then it can go up to 100 MW.”
In the city, data centres largely remain an enterprise-driven market; however, what was once a 100–200 kilowatt requirement has now moved into the megawatt range.
“Our first customer itself is already a megawatt. We’ve also signed a financial institution from Mumbai asking for 6.4 MW—something you never heard of earlier in enterprise,” he noted.
Environmental clearances are another major friction point. “It’s time-consuming and tedious, and that’s where states can really help by fast-tracking processes,” Chatterjee noted.
Fragmented Policies, Fast-Moving Technology
Although data centres were granted infrastructure status in the Union Budget 2022, state-level interpretations and execution vary widely. “Largely, the policies are similar,” the CapitaLand executive explained, “but some states are showing extra effort to implement them quickly, while others are still taking too long.”
This delay is especially costly in a sector where technology cycles move faster than construction timelines. A greenfield data centre project in India typically takes 28–30 months to complete. “By the time you finish your first phase, technology will have gone through two rounds of evolution,” he added. “That’s why infrastructure has to be modular and flexible.”
Regulatory and approval-related delays remain a central pain point for operators. Even when state governments are supportive, policy changes mid-project can cause significant setbacks.
While building the NTT Data Centre in Bengaluru, Bajpai recalled that the master plan had to change midway. “The data centre policy changed, and because of that, the occupancy certificate got delayed.”
The delay pushed the go-live date by several months. “We had committed to an October go-live, but now we are going in December—after a lot of push and pull. We were under fire from customers,” he lamented.
Meanwhile, India’s data centre capacity has surged from 50–60 MW per location pre-COVID-19 to nearly 1.5 GW today, according to a PwC report, with ambitions to reach 14 GW by 2035.
AI workloads are now pushing physical limits, demanding a the shift toward liquid cooling.“Traditional racks operated at 6–12 kilowatts,” Chatterjee explained. “Liquid cooling takes that to 100-plus kilowatts per rack.”
Yet liquid cooling is expensive, complex, and still nascent in India. “It’s a high-capex technology. Not every end user can afford it,” he said, noting that current deployments are largely driven by global hyperscalers. “GPUs are coming faster than liquid cooling infrastructure. The ecosystem—original equipment manufacturers (OEMs), supply chains, talent—still needs time to mature.”
However, traditional air and water cooling systems may soon fall short. “Water cooling may become inefficient or even more expensive. Early movers in liquid cooling will definitely have an advantage,” Bajpai added.
Talent: Adequate Today, Scarce Tomorrow
Contrary to popular belief, data centres do generate employment—particularly across allied industries such as electrical equipment, cooling systems, and OEM manufacturing. Still, the sector faces an impending talent crunch.
“Today, we have talent,” Chatterjee said. “But moving from 1.2 GW to 3 GW—we won’t be able to manage without building the pipeline.”
To prepare, operators are increasingly planning partnerships with academic institutions. “We’ll pick up graduates, deploy them on the floor for a year, train them, and then put them on projects,” Chatterjee observed. “These are high-SLA, 24×7 critical infrastructures—you can’t just plug people in.”
Industry leaders are now pushing for a national data centre policy to harmonise standards across states, especially around power, sustainability, land, and clearances. “A national policy is critical,” he said. “It will ensure states don’t create fragmented rules and will help the ecosystem move faster.”
Despite the challenges, optimism remains strong, given investor enthusiasm and India’s steady data fundamentals. The country generates over 20% of global data, but has only about 3% data centre penetration, according to a Deloitte report.
Industry players say engagement with policymakers has increased significantly over the past year.
Karnataka, in particular, Bajpai added, is showing renewed intent.
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