Is India Heading to Become the Next Datacenter Hub?

With digitalization booming, data in India is mushrooming. Will India be able to contain it?

The growth story of data centers in India is hitting a high note. Due to the massive growth of data where the global data center market is estimated to reach USD 288.3 billion by 2027, growing at a CAGR of 4.95% during the forecast period; according to the rating agency ICRA, India itself is anticipated to witness a five-fold increase in its data center industry’s capacity with an addition of overall 3,900-4,100 MW of capacity involving investments of Rs 1.05-1.20 lakh crore in the next five years.

The Growth Spurt of Data

When the deadly pandemic invaded us, everything went downhill. From health, wealth, emotions, social life, and livelihood to the most painful - many lives. But, there have also been some positive impacts of the pandemic that we cannot rule out. Despite how dreadful the pandemic was, it did leave or triggered some good things like - the importance of sanitization, the need for spending quality time with your family, lifestyle and work culture changes, and the most life-changing one - the drastic shift towards the online world.

Everything went from offline to online so swiftly and abruptly but it only made our lives much more convenient, easier, and safer. Also, this impulsive surge in the online world led to another major flattering impact - a dramatic boom in data.

Yes, the pandemic has pushed data consumption so much that data centers are on the verge of overflowing. What we mean to say is that the rapid digital transformation that both people and businesses have made to survive the unprecedented times of pandemic, has skyrocketed internet usage to an extent that the demand for clouds across the globe, the latest technologies, their services, and maintenance all in order to contain data is getter bigger with every nanosecond and looking at the way India is growing, undoubtedly it soon will be the next data center hub.

India & Its Data Growth Story

We all talk about how advanced America, China, Japan, Russia, Australia, or the UK are but guess what? India is not far behind. Thanks to the Indian government’s efforts, we have become technologically advanced way too much and are still growing at a pace that pretty soon India will beat other tech-savvy foreign nations in the future.

With the country’s cost advantage, availability and emergence of skilled labor, proximity to customers, low climate risk, submarine cable connectivity, stable government, and strong data protection laws, India is attracting investments from large global data center operators, cloud service providers, hyperscalers, and private equity investors, and developers. This may be the reason behind the recent announcement by the government in the Budget 2022 that “Infra status to data centers may spur Rs 70,000-72,000 crore investments over five-ten years.” It is a much-need move because doing so will provide access to long-term institutional funds, which will fuel further investments in the sector, thereby boosting the fast-evolving digital infrastructure of the country.

Due to the constant growth of data volumes and digital consumption, the use of technologies like artificial intelligence (AI), machine language (ML), and the Internet of Things (IoT) is becoming an ordinary thing in India. IoT-linked devices, data localization, and cloud adoption are becoming the need of the hour not just for giant businesses but also for individuals. So, you can imagine what will happen when 5G becomes available to us tech-hungry people.

What is fueling the growth of data centers in India?

It is quite obvious to question how India reached such limelight. What are the factors that are influencing the growth and need for data centers in India?

Well, first of all, the credit goes to the government’s initiative - Digital India, a flagship program of the Indian government to transform India into a digitally empowered society is one of the biggest reasons behind all this surge. This is no end, in fact, it is just a beginning because the government is aspiring to turn India into a ‘Global Data Hub’ which is why various policies, reforms, schemes, and campaigns have been initiated to make online access available and safe for everyone. To establish Universal Digital Literacy, the government has launched countless online services like National e-Governance Plan (NeGP), e-visa, and the National CSR Data portal, to name a few which prove how digitalization is spreading across the nation.

Secondly, the population of India. With the world’s largest democracy with a 1.4 Billion population using smartphones and 4G broadband, rising social media consumption, and IT penetration, adoption of cloud computing, big data, AI, etc. by Indian enterprises, increasing number of interconnected devices due to IoT, and government's digital initiatives, the need for data centers is multiplying. Our data centers in Mumbai, Hyderabad, Pune, Delhi, and Chennai, are already ballooning, hence to encourage companies to set up data centers, the government is targeting an investment of Rs 3 lakh crore in the next five years as part of the hyper-scale data center schemes. It is planning to provide between 3% and 4% of capital investment as an incentive to companies, along with real estate support and faster clearances to expedite site selection having good geographic location, power, fiber connectivity, and general construction & operations to establish data centers.

Lastly, the key driver responsible for the rise in demand for data centers is the technology boom in India. Various tech-related factors such as - India's e-commerce policy that enforces the storage of critical data within the country, RBI's mandatory policy for all payment firms and wallet services, social media companies, credit card companies, e-commerce sites, and other online services that operate overseas but have Indian customers to store their data in India, the need to have local data centers for all the, the exponential growth of telecom & IT sectors, the entry of international cloud-based service providers as well as consolidation of domestic players, implementation of government initiatives like Digital India, Start-Up India, Jan Dhan Yojana, AADHAR, Mobile Penetration, and Smart City, etc., are some of the major tech factors that is causing data center boom in India.

What's Ahead?

Many foreign nations and their giant companies are eying India to invest which means India has become the center of attention for the data centers. One can expect a lot of investments and establishments to happen in the near future to mention a few:

• Adoption of cloud platforms and related services is expected to double in 2022 & 2023.
• The world’s leading cloud service providers have announced their availability zones in India, specifically in Hyderabad.
• Amazon Web Services (AWS) is developing a network of three Availability Zone (AZs) in Hyderabad.
• India’s technology services industry may achieve $300-350 billion in annual revenue by 2025.
• Microsoft recently acquired land parcels in Hyderabad to launch a new data center region. Google has two cloud regions in India — Mumbai, and Delhi-NCR.
• Like Chennai which is a strategic landing station location for submarine cables that carry high-speed internet, connecting India to South-East Asia and China, plans to develop cable landing stations in coastal cities like Vizag, Kochi etc., are on discussion tables.
• With the global data centre market investments expected to reach ~$200 billion per annum by 2025, India is also expected to get a share in this growth with investments in the country expected to reach ~$5 billion per annum by 2025

Apart from all these, pretty soon we can expect India's first comprehensive, general data protection law which is still on the parliament’s table. Where until now, the personal data of India’s population has been protected by the IT Act 2000, which underwent many amendments such as we got the right to privacy - declared as a fundamental right by the Hon'ble Supreme Court of India on August 24, 2017, the Indian Personal Data Protection Bill (PDPB) - that modernized the laws that govern personal data in India in 2018, additions in PDPB in 2019 to include one data protection authority (DPA) for personal and non-personal data, a 72-hour period for breach disclosures, and potential penalties amounting to 4% of a company’s global turnover. In 2021, the latest draft of PDPB was submitted seeking to regulate the collection, storage, transfer and use of personal data and to extend the provision to foreign-based entities in case Indians are subjected to their data processing activities. Indeed there are talks of re-drafting the bill but, by the end of 2022, we might definitely get a full-fledged data protection law

Conclusion

As data grows, its security grows but along with it also grows the risk of our data getting stolen, destroyed, or damaged. But, what many of us are unaware of is the laws through which our data can be protected and through which we can take legal action against such cyber criminals. To know more about how you can safeguard the data regarding your Intellectual Property, you need to consult an experienced IPR law firm like Parker and Parker Co. LLP to broaden your knowledge regarding the laws and to get proper guidance in their application.