New policies set to spur data centre investment

New government policies in India are aiming to boost investment in data centres, part of an effort to make the country a hub for the world’s growing data traffic.

Making India a data centre hub has been a goal in recent years for the government, which made several announcements supporting such efforts in its 2022 budget. This included attempts to make borrowing cheaper for operators, details on 5G auctions and spreading the internet to all villages in the country.

“The policy initiatives announced in this year’s budget will accelerate the data centre industry growth and spur investments in India,” says Rachit Mohan, Head, Data Center Advisory – India, Co-Head, Office Leasing Advisory – Mumbai, JLL. “It’s coming at a time when demand for such real estate had already been heating up.”

Data centre investment rose 60 percent globally in 2021, according to JLL. The surge stems in part from efforts to diversify portfolios and gain exposure to assets exhibiting long-term growth prospects.

Crucial reclassification

The new initiatives in India come amid a general push to further increase internet access for the country’s data-hungry population.

The key to the effort is changing how the government classifies data centres. The new policy will include them as part of the infrastructure sector, which will allow operators to raise long-term credit at cheaper rates. They can also use the “external commercial borrowing” route to raise funds and borrow from the India Infrastructure Finance Company.

The government grants infrastructure status to sectors deemed critical to the country's economic growth and job creation.

Fibre optic cable connecting villages

The Indian government plans to connect all villages using optical fibre, including remote areas. For this, it will award contracts under the BharatNet project through Public-Private Partnerships (PPP) in the financial year 2023. It expects to complete the project in 2025.

BharatNet is a government-owned broadband infrastructure provider that operates and manages the National Optical Fibre Network. The aim is to provide a minimum of 100 Mbps broadband connectivity to all villages (over 600,000).

It will give a fillip to “edge data centres” — smaller facilities located close to the population. Recently, another government entity, RailTel Corporation of India, spoke of setting up 102 edge data centres via the PPP model.

"Infrastructure status is an enabler in further capacity addition,” Mohan says. “5G roll out and connecting villages with optical fibre will be the real game-changers, as these will increase data and content consumptions sharply."