A race to secure market share through rapid and reliable infrastructure buildout is balanced with emerging sustainable development concerns
By Amol Samant, Data Centre Lead, India
As we emerge from a global pandemic, optimism around the growth of India’s economy abounds. The International Monetary Fund’s forecast of eight percent growth outstrips all other major economies, including China, and predicts India will become the world’s fifth largest economy by 2025.
Financial reforms are making it easier for new companies to list on the National Stock Exchange of India, which now accounts for approximately three percent of the world’s stock market capitalization and only trails U.S., China and Japan markets. India can also claim close to 100 of the world’s unlisted start-ups valuing over US$1 billion – so called ‘unicorns’ – this time third only to the U.S. and China.
Synergy of Data and Economic Growth
At the country’s core remains its vaunted IT services industry which continues to grow and has doubled over the last decade. The government’s recent Digital India initiative has made significant progress across digital services – digital identify schemes, payments and tax systems, online bank accounts – and, thanks to necessities at play during COVID-19 lockdowns, is playing a critical role in transforming India’s informal cash economy. The nation is catapulting into the 21st century.
And what will fuel this progress? Data. And lots of it, delivered through the rapid deployment of new, future-ready data centres.
With Asia expected to account for half of the global data centre market by 2025, India envisions capturing much of this share of investment and development and securing a position as a data centre hub for its surrounding region. To enable and attract this investment, data centres, under Indian law, became formally classified as “infrastructure” as recently as April 2022.
This change in legislation will attract considerable new and additional investment flows with developers having access to capital at lower credit rates as a result. Under these conditions, the data centre infrastructure sector is projected to grow with a compound annual growth rate of 15.2 percent from 2022 to 2027. What’s more, future data sovereignty demands alongside India’s gravy train of locally skilled labour and a good regional location will also factor in attracting both local and international sources of finance.
What developments are in the pipeline?
As the government worked toward the re-classification of data centres as infrastructure, a number of major international deals have taken place that reflect a race from global data centre players to enter and secure existing assets and customers with the Indian market.
For example, companies like AdaniConneX were established – a joint venture between India’s Adani Enterprises and EdgeConneX – to build and operate a one GW network of large hyperscale and edge location data centre capacity over the next decade, largely powered by renewable energy. A joint venture between Iron Mountain and Web Werks, a top co-location data centre provider in India operating approximately four MW of capacity today, was also established to increase these capacities further across Web Werks existing markets in Pune, Mumbai and Dehli, and enable the expansion of these services to other markets around India. Equinix also closed its acquisition in mid-2021 of GPX India, an operator of two existing data centres; this acquisition gives Equinix an initial entry into the Mumbai data centre market.
A complex world to plan and build new data centres
This new generation of internationally backed entrants are also seeking to tap into demand growth in India and avail of existing and emerging government incentives designed to create India as a regional data centre hub. Accessing more favorable capital, new entrants and incumbents will expand data centres across the country. With much competition at play, however, the pressure to capture new market share will only heighten the need for more efficient and reliable delivery of turnkey development solutions from India’s engineering and construction industry.
The need for fast-track constructability is also set within the context of yet more rapid demand growth as well as increasingly relevant climate change demands. Infrastructure assets that are rapidly designed and built today require pay back and operations over decades and, therefore, India’s new set of data centre developers will need to also anticipate future expansion plans and pressing sustainability issues.
Parts of India have been experiencing widespread drought conditions since 2015. A 2022 report from the United Nations Convention to Combat Desertification (UNCCD) disclosed that nearly two-thirds of India suffered drought between 2020 and 2022; India is now comparable to sub-Saharan Africa on UNCCD’s Global Drought Vulnerability Index. Further, soaring temperatures and an increase in the frequency of heat waves in 2022 saw the government revise estimates for wheat production resulting from lower yields amid higher temperatures. Climate change is having real impacts on life in India.
While much progress continues in the investment of renewable energy, the carbon intensity of India’s power sector today remains well above global average and means that a switch to electrified transport, for example, will “yield no CO2 benefit”, according to the International Energy Agency. What’s more, the consumption of energy by data centres is set to increase from current annual growth of three percent globally to what is forecasted at 10 percent annual increase by 2030; how data centres plan to conserve energy, regardless of its carbon intensity will persist as a concern.
New integrated approach for development in India
This new set of internationally backed data centre developers are accompanied by high expectations (from international and increasingly local stakeholders) around energy and water uses and sustainability commitments; they will be challenged to secure renewable power supply that provides sustainable, green-powered data to customers while also challenged to ensure that data centre operations will not adversely impact community water supplies.
Higher expectations around sustainable and resilient data centres, alongside thinking through the operational lifecycle and inevitable expansion plans to meet increasing customer demands, mean planning, designing and building India’s new generation of data centres requires a new and integrated commercially-sensitive approach to project development, engineering design, construction and operation. New data centre development must be designed holistically, squaring intensive energy and water use while also balancing the need for cost-efficient and expediated delivery schedules that make use of local engineering and construction teams. Not only will such developers demand sustainable environmental outcomes, working seamlessly through local regulations while matching international standards of quality – and delivering within advanced construction schedules – remain non-negotiable.
Such dynamics point to the important of pre-construction planning and the exploration of additional infrastructure considerations that think beyond the ‘box’ of a data centre. Early conversations with utility provider and other developers, for example, may prove critical in establishing the right ingredient for long term profitable operations. Accelerated, fast-track construction will need to tied together with long-term contingency planning that thinks through expansion and sustainable power and water requirements.
With more than 40 years of global experience in planning, engineering and constructing data centres, and more than 700 India-based professionals, consider a conversation with our team to learn more about how to fast-track construction of your data centre in India.
