Syllabus: GS3/Digital Infrastructure; Security
Context
- India holds the potential to transform itself into a global leader in data-driven innovation by technological advancement, and social development in a rapidly growing digital ecosystem.
Digital Data Generation
- India as Highest User Count: India accounts for an estimated 20% of the world’s data production, with millions of users on social media platforms like Facebook, WhatsApp, Instagram and YouTube.
- Additionally, 82.6% of Indian email users prefer Gmail.
- Global Comparison (Natural Resources vs. Digital Data): Other nations have capitalized on their inherent strengths:
- China: Controls 70–80% of global rare earth processing
- Australia: Leads in iron ore mining
- Chile: Dominates copper production
- Generative AI Boom: The value of data has been amplified by Generative AI:
- McKinsey estimates it could add $2.6 to $4.4 trillion annually to the global economy.
- Productivity gains from AI could reach 40%.
Concerns & Challenges
- Underdeveloped Infrastructure: India’s natural advantage in digital data remains largely untapped.
- Despite generating a fifth of the world’s data, it holds less than 2% of global data centre capacity.
- Infrastructure Deficit: Global data centre power capacity is projected to triple from 59 GW (current estimate) to 171–219 GW by 2030, growing at a CAGR of 19–27%.
- In contrast, India’s capacity is currently just 900 MW. Even if it doubles in the next five years, it will remain vastly insufficient.
- Traditional barriers such as, Unreliable power supply, Limited cable landing stations, and Insufficient undersea cable capacity.
- India’s Data Centre Gap: India’s current data centre capacity: 900 MW (approx); Expected to double in five years.
- Still a small fraction of the needed 40 GW by 2030.
| Why Do Data Centers Matter? – These are more than repositories for digital storage — they are foundational to economic growth, national security, and technological innovation. – They act as backbones for critical sectors such as fintech, e-commerce, healthcare, and artificial intelligence. – They enable secure, high-speed processing, ensure regulatory compliance, and attract FDI — forming a robust ecosystem that powers digital economies. – A 2017 MIT study found that data-driven firms outperform others, with 4% higher productivity and 6% higher profitability. |
- Case Against Mandatory Data Localisation: While data localisation mandates may seem like a quick fix, they have significant downsides:
- May trigger retaliation from other nations, hurting Indian exports
- Could raise service prices and reduce competition
- Smaller firms may exit the Indian market
- May be viewed as a trade barrier, leading to legal disputes
Policy Landscape and Reform Readiness
- Positive Policy Environment: India is now better prepared to grow its data infrastructure, with:
- Digital Personal Data Protection Act (2023) ensuring secure, compliant data use
- 100% FDI permitted for data centres
- Global companies localising services (e.g., Facebook, YouTube)
- Large employable workforce ready to support the industry
| For more information on initiatives, kindly visit the following link: https://www.nextias.com/ca/editorial-analysis/07-01-2025/digital-governance-in-india |
Learning from Global Leaders like US and China
- United States: It offers tax breaks (sales, property, income), accelerated cost recovery, renewable energy credits, and subsidised electricity.
- China: It classifies data centres as national strategic projects, offering ultra-low electricity tariffs, corporate tax cuts, and green data centre incentives.
Recommendations for a Data-Centric Future
- Infrastructure: A proportional data infrastructure would demand at least 20% of global data centre capacity.
- India needs to invest $400 billion, creating 1–2 million direct jobs. support up to 6 million indirect jobs, and construct 800 million sq. ft. of infrastructure, to match its data output.
- Tax Incentives:
- 10-year tax holiday for data centres.
- Customs duty exemption on data centre hardware.
- 5% GST on infrastructure and services.
- PLI and Design-Linked Incentives: Extend PLI-type schemes currently used in electronics manufacturing to the data centre industry.
- Infrastructure Financing: Concessional loans for green and high-efficiency data centres.
- Subsidised electricity, with the ability to purchase directly from discoms.
- Regional Hubs Development: Leverage cities like Dehradun, Shimla, and Chandigarh—where cooling costs are lower—to develop data centre hubs connected via dedicated fibre corridors.
Road Ahead: Urgency and Opportunity
- As global data production surpasses the sum of all prior human history annually, the stakes have never been higher. Data infrastructure is no longer a technical issue—it is a matter of economic sovereignty, technological competitiveness, and geopolitical resilience.
| Daily Mains Practice Question [Q] How can India effectively harness its vast untapped data reserves to achieve economic growth, technological leadership, and social development, while addressing challenges like data privacy and infrastructure gaps? |