India is poised to significantly boost its data center industry through a proposed National Data Centre Policy. A key provision involves a potential 20-year tax exemption for data center developers who meet specific criteria related to capacity expansion, energy efficiency, and job creation, as detailed in a Business Standard report. This initiative aims to establish India as a leading global hub for cloud infrastructure, AI modeling, and diverse digital services, addressing the rapidly escalating demand for data storage and processing capabilities.
The draft 2025 policy presents a compelling incentive framework. This includes a tax holiday extending up to two decades, contingent upon achieving targets in capacity, efficiency, and employment generation. Furthermore, the Goods and Services Tax (GST) input tax credit is likely to encompass capital assets like construction materials, cooling systems, HVAC, and electrical equipment. Foreign entities operating with a capacity of at least 100 Mw may secure permanent establishment status within India. The policy also encourages eligible companies to establish AI development centers or global capability hubs in proximity to their data facilities.
An official speaking to Business Standard emphasized the policy’s potential to generate employment opportunities and strengthen domestic capabilities in advanced technologies such as AI, cloud computing, and cybersecurity, extending beyond major metropolitan areas to Tier-II and Tier-III cities. India’s data center sector has experienced substantial growth, demonstrating a 24 percent compound annual growth rate since 2019. JLL forecasts an additional 795 Mw of capacity by 2027, bringing the total to 1,825 Mw. Current occupancy rates, ranging between 75 and 80 percent, indicate that demand is outpacing supply.
CBRE noted in a recent report the increasing need for next-generation infrastructure to sustain India’s digital economy. The draft policy addresses critical challenges such as land acquisition and power availability. States are encouraged to allocate land near industrial corridors, IT hubs, or manufacturing clusters for data center parks. The IT ministry will collaborate with the Ministry of Power, the Central Electricity Authority, and the Central Transmission Utility of India to ensure consistent power supply. The policy promotes the use of renewable energy sources, proposing standardized regulations for energy storage and the deployment of small modular reactors near major data center hubs. An official stated to Business Standard, the importance of encouraging newer centers to use renewable energy as much as possible.
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