The next wave in India is going to be the demand for data centre capacity. The data centre industry is set for huge expansion, with total installed capacity expected to nearly triple from 1.65 GW in 2025 to 5 GW by 2030. What’s driving the growth? According to Avendus Capital, the sector is benefiting from a dual growth trajectory. On one hand, the sector benefits from a rapid expansion of India’s digital economy and on the other, a rising demand for artificial intelligence (AI) infrastructure.

“India’s data centre ecosystem is on a dual growth trajectory, driven by surging demand from expanding digital economy, and scaling infrastructure to support GPU deployments for AI training and inference workloads,” Avendus Capital said in its report.

India’s data centre capacity is projected to grow at a compound annual growth rate (CAGR) of 26% through 2030. Developers are expected to invest around $25 billion to add more than 3 GW of new capacity over the next five years. However, AI-dedicated data centre capacity in India alone could rise from 0.3 GW in 2025 to 1.2 GW by 2030.

Alongside AI, traditional demand drivers such as cloud adoption, need for data localisation and increased data consumption, continue to support the sector, along with the rollout of more 5G services.

AI is emerging as the next major growth engine for the data centre industry. According to the report, India’s domestic AI market is expected to reach $131 billion by 2032, growing at a CAGR of 39%.

India, which hosts the second-highest number of ChatGPT users globally as of January 2026, is expected to see strong demand for AI applications and the need for more computing power. To support these ambitions, the country is expected to deploy between 650,000 and 700,000 GPUs over the next five years.

GPUs or graphics processing units are advanced computer chips that provide the massive computing power required to train and run AI models.

The increased use of AI is coming not only from individual users but also from businesses. More than 80% of Indian firms are prioritising AI adoption, while 45% have already started implementing AI in their business processes. The report also noted that 64% of Indian enterprises are planning to build in-house AI products using cloud-based computing power, which in turn would fuel the need for more data centres.