By Sanjana B

Copyright thehindubusinessline

India’s draft National Data Centre Policy 2025 is being hailed by industry leaders as a game-changer, promising a 20-year tax holiday, GST credits, and renewable power incentives that could make the country the world’s most cost-efficient and sustainable hub for digital infrastructure.

A Colliers report titled ‘The digital backbone: Data centre growth prospects in India’ noted that India’s DC market has scaled up significantly in recent years. India’s overall DC stock across the top seven cities has increased over three times in the last 6-7 years, to approximately 16 million sq ft, with a capacity of about 1,263 megawatt (MW) as of April 2025.

The country is on track to become the fastest-growing DC market in the world, driven by the availability of land at affordable rates, submarine cable connectivity, uninterrupted power for commercial usage, and strict data localisation norms. The report also shared that India’s DC market is primed for exponential growth and will have a competitive advantage in the wider APAC region, considering inherent strengths in the four key components of DC industry development – land, electricity, infrastructure, and skilled talent.

Neha Aggarwal, a Partner at Deloitte India, emphasised the significant capital investments and expenses Data Centres require, averaging at roughly $5.4 million per MW in India. Thus, any tax incentive that lowers the effective cost of capital, increases payback multiples, and makes long-duration infrastructure play like hyperscale campuses or power agreements more finance-friendly is welcome.

Demand shortage

Industry players also shared that India’s total data center capacity is expected to reach 3 GW by 2030. However, by 2033, the country will require nearly 6,043 MW of capacity, while supply is projected at only 4,501 MW, leaving a shortfall of about 1,542 MW.

The draft policy highlights that States will be encouraged to earmark land near industrial corridors, IT hubs, and manufacturing clusters for data centre parks, Amit Sarin, the Managing Director of Anant Raj Ltd, noted. This is critical for reducing development timelines.

Such land allocation can ensure an uninterrupted power supply, which is crucial for data centre operations. Moreover, for developers, the cost will be lower as the land will be away from urban locations. This will make projects more viable, reduce costs, and encourage faster adoption.

“The proposal under the draft policy to offer income tax exemptions linked to output capacity, power efficiency, and employment generation will play a crucial role in bridging this gap. Such long-term incentives will ease capital requirements, strengthen the economics of building large-scale data centres, and accelerate the creation of critical digital infrastructure,” Sarin said.

He noted that Anant Raj Cloud is building one of the largest data centre portfolios in India. With new capacity at Panchkula and expansion at Manesar, the company is on track to scale to 307 MW by FY32. This growth, supported by measures such as tax exemptions, is expected to strengthen the company’s position in India’s digital infrastructure sector.

Ease of doing biz

Sharad Agarwal, CEO, Sify Infinit Spaces, echoed this, and added, “The national data centre policy should improve ease of doing business through ease of generation, contracting (PPA), and transmission of renewable power. It will also aid uniform building codes, open access policies, and auto approvals. The policy should bring all approving authorities under one window and ensure the shortest possible turnaround time to make India the most attractive destination.”

These measures reduce high upfront capital costs, boost ROI, and lower ongoing operational expenses – especially energy, a key cost driver, said Sridhar Pinnapureddy, Founder and CEO, CtrlS Datacenters.

Aggarwal, however, pointed out that while tax exemptions would aid in accelerating investments by increasing the financial attractiveness quotient, it is not sufficient by themselves.

Key priorities include timely land approvals; reliable high-voltage power with dual feeders; strong connectivity through high-capacity backhaul; the option to invest in subsea cable infrastructure; incentives for R&D; availability of skilled talent, and clearer policies on issues such as permanent establishment and copyright.

Published on September 18, 2025