India Poised for Data Centre Boom as AI Demand Surges: Goldman Sachs

India is well-positioned to become one of Asia's fastest-growing data centre markets, supported by rising artificial intelligence (AI) demand, a large talent base, favourable demographics, and its strategic location near the Middle East, according to a Goldman Sachs Research report. The report identifies India as a major growth driver in the region alongside Japan and the Philippines.

India's Structural Advantages Drive Growth Outlook

Goldman Sachs said India is uniquely placed to capitalize on the next phase of data centre expansion due to a combination of demographic, geographic, and workforce strengths.

The report highlighted India, Japan, and the Philippines as the leading growth markets in Asia. While Japan's expansion is being fuelled by government-backed initiatives and the Philippines benefits from a more streamlined regulatory environment, India's growth is underpinned by deeper structural advantages.

"The outlook for data centers in Asia is exceptionally robust, characterized by a broad and steep growth curve," the report stated. "Traditional cloud workloads continue to grow alongside new GPU and AI-first demand, expanding the total market size rather than simply redistributing it."

According to the report, the growth of AI workloads is creating new demand rather than replacing existing cloud infrastructure needs, significantly increasing the sector's long-term growth potential.

AI Reshaping Data Centre Demand and Infrastructure

The report noted that the rapid adoption of artificial intelligence is fundamentally changing how data centres are designed, built, and sold.

"The rise of AI is fundamentally changing customer timelines and infrastructure needs," the report added. "Single-tenant AI customers are committing to orders well before construction starts to lock in bespoke designs, whereas traditional multi-tenant customers expect much shorter lead times."

Goldman Sachs said the emergence of AI-focused companies and so-called "neocloud" providers is accelerating demand for flexible infrastructure and faster deployment schedules.

"Furthermore, new AI-first customers and neoclouds move at a radically different commercial speed, pushing for modular and prefabricated designs to compress delivery timelines," the report added.

Power Constraints Remain Key Challenge

Despite the strong demand outlook, the report cautioned that infrastructure bottlenecks, particularly power availability, remain a major challenge for data centre operators across Asia.

It noted that resolving electricity grid constraints often requires years, if not decades, making reliable power access one of the most significant hurdles to expansion.

To address resource limitations, operators are increasingly adopting localised solutions. In Mumbai, for instance, data centres are sourcing treated wastewater from nearby purification facilities rather than relying on potable water supplies. This approach helps conserve resources while maintaining highly efficient power usage effectiveness levels.

The report also pointed out that geopolitical developments and evolving regulatory requirements are increasing compliance burdens, forcing operators to conduct more extensive due diligence across customers, end-users, and supply chains.

Despite these challenges, Goldman Sachs said the region's underlying demand for data centre capacity remains strong, with AI and cloud computing continuing to drive long-term expansion.

(With inputs from ANI)