Axis Capital has lowered its growth forecast for India's data centre sector, citing delays in power connectivity and equipment procurement. While demand from AI and cloud providers remains strong, industry experts now expect capacity to reach 3-3.6 GW by mid-decade. Investors should watch how these execution hurdles impact the profitability of power infrastructure providers and data centre operators.
India's data centre industry is experiencing a shift in its expansion timeline. According to a recent report by Axis Capital, the country's total data centre capacity is now projected to hit 3-3.6 gigawatts (GW) by the middle of this decade. This is a more cautious outlook compared to earlier market expectations that had suggested a potential for 6-8 GW of capacity by 2030. Despite the tempered growth forecast, the industry is still set to more than double from its current operational base of approximately 1.3-1.4 GW.
Execution Constraints and Supply Bottlenecks
The slower pace of development is primarily linked to operational challenges rather than a lack of demand. Developers are facing significant delays in securing critical infrastructure, such as high-capacity transformers and power generators, with lead times for some equipment stretching up to two years. Furthermore, obtaining high-capacity, redundant power connections from local grids can take up to 18 months, creating a bottleneck for new projects. These delays mean that of the 3.4-3.6 GW pipeline planned by major operators including Adani Connex, CtrlS, and Jio, only about 40% is expected to become operational within the standard three-to-four-year building cycle.
Rising Costs for AI-Ready Infrastructure
As the demand for Artificial Intelligence (AI) and large language model workloads grows, data centres are moving toward more complex designs. These AI-ready facilities require liquid cooling systems, denser power distribution, and reinforced structural builds, which collectively drive up capital spending. Developing these advanced centres is estimated to cost between Rs 480 million and Rs 540 million per megawatt, marking a 10-15% premium over standard facilities. The total investment required for India’s data centre build-out between fiscal years 2027 and 2030 is estimated at Rs 1.31-1.66 lakh crore, which excludes costs for land and IT hardware.
Impact on Power and Electrical Equipment Suppliers
While operators navigate these execution risks, the demand for essential electrical equipment remains high. Companies that manufacture power distribution and management systems, such as ABB India, Siemens, Hitachi Energy India, and CG Power, are positioned to provide the necessary components for these projects. Additionally, the integration of renewable energy—such as solar and wind—is becoming a standard requirement. By pairing renewable energy with grid power, operators in high-cost regions like Mumbai can potentially reduce their electricity bills by Rs 2-3 per unit, helping to improve long-term operational margins while meeting sustainability targets for their hyperscale clients.
Investors tracking this sector should monitor whether operators can successfully navigate supply chain delays and land acquisition challenges, as these factors will dictate the actual pace of capacity rollout. The shift toward hyperscalers, who are expected to account for 90% of the market demand by 2030, will also be a key indicator of long-term contract stability for these large-scale projects.