Why in news?

  • Ministry of Electronics & Information Technology (MeitY) has recently drafted a Data Centre policy aimed at making India a Global Data Centre hub, promote investment in the sector, and propel digital economy growth.


  • Importance of Data Centre Sector in India
  • Fulfilling the growing demands of the country: Large size of the digital population in India and the growth trajectory of digital economy, especially software as a service (SaaS) sector, necessitate a strong growth of Data Centres. India is home to 1.15 billion mobile users, 661 million broadband users, 376 million social media users, 401 million smart phone users and 564 million internet users consuming around to 2.3 million petabytes in 2020.
  • Maintaining Data sovereignty: Presence of domestic data centres will allow companies to store critical personal data and sensitive personal information of Indian citizens within India.
  • High growth potential: India’s data centre market is expected to reach values of approximately $4 billion by 2024 and is set to play a key role in job creation, bring in foreign investment and contribute to the growth of the country’s economy.
  • Providing digital services to other sectors: Growth of Data Centre service providers can create an enabling ecosystem for provision of services such as data management, cyber security, Big Data and Data Analytics etc. for enterprises in India.
  • Factors enabling the growth of data centres in India
  • Rapid growth in Data consumption: The per capita data consumption is estimated to grow from 2.4 GB in 2017 to 14 GB by 2022 due to factors such as declining bandwidth price, availability of high-speed data connectivity and surge in sectors such as e-commerce, digital entertainment (OTT platforms), fintech, digital education etc.
  • Digitization initiatives: of the government like e-Governance drive, Smart Cities, Digital India, Digital Health Mission etc. will result in the huge volumes of data (structured as well as unstructured) requiring investment for storage, processing and security.
    • Further, states like Maharashtra, Telangana and Tamil Nadu provide incentives to data center companies such as Stamp duty exemption, electricity duty exemption during investment period, building fee rebate etc.


  • Upcoming trends: like the adoption of 5G, cloud-based computing, Artificial intelligence, Big Data analysis and Internet of Things (IoT) are expected to increase storage volume requirement in addition to the “digitization fillip” caused by the disruptions in the wake of the Covid-19 pandemic.
  • Data localization norms: Several provisions of Personal Data Protection (PDP) Bill, 2019 and draft ecommerce policy require storage of critical data within the country. Also, RBI mandate requires personal financial data of Indian citizens to be stored on local servers in the country. Such data localization norms are likely to increase the presence of data centers in India.
  • Other factors: Higher adoption of technology by SMEs in every sector, favorable Startup ecosystem with growth in e-commerce sector, availability of skilled workforce in Information and technology sector etc. will also spur the demand for more data centers in India.
  • Challenges in establishing Data Centres in India
  • Unstable and expensive power supply: Unavailability of uninterrupted, clean and cost-effective electricity remains a hurdle for the Data Centre sector in India. Power failures in data centers can lead to massive loss of data, business disruptions, revenue loss and decrease end-user efficiency.
  • Need of robust internet connectivity: Data centers need low latency, high bandwidth, and stable and secure internet connectivity, which is not available uniformly across India.
  • India ranks 74th amongst 174 nations with an average download speed of 43.0 mbps while global average being 84.3 mbps.
  • Lack of published standards: such as specialized building norms for building the Data Centers, encryption standards which are essential to prevent breaches etc.
  • Skill shortage: The sector needs highly-skilled professionals in specialized areas such as cooling, power, security, network which aren’t always readily available in India.
  • Costly real estate: Data centers in India are mainly established in metro cities such as Mumbai, Chennai etc. where cost of commercial lands is extremely high.
  • Need of high investment: Data centers are capital intensive and have high operational expenditure. With Indian banking sector facing issues of NPAs and liquidity crisis, securing necessary finances can be an issue for this sector.
  • Import dependence: Lack of innovation and low investment in R&D has led to dependence on imported IT and other electronic equipment’s for the sector in India.


Key Features of Draft Data Centre Policy, 2020 that can help India become a Global Data centre hub

  • Proposal to provide Infrastructure Status to the Data Centre Sector: This will help the sector in availing long term institutional credit at easier terms and reduce the cost of borrowing.
  • Simplified clearances: establishing a single window clearance with the defined timelines.



  • Setting up of pre-provisioned Data Centre Parks: with infrastructure like road connectivity, water availability etc. States will be encouraged to demarcate specific zones (land parcels) for them.
  • Data Centers to be declared as an Essential Service: under the Essential Services Maintenance Act, 1968 (ESMA). This will enable seamless continuity of services even during times of crisis.
  • Availability of uninterrupted, clean and cost-effective electricity: by focusing on policy measures such facilitating Data Centre Parks to setup own power generation units to ensure quality of power;
  • Recognizing Data Centers as a separate category under National Building Code: since Data Centre buildings require different norms as compared to other office/ commercial buildings.
  • Setting-up of Data Centre Economic Zones: Government of India proposes to set-up at least four Data Centre Economic Zones (DCEZ). The proposed DCEZ would create an eco-system of Hyper scale Data Centers, Cloud Service Providers, IT companies, R&D units and other allied industries.
  • Promoting indigenous technology development, research and capacity building.
  • Setting up an Institutional Mechanism: This will be done by establishment of bodies such as
    • Inter-Ministerial Empowered Committee (IMEC) under the Chairmanship of Secretary, Meity.
    • Independent Data Centre Industry Council (DCIC) which would act as an interface between the sector and the Government.






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