The announcement marked Reliance’s formal entry into India’s artificial intelligence (AI) infrastructure market while aligning with the country’s broader ambition to establish itself as a global data centre hub.
Data centres are physical facilities for storing, processing, and distributing digital data and applications. In the past few years, India has seen significant investments in data centres, driven by factors such as increasing digital consumption, government initiatives, and the expansion of AI and cloud computing.Â
According to CBRE, a global real estate consultancy, more than $60 billion in investment commitments were made between 2019 and 2024 for establishing data centres, with over $19 billion in 2024 alone.
Such investments are expected to boost India’s data centre capacity, which is expressed in terms of megawatts and gigawatts, reflecting their energy dependence. India’s data centre capacity jumped from 877 MW in 2023 to an estimated 1,600 MW at the end of 2024, according to CBRE.
This will jump further as more investments pour in. Reliance alone is planning a capacity of 3 GW (1 GW = 1,000 MW).Â
Scale aside, there are two points worth noting in the Reliance announcement. First, Reliance is building its data centre not in one of India’s traditional IT hotspots, but in Jamnagar, Gujarat. And second, it has committed to using green energy to power its infrastructure. These reflect a broader trend, driven by two critical and interconnected issues facing the data centre industry: location and resources.
India’s digital drive
India has seen a big jump in digital consumption driven by internet usage and smartphones. The number of active internet users in India jumped to about 885 million in 2024 from 573 million in 2019, according to a January report by IAMAI-Kantar. Penetration was at 58%.Â
India’s average monthly mobile data usage is expected to touch 33-35 GB by 2025-26 from 24 GB at the end of 2023-24, according to Crisil Ratings. As AI picks up in India, data usage is expected to grow further, pushing the need for more data centres.
India’s push for data localization—local storage of critical data and applications—is also driving investments in domestic data centres. The Reserve Bank of India has mandated that sensitive financial data be stored and processed within the country’s borders, while the Personal Data Protection Bill emphasizes local data-storage requirements.Â
Beyond regulatory compliance, local data storage also offers practical benefits, including reduced network latency and improved processing speeds.
Cables vs consumption
Big cities, led by Mumbai, dominate India’s data centre landscape at present. Mumbai has 49% of all the stock available in the country, followed by Chennai (18%), according to CBRE.Â
Incidentally, these two cities have the maximum concentration of landing points of under-sea cables in the country, connecting them to key cities in Southeast Asia, West Asia, East Africa, and Europe, Avendus pointed out in a report.Â
India’s other top two cities in terms of data centres, Delhi and Bengaluru, are traditionally strong in information technology.
However, India’s tier-II and tier-III cities are also gaining traction in terms of data centres, driven by lower real estate costs, improved infrastructure, and increasing digital penetration. Rural India has led urban India in active internet users since 2021, with 488 million rural versus 397 million urban users in 2024, according to the IAMAI-Kantar report.Â
“While hyperscale data centres will still manage the brunt work of the cloud, the data requirements of tier II cities are on the rise on account of a decentralised workforce,” Avendus said in its report.
Power plays
Globally, there are concerns about high electricity consumption by data centres. The International Energy Agency said in a report last year that data centres worldwide accounted for 1-1.3% of total global electricity consumption.Â
In the US, this figure stands at 2-4% nationally, while in states hosting large clusters of hyper-scale facilities, it surpasses 10%. As India seeks to become a global hub for data centres, it will face questions about meeting increased power demand.
Improvement in technology will partly solve the problem. The new versions of graphic processing units, or GPUs, and servers tend to be more energy-efficient while delivering better performance.
As for using renewable energy for data centres, current efforts might not suffice.Â
The Union finance ministry’s latest Economic Survey warned that “…scaling up AI has the potential to start a bidding war for minerals, land, and water, driving up prices for essential resources”. As leading Indian business groups like Reliance and Adani expand their presence in the data centre ecosystem, such interplays could also come into the frame.
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