From OTT to AI: Here’s What’s Fuelling Your Digital Life

Have you ever wondered what’s powering your Netflix streams or ChatGPT queries? Of course, that 5G high-speed internet, but what’s really working behind the scenes to deliver all that data to your screen in milliseconds? It’s the massive data centers: the factories of our digital world.

Behind every streaming video, digital payment, AI, and cloud-based application lies this invisible but critical infrastructure, and India is currently seeing a boom in this industry. India’s data centers have reached a $10 billion valuation, growing at a 25% CAGR.

Over the past decade, this sector has attracted investments estimated at $6.5 billion, generating about $1.2 billion in revenue last year, according to a report by ANAROCK. The country now has 262 data centers and ranks seventh in the world, just behind France and Canada (264 each). Also, the industry’s capacity is set to more than double to 2-2.3GW by FY27, says a report by Crisil Ratings.

And there’s more. With GenAI demands blowing off the charts, the consumption is set to rise exponentially. Let’s take a closer look at this industry.

What Exactly are Data Centers?

A data center is a physical facility, can be the size of a room or a large campus, that houses powerful computing and storage systems, such as servers, storage devices, and networking equipment.

These centers store, process, and transmit data for everything from your email and online banking to video calls and AI model training. In essence, they are the engine rooms of the global digital economy, collectively forming the “cloud” that we rely on daily.

They come in various types:

Hyperscale data centers: Massive facilities (often owned by big tech companies like Amazon, Google, Microsoft) with tens or hundreds of megawatts of capacity, supporting cloud services used worldwide.

Colocation data centers: Third-party facilities where multiple organisations rent space to run their servers. Colocation providers supply the power, cooling, and security, and clients bring their own IT equipment.

Enterprise data centers: Privately owned by companies for their internal IT needs (though many firms are now moving these to cloud or colocation for efficiency).

Edge data centers: Smaller installations located closer to end-users or devices to reduce latency. These might be in tier-2 cities or even at cell tower sites, handling local processing for faster response (important for IoT and 5G applications).

TL;DR: Without data centers, modern digital services would grind to a halt.

Why India? The Demand Drivers

Why is India experiencing a data center boom now? In short, rapid digitalisation due to the development of digital services such as AADHAR, DIGI-Locker, UPI, FASTag on toll booths, to name a few. Along with this, several powerful demand drivers are converging:

AI and Generative AI workloads: The rise of artificial intelligence, from machine learning in banking to generative AI like ChatGPT, Perplexity, and Gemini, requires immense computing power. In fact, a CBRE report says that India’s Generative AI sector is expected to grow at a CAGR of 28% from 2023 to 2030, potentially strengthening data centre demand.

5G & Mobile Data Explosion: India has become the world’s data consumption champion, with average monthly usage per smartphone reaching 32 GB per user, the highest globally, supported by 5G technology. 5G can increase mobile data speeds by 10x. This means a huge jump in data traffic, which would then benefit sectors like manufacturing, retail, healthcare, agriculture, and real estate. 

Cloud Usage: From banks and government agencies to startups, all companies use cloud computing (offered by AWS, Azure, Google Cloud, etc.) for faster processing and storing of data. SaaS (Software-as-a-Service) and digital-first businesses (fintech, e-commerce, edtech) all run on cloud data centers. 

Digital Payments & UPI: The Unified Payments Interface (UPI) handles billions of transactions monthly in real time. The banking sector, stock exchanges, and fintech startups all rely on data centers for low-latency, secure processing of financial data. 

OTT, Gaming & Social Media: India has become one of the world’s largest consumers of online video (OTT streaming) and mobile gaming. HD video streaming from platforms like Netflix, YouTube, as well as millions of users on Instagram, WhatsApp, and gaming platforms, all translate into enormous data throughput. 

Govt’s Policies: Policies like the National Cloud Service Project (2014) and India AI Mission (2024) aim to enhance digital infrastructure and computing capacity. Additionally, the Draft Data Center Policy Framework 2020 promotes the development of Data Center Economic Zones (DCEZs) to attract global and domestic investments. Meanwhile, the Data Protection Bill 2023 is accelerating demand for local data storage by ensuring data privacy, security, and governance. 

India’s Data Center Hubs

India’s data center landscape is dominated by two coastal giants – Mumbai leads with 41%, followed by Chennai at 23%, together accounting for nearly two-thirds of the country’s total data center infrastructure. 

Emerging Tier-2 Markets: Beyond the “Big 5-6” cities above, data center operators are now exploring tier-2 cities for edge nodes and new markets. Places like Kolkata (which has strategic importance for serving the eastern region and links to Southeast Asia) are on the radar. Other cities like Vizag (Visakhapatnam), Jaipur, Kochi, and Nagpur have been mentioned for future edge data centers. 

Globally,]India still comes in the low penetration zone, but it’s rapidly growing. While the USA, UK, Canada, and Germany are mature DC markets, emerging markets, including India, UAE, and Indonesia, are also attracting global investors and operators, thanks to robust government policies, improvements in infrastructure & connectivity, a surge in technology adoption, and land availability.

Sustainability & Challenges

India’s data center boom comes with significant power and environmental demands. Often dubbed “energy guzzlers,” data centers consume vast amounts of electricity. Deloitte India estimates an additional 40–45 TWh of power and 45–50 million sq. ft. of real estate will be needed by 2030 to meet AI-driven growth.

Power availability remains a challenge. Grid instability, high tariffs (₹7–₹9/unit), and reliance on diesel generators increase operational costs and emissions. Finding suitable land near major cities with access to fibre and power is another constraint. 

Cooling alone accounts for up to 50% of energy use. As AI and high-density computing rise, operators are shifting from traditional air systems to more efficient liquid cooling, including direct-to-chip and immersion methods, which help lower Power Usage Effectiveness (PUE).

Sustainability efforts are ramping up. As of April 2025, one-fourth of total data center capacity in major Indian cities was green certified, growing at a 15% CAGR, as per Colliers. 

Still, challenges persist. Global supply chain disruptions delay critical equipment like servers, generators, and transformers. Water usage for cooling raises community concerns, especially in water-stressed regions. Operators are responding with recycled or alternate water sources and cleaner backups like gas or fuel cells.

Despite these hurdles, the industry is actively adapting, balancing growth with environmental responsibility and long-term resilience.

Outlook: The Next 5-10 Years

Looking ahead, the trajectory for India’s data center industry over the next decade appears robustly upward, though different scenarios present varying degrees of growth. Let’s break down the outlook:

Growth projections: Multiple studies concur that India’s data center capacity will see at least a 3-4x expansion by 2030. A recent Colliers report estimated that total capacity across major cities will surpass 4,500 MW (4.5 GW) by 2030, more than tripling from ~1.5 GW in 2023. It also expects the data center real estate footprint to grow from ~16 million sq ft in 2023 to ~55 million sq ft by 2030.

On the other hand, a more bullish scenario from Nomura research projects capacity could reach 7.5–9 GW by FY2030 (i.e., by March 2030) in a high-demand case.

In the near term, say the next 3–5 years, growth is almost locked in from projects already announced. For instance, Colliers’ report mentions that Mumbai will continue to dominate overall DC capacity share, witnessing a 3.4X times rise by 2030 compared to the current levels. Other primary markets (Chennai, Delhi NCR, Hyderabad, Pune, Bangalore) are expected to add about 3.0–3.7 GW of new supply by 2028.

So by 2027–28, we might already see ~3 GW operational, up from ~1.4 GW in 2024 – that’s a little over double in 4 years. 

Investment inflows: To fund this growth, capital will be pouring in. Colliers estimates that about $20–25 billion will be invested in Indian data centers in the next 5-6 years (by 2030). This influx will also drive allied sectors like construction, power equipment manufacturing, and renewable energy.

Tech Shifts: By 2030, AI computing might be a huge chunk of capacity (some forecasts suggest AI workloads could account for 50% of data center power usage by then, given trends).

All that said, on balance, the outlook is positive. India’s sheer population scale, rapid digitisation, and government focus practically guarantee a strong growth baseline. 

What’s in Store for Investors? 

For investors, the rise of data centers in India presents a compelling opportunity. Here’s why this sector should be on the radar:

Long-term secular growth (not cyclical): Data centers are fundamentally a bet on data and digital consumption, trends that are largely one-way and resilient. AI, IoT, 5G, and an emerging cashless economy ensure that digital activity will keep expanding regardless of short-term GDP fluctuations. For investors, this means exposure to a long-term growth story that isn’t as volatile or cyclical as many traditional industries. 

Portfolio diversification and stable returns: Data centers can offer a combination of yield and growth that is attractive for diversification. The data center boom creates opportunities across multiple sectors:

1. Real Estate: Land acquisition and purpose-built facilities
2. Renewable Energy: Solar and wind projects to power green data centers
3. Advanced Technology: Cooling solutions, security systems, and AI optimisation
4. Fibre Infrastructure: Connectivity backbone supporting data center operations 

ESG considerations: Data centres enable connectivity and digital services for millions, arguably contributing to socio-economic development (jobs in IT, enabling education and healthcare via digital means, etc.). So, from an ESG investing lens, this sector can be seen as allowing sustainable digital growth (provided the energy source is green).

In Conclusion

India’s data centre journey is still in its early days. Yet, in a short span, capacity has doubled. Who knows, by 2030, we might talk about India in the same breath as the traditional data centre giants of the US and Asia-Pacific. Well, at least the huge investment flows are backing us up! 

Disclaimer: This analysis is for educational purposes and does not constitute investment advice. Market conditions can change, and past performance is not indicative of future results. Investors should conduct their own research and/or consult a certified financial advisor before making investment decisions.