India's Digital Boom: Data Centers Surge

India is undergoing a profound economic transformation, with digital infrastructure at its forefront. The rapid expansion of data centers is a direct response to the escalating demand for digital services, supported by robust connectivity and consistent energy supply. Encouraging government policies are further attracting substantial international investments into this burgeoning sector.

Over the past decade, India has built a formidable digital backbone, characterized by deep telecom penetration and widespread smartphone usage. This foundation is now necessitating a large-scale build-out of physical infrastructure, including data centers and their power systems. The country boasts extensive subsea cable connections and a developing national power grid, ensuring high bandwidth and secure energy supply.

Despite being a major data consumer, India's data center capacity per capita remains significantly lower than in developed nations, presenting a substantial growth opportunity. Ultra-low mobile data costs have democratized digital access, leading to exponential traffic growth across various sectors. This increasing digital usage is driving demand for compute power.

Several factors contribute to this demand: enterprises localizing data for compliance, accelerated cloud adoption, expanding AI workloads, and continued consumer internet growth. A new long-term policy framework until 2047 offers tax incentives and streamlined approvals to attract global hyperscalers. These combined forces ensure sustained demand for data center capacity.

India offers compelling structural advantages for data center development, including lower construction costs (40-50% cheaper than the US) and cheaper power (30-40% less). Favorable land economics, lower labor and material costs, and scalable power availability enhance its attractiveness. A strong rule of law and skilled labor pool further support local manufacturing of cooling and power technologies.

The opportunity extends beyond data centers to essential enabling infrastructure like power generation, grid connectivity, renewables, and network infrastructure. India's data center growth is intrinsically linked to its energy transition, creating long-term investment prospects across the digital ecosystem.

For investors, this represents a rare alignment of structural demand, under-penetration, favorable economics, and critical infrastructure relevance. Data centers and their supporting assets promise visible cash flows, long operating lives, and resilience across economic cycles. CapitaLand Investment recognizes India as a strategic market, leveraging various capital pools to scale digital infrastructure.

As India moves towards a future of significant change, digital infrastructure will play a role as critical as transport and power in previous eras. Investments made with scale, discipline, and a long-term perspective will be instrumental in shaping India's digital future.