Geopolitical Stability: India’s Edge in the Asian Datacenter Market

Good governance and a stable government can do wonders to the business climate of the country, and it is no different for the datacenter market. India, one of the world’s fastest-growing economies, with a GDP growth of 8.2% in 2024, has undergone a significant transformation in recent years, largely driven by its geopolitical stability.

Unlike several nations that have been facing political turmoil, economic disruptions, or even sustained conflicts, India has remained greatly stable, fostering an environment conducive to growth and progress. This stability has played a crucial role in attracting global investments, nurturing innovation, and pushing the nation toward becoming a digital powerhouse.

The government has been able to implement long term policies that have positively impacted ease of business, improved infrastructure, created scalable economic solutions for digitization and healthcare. Along with this, India’s datacenter growth story has had a jumpstart because of a growing culture of start-up economy, global investments in business and the market benefits of a young skilled population.

Indian DC Sector Witnessing Rapid Growth

The geopolitical stability and government’s conscious efforts to boost datacenter growth, has resulted in an unprecedented growth of the sector, attracting massive investments. In the past four years, the Indian datacenter industry has grown at 24 percent CAGR. This growth places India among the fastest growing datacenter markets in APAC region, with the country’s DC capacity ahead of markets such as Japan, Australia, Singapore, Hong Kong and South Korea. With a cumulative gigawatt capacity now, the Indian datacenter industry is set to add 800 MW capacity by 2026, according to industry estimates.

The Ministry of Electronics and Information Technology (MeitY) in 2020 released a draft Data Centre Policy in which it proposed easing clearances to aspiring datacenter companies to set up operations in the country. To keep pace with the changing dynamics of the industry, the government is likely to update the policy to enhance it with better incentives to States to provide dedicated zones where datacenter parks can be set up. MeitY may also consider granting incentives to companies to set up AI-ready datacenters.

With the government establishing clear regulations and supportive policies, a stable and attractive environment for investors and operators is being created. This fosters confidence within the market, attracting investment and encouraging the development of high-quality datacenter facilities.

State-level incentives are also creating a favorable ecosystem for datacenter growth. Many States are offering subsidies on land, power tariffs, and taxes to attract datacenter investments. While Maharashtra, Telangana and Tamil Nadu were the first movers to release State-specific incentives for the industry, Uttar Pradesh too got into the race by introducing a dedicated policy offering perks to service providers.

Maharashtra government has recently approved the establishment of Green Integrated Data Centre Parks, with an expected investment of ₹1.60 lakh crore, make it the first State in India to do so. UP too amended its policy, and under the new framework, datacenter parks and units are eligible for various financial and non-financial incentives, including capital subsidy, interest subsidy, stamp duty exemption on land purchase/lease, and energy-related financial incentives. Telangana also has progressive policy framework to support investments in the datacenter space by encouraging industry with a range of incentives and perks.

On a pan-India level, the datacenter industry is undergoing substantial expansion backed by government support, with forecasts indicating total investments into the sector amounting to $5.7 billion by 2026. Supported by conducive policy ecosystem and business environment, the sector has attracted considerable investments from investors who are eager to capitalize on the burgeoning datacenter market in India. Between 2018 and 2023, India secured commitments exceeding $40 billion from both global and domestic investors.

Political Stability Propels Investments

India’s steady political environment over the past few years, has been instrumental in shaping its economic landscape. The lack of internal conflicts or political upheavals has allowed the government to implement long-term policies aimed at improving infrastructure, fostering innovation, and enhancing the overall business climate. Investors, both domestic and international, view this stability as a positive factor, encouraging them to invest in a market where the risks of sudden policy changes or disruptions are minimal.

Some of the long-term economic decisions that have positively impacted the Indian economy are-

– The Indian government has opened as many as 27 sectors for foreign direct investment.
– The Product linked incentives that boost local manufacturing, too have attracted sizeable investments, nearly 67,690 crores and with the scheme extended for another 5 years, from the financial year 2023-2024, we can expect more investments.

Political stability and economic growth are deeply connected. When there is political instability, it can lead to reduced investment and poor financial indicators. This in turn can lead to political unrest, public frustration and collapse of the government. India has a lesson or two in the way this has played out in our neighboring countries.

The Digital Economy: A Key Driver of Transformation

India’s push towards a digital economy is one of the key outcomes of its continued policy by way of political stability. India’s digital economy is growing at a rate of almost 3 times the overall GDP growth and it is projected to be 1/5th of the GDP by 2026-27.

The Digital India initiative, aimed at empowering citizens through access to digital services and infrastructure, has been a flagship program of the government. The stability in leadership has enabled the continuity of this program, leading to widespread digitization across sectors such as banking, healthcare, education, and governance.

Today, India boasts a robust digital ecosystem, with millions of citizens benefiting from services like e-governance, digital payments, and online education. The government’s push for a cashless economy through the promotion of UPI (Unified Payments Interface) and other digital payment platforms has revolutionized the way Indians conduct transactions.

This push has laid emphasis on building digital infrastructure, including high-speed internet connectivity, cloud computing, establishing datacenters, and the promotion of technologies such as 5G.

Nurturing Startups and Innovation

India has become a thriving hub for startups and technological innovation, largely due to its consistent policies and a stable economic environment. Today India is ranked third in the world for its start-up’s, just behind the US and China.

The government’s focus on fostering a startup culture through initiatives like the Startup India program has created an ecosystem where entrepreneurs can flourish. In the datacenter industry alone, there are around 51 startups around the datacenter infrastructure. Today, Indian government and corporates have come together to provide a thriving ecosystem for these startups to flourish.

All this is possible when there is stability and hope for a secure future. The absence of political volatility has allowed the government to create policies that support innovation, research, and development in the long run. In addition to this, several sustainability and self-reliance initiatives on food, defense, and renewable energy (particularly solar) have enhanced technology and innovation in the country, making a difference at the grassroots level. Funding opportunities, tax breaks, and easier access to credit has continued for over a decade now, because of consistent policies to support startups.

Infrastructure Development: Building for the Future

The government has invested heavily in developing infrastructure across the country. This infrastructural growth has made it easier for businesses to expand, attract investment, and generate employment.

The ongoing efforts to build smart cities have further pushed the need for a thriving datacenter market. The infrastructure is growing and improving in cities beyond the metro’s and that has helped India be in a position to lead the Asian datacenters industry. The government’s focus on sustainability, renewable energy, and green technologies is further positioning India as a leader in environmentally conscious, technologically advanced development.

Conclusion

India’s geopolitical stability has been a bedrock for its recent economic, technological, and infrastructural advancements. This has had a cascading effect on industries such as datacenters that rely heavily on security, technological advancement and policy stability to grow. The absence of political turmoil or conflicts has allowed the country to implement long-term strategies that focus on digitalization, growth, innovation, and sustainability. All this augurs well for the growth of Indian datacenter industry.