NEW DELHI/MUMBAI: : The Union budget proposal to enable private firms to build data centre parks could help India become a major global data centre, but only with a supportive policy and infrastructure framework, industry officials said.

“Currently there is no large-scale foreign investment in data centres in the country. There is no policy or framework right now on how these global data centres hubs can be created in India. If the government has a clear cut policy around it, India could essentially become a data centre hub for global enterprises," said Vishal Malhotra, tax partner at Ernst & Young (EY).

The global data centre market is expected to grow by $284.44 billion during 2019-23, according to market researcher Technavio.

According to Research and Markets, US data centre market is expected to reach revenue of $69 billion by 2024. Meanwhile, India data centre market is expected to reach values of approximately $4 billion by 2024.

However, setting up data centres in India can be challenging considering costly real estate, high power consumption and heavy expenses on improving wide area network connectivity.

Naveen Mishra, senior director analyst at Gartner, said setting up data centre parks will build an environment where more and more capacity is available for data centre providers and hyperscalers in India.

“Finding the land, working with local authorities and having uninterrupted power supply are some of the challenges that data centre companies face. Beyond that, they have to work with different regulations specific to different states and cities. From that perspective, the announcement by FM is a welcome step," Mishra said.

The new policy on data centre parks is expected to incentivize setting up data centres, similar to some US states that have relaxed taxation on data centre providers.

Illinois, one of the largest data centre markets in US, announced a data centre tax incentive in June 2019 exempting data centres from state and local sales taxes on fulfilling certain provisions required by the state.

“We expect data centre parks to come up in satellite towns within 100km from major metro cities. Data centre parks may not come up in remote/B cities, though edge data centres which are smaller in size shall come up at almost all major metros across the length and breadth of the country," said Sunil Gupta, managing partner and CEO at Yotta Infrastructure, the data centre subsidiary of Hiranandani Group.

The budget proposal follows the requirement for data localization for most companies under the Personal Data Protection (PDP) Bill 2019, which is expected to be made into law soon. However, data localization won’t be the only driving principle for the data centre policy, as such parks can generate business worth billions of dollars each year.

Oracle Corp. opened its first data centre facility in Mumbai in 2019 and plans to add another in Hyderabad this year.

The Adani group intends to invest 70,000 crore to set up solar powered data parks in Andhra Pradesh. Yotta Infrastructure is committed to launching three data centre parks across Maharashtra and Tamil Nadu in the next five years.

Sharad Sanghi, CEO of global data centres and cloud infrastructure (India) NTT, recently said that his company is exploring the scope for edge nodes in India.

“Data centres are capital intensive businesses so it still makes sense to operate from major cities where overhead costs are distributed across a larger facility while smaller markets may not attract enough customer base."

NTT Ltd recently announced $7 billion worth of investments across four key data centre markets globally, one of which is India.

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