Data Centre Dreams: Can India Keep Up?

India’s Data Centre Dream Faces A Supply Chain Reckoning

By Dev Chandrasekhar

India's data centre sector attracted $56.4 billion in fresh investment commitments in 2025 alone as total installed capacity crossed 1,700 MW. CBRE projects 500 MW of new supply in 2026, and the government's target of 9 GW by 2030 implies a fivefold expansion from current levels. 

The capital has been committed, and the policy framework has improved materially. Deserving more scrutiny is the supply chain that must deliver the physical infrastructure behind these projections.

In early February, Zhao Haijun, co-chief executive of China's largest chipmaker SMIC, offered a pointed reference point. Companies, he told analysts, built ten years' worth of data centre capacity in one or two years, but what those data centres would actually do had not been fully thought through. He was alluding to China's overbuilding episode: government-backed facilities in that country’s western provinces running at 20–30% utilisation, unable to find tenants. 

The warning was addressed to the global buildout. But the supply chain dynamics it exposes apply to India as much as anywhere. 

The Announced Ambition

Cumulative investment commitments in India’s data centre pipeline stood at $126 billion at the end of 2025. They are projected to cross $180 billion in 2026, a 45% year-on-year rise. 

Mumbai alone accounts for more than half of the current operational inventory; Mumbai, Chennai, Delhi-NCR, and Bengaluru together hold nearly 90% of tier-I city capacity. Maharashtra, Telangana, Andhra Pradesh, Tamil Nadu, and Uttar Pradesh are all competing for the next wave, with tier-II cities attracting growing interest. The government's 9 GW target by 2030 would place India among the world's largest data centre markets. Electricity consumption is projected to rise from 10–15 TWh to 40–45 TWh over the decade.

Behind these figures sits a supply chain that has not been examined with the same rigour as the demand assumptions underwriting it.

The Electrical Gap

The most acute near-term constraint is electrical infrastructure. Transformers, switchgear, and battery storage account for less than 10% of total data centre capital expenditure, but they are non-negotiable. In the United States, lead times for high-power transformers that ran 24–30 months before 2020 have stretched to five years today, with prices doubling. 

As American builders turned to China, transformer imports rose more than fivefold between 2022 and October 2025. China accounts for over 40% of US battery imports and near 30% of transformer and switchgear categories. That relationship is now disrupted by tariffs. Nearly half of the US data centre builds planned for 2026 are projected to be delayed or cancelled as a result.

India faces the same global queue, with a thinner domestic manufacturing base. Core electrical equipment is still heavily import-dependent; procurement cycles routinely stretch beyond twelve months. 

India’s data centre narrative has several other missing links: CRGO steel on the electrical side; liquid cooling and GPU allocation on the compute side; and battery backup reliability, water, commissioning labour, and subsea cable concentration that barely register in the conversation.

What two founders learned growing a 37-year-old company

Intrepid's co-founder and CEO don't do corporate gloss. Their opening letter in the Integrated Annual Report gets into what 2025 actually required: the hard calls, the strategy reset, and how a nearly 30% growth year still came with real challenges.

Read their story

$20.67 billion

That’s how much India’s trade deficit narrowed to, in March 2026, from $27.1 billion in February 2026, according to data released by the Commerce Ministry.

Merchandise imports:
February 2026: $63.71 billion
March 2026: $59.59 billion

Merchandise exports:
February 2026: $36.61 billion
March 2026: $38.92 billion

The Turning Point: The deficit narrowed as imports fell sharply while exports rose, supported by stronger demand from the US, even as West Asia disruptions weighed on trade. Lower import volumes, including edible oils, also contributed to the decline.

Key driver on the import side was a steep decline in petroleum, crude and products imports, which reduced by 35.91% to $12.18 billion in March 2026.

Analysts said the narrowing deficit reflects a mix of falling imports and resilient external demand, but warn that geopolitical tensions and shipping disruptions could keep trade volatile in the coming months.

Air India Needs Cash

Air India is back in the red. The airline posted a record loss of over Rs 22,000 crore in FY26, more than double its roughly Rs 10,800 crore loss in the previous fiscal, and is now seeking fresh funds from Tata Group and Singapore Airlines, sources told Bloomberg.

How We Got Here: The airline had started the fiscal year on a positive note, posting operating profits in early April 2025, the people said. But that reversed after Pakistan closed its airspace to Indian carriers following the conflict in May, forcing longer routes to the US and Europe and pushing up fuel and operational costs. The West Asia war added further disruption, and the deadly Boeing 787 crash forced flight cuts and strained operations.

Why It Matters: At the same time, Air India’s long-running turnaround continues to strain finances. The airline is still integrating operations, investing heavily in fleet modernisation, and upgrading service and systems, with costs rising faster than revenues despite expansion.

India’s Inflation, Iran’s Tensions

India's wholesale price index surged 3.88% year-on-year in March, the fastest pace in over three years, surpassing February's 2.13% rise and economists' forecast of 3.04%. The spike was driven by manufactured products (+3.39%), food (+1.85%), and a sharp reversal in fuel and power prices, which rose 1.05% after a 3.78% decline in February.

Catch Up Quick: Separately, around 4 million barrels of Iranian oil arrived in India ahead of a US sanctions waiver expiry, Bloomberg reported. Meanwhile, the government has assured stable domestic LPG supplies.

Setup: Trump reportedly told Fox Business Network that he urged China's Xi Jinping not to arm Iran, with Xi denying any weapons supply.

Trump also predicted an imminent resolution to the conflict, hinting at a significant two-day window, even as US forces imposed a maritime blockade on Iranian ports, Reuters reported, quoting ABC News.

Despite optimism over resumed talks, no breakthrough has emerged yet.

QCO Cost Burden

India’s expanding quality control regime is driving up compliance costs, putting MSME importers under strain.

Context: Under Quality Control Orders (QCOs), foreign suppliers must obtain certification from the Bureau of Indian Standards before exporting. A case reviewed by the Global Trade Research Initiative shows a Vietnamese supplier was charged Rs 57,000 per sample for testing industrial screws. For 29 samples, the total cost rose to Rs 16.5 lakh, highlighting the steep cost of even routine certification.

These tests include basic checks such as tensile strength and hardness. Notably, setting up a lab for such testing costs around ₹25–30 lakh, making certification almost as expensive as building testing capacity. While large importers can absorb these costs, MSMEs handling low volumes may find imports unviable.

What’s Next: Without rationalisation, high compliance costs could reduce competition, favour large firms, and disrupt supply chains critical to domestic manufacturing.

NBFC Funding Shift

NBFCs are expected to tilt further towards bank borrowings this fiscal, as relatively lower lending rates make them more attractive than market-based instruments, according to Crisil Ratings’ report.

Trigger: Bank loan rates have been softening, while bond yields (after easing earlier) have firmed up and remain elevated. As a result, the share of bank loans in overall borrowings is projected to rise to 44–45% this fiscal, up from around 43% in the latter half of last year.

“As a result, NBFCs’ preference for bank credit will continue. In the base case, we expect the share of bank funding in overall borrowings of NBFCs to increase 100-200 bps this fiscal,” said Malvika Bhotika, Director, Crisil Ratings.

Forecast: While funding costs may stay uneven, diversified borrowing strategies will be key for NBFCs to maintain stability and support growth.

The Markets Cheer the Words but Actions Suggest Otherwise

On Episode 848 of The Core Report, financial journalist Govindraj Ethiraj talks to Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank; Adelle Thomas, Director of Adaptation at NRDC and Vice Chair of the IPCC Working Group; as well as Krishnan Sitaraman, Chief Ratings Officer at Crisil Ratings.

• The markets cheer the words as always but why the actions suggest otherwise

• Indian exports rise to the US on lower tariffs

• How a reduced monsoon will impact the economy

• Why is bank credit slowing this year?

• Extreme heat is emerging as one of the most immediate climate risks globally