View from India: Data centres get a pandemic push
The Government of India (GoI) had already begun to push the country towards becoming a digital economy with its Smart Cities and Digital India initiatives before the pandemic struck. However, the crisis accelerated the transition to the digital medium as almost all aspects of daily life – be it banking, education or shopping – switched to the digital medium almost instantaneously, leading to a boo
m in India’s digital ecosystem. The upshot has been an exponential growth in data generation; this has created unparalleled demand for data centres in India. Add to this the government’s norms on data localisation, and the industry has a booster like never before. The Indian data centre industry, which accounts for 1-2 per cent of the global pie, is estimated to have clocked a compound annual growth rate (CAGR) of 15-20 per cent since fiscal 2016 to touch $1bn in fiscal 2019 and $1.2bn in fiscal 2020. This growth rode on a sharp increase in internet penetration from 30 per cent in fiscal 2016 to 55 per cent in fiscal 2019. With Covid-19, the data consumption has seen a sharp 38 per cent rise on-year in Q1FY21. The industry is expected to log a rapid 25-30 per cent CAGR to $4.5-5bn by fiscal 2025. The growth drivers include an exponential surge in data being generated and a growing need for local data storage in line with the government’s thrust on data localisation. The industry capacity, which stood at 360MW in fiscal 2020, is expected to expand more than threefold to reach 1,100-1,200MW by fiscal 2025. This estimated growth can be attributed to GoI’s announcement towards investments in this segment. Over the past three years, $4-5bn in investments has been announced for the expansion of brown-field and green-field projects. The rapid growth is driven by a need to expand capacity for data storage on account of exponential growth in data volume and penetration (75 per cent by fiscal 2025). This increase in data volume would be supported by high growth in e-commerce, increase in usage of social media, greater preference for over the top platforms, the government’s impetus to the Digital India initiative, and rapid digitalisation of services across industries, especially those that use Industry 4.0 and 5G. GoI-initiated data localisation norms that mandate the storage of sensitive data within India will also support development of local data centres. Digital India is the other GoI programme; Project Meghraj, a national cloud initiative, aims to host several government applications and services on the cloud. Various other factors will fuel the growth of data centres. The transition to IaaS (Infrastructure as a Service) based offering, higher adoption by IT, and e-commerce and media will boost the demand for data centres. According to NASSCOM, as of fiscal 2020 more than three-quarters of the total IT infrastructure expenditure was focused on a captive and co-location-based operating model. By fiscal 2025, however, the share of IaaS in IT infrastructure expenditure is forecast to increase to more than 40 per cent. CRISIL Research expects the shift towards IaaS to continue as the rapid adoption of Industry 4.0-led revolution leads to exponential growth in data volume and increases the need for scalability of resources. This growth will be driven by non-regulated sectors. The data centre industry has been largely concentrated in top four cities, with Mumbai, Delhi, Bangalore and Chennai accounting for 60 per cent of total data centre sites and more than 75 per cent in terms of IT load capacities. Some state governments already have incentives in place for the data centre industry. For instance, Maharashtra and Telangana are offering incentives in land and electricity, along with a special single-window clearance for permissions to set up data centres. Considering the challenges in setting up data centres, larger international players have acquired local players to foray into the Indian market – for instance, Netmagic was acquired by NTT, a Japanese firm. CRISIL Research expects such acquisitions and partnerships to continue, given the projected growth in the data centre business. All this was outlined in the November 2020 CRISIL Research Report titled ‘Demand for data centres goes viral. When pandemic is a blessing in disguise’.
Author: Kavitha Srinivasa
Date: 2020-11-12
URL: https://eandt.theiet.org/content/articles/2020/11/view-from-india-data-centres-get-a-pandemic-push/
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