A compelling economic logic is leading India's big data push away from major coastal centres, deep into the inlands

India's big data push is unfolding in an unconventional way, with more and more companies deviating from the tried-and-tested global playbook on data centres business, ToI reported on May 28. Most new players are setting up their data businesses inland rather than on major, established coastal hubs such as Mumbai and Chennai, ToI's report (by Akhil George) said.

Narendra Sen, at the helm of RackBank, a data centre firm based in Indore, oversees a substantial 10-megawatt facility situated on the periphery of Madhya Pradesh's capital. Additionally, he is in the process of developing two more data centres, with one of them located in Raipur, and has also acquired land for a fourth site.

Rather than pursuing the bustling markets of Mumbai's eastern coastline or Chennai's shores—both of which are well-known for being landing points for submarine cables that support the global internet—Sen focused on the affordability of land. “In Indore, we purchased land for approximately 30 lakh an acre,” Sen told ToI.

“In contrast, a comparable plot in Mumbai approaches 30 crore. If you invest heavily, you must also sell at a high price. Indian startups cannot sustain that.” The availability of low-cost land is just the initial step in Sen's mission for affordability. Since energy costs represent the largest expense for data centre operators, RackBank has successfully negotiated a state subsidy that reduces its electricity tariff to around 6 per kilowatt-hour, which is less than half of what is charged in Mumbai. “We believe we can operate at 40% lower costs than a tier-one data centre, while still adhering to the Uptime Tier IV standards, which signify the utmost reliability in data centres,” he said.

Unconventional approach, but a sound one
Sen's approach—positioning capacity in areas with ample land and power rather than in regions where submarine cables are installed—is swiftly gaining traction in the industry. Vipul Kumar, the vice-president for edge and network at CtrlS Datacentres, acknowledges the clear shift in momentum. “We have already launched edge data centre operations in Patna and Lucknow and are broadening our reach into cities like Ahmedabad, Bhubaneswar, Guwahati, Bhopal, Jaipur, and Nagpur,” he states.

For Kumar, the reasoning behind this shift is both strategic and economic. He asserts that decentralizing data centres is crucial for India's digital advancement. “Our facilities in these emerging cities are specifically designed to provide low latency, meet data localization standards, and offer cost-effective solutions,” he explains.

Ashish Arora, the CEO of Nxtra, a subsidiary of Airtel, emphasizes that with the increasing demands from over-the-top (OTT) services and content delivery networks for fast and efficient content distribution, edge data centre networks have become essential. The company currently operates over 120 edge facilities across more than 65 cities, in addition to 14 hyperscale data centres, ensuring uninterrupted streaming capabilities even in smaller urban areas.

Fintech platform Infibeam Avenues is banking on a network of smaller facilities for its future. Chairman Vishal Mehta indicates that they are planning to establish a series of 1 to 2-megawatt data centres in at least ten cities, with each facility costing between 20-50 crore. He believes that this decentralized model not only mitigates risk but also supports low-latency AI operations and can break even within a two-year timeframe.

Mehta further notes that this inland shift is transforming the landscape of corporate real estate. “Global Capability Centres (GCCs), which were once concentrated in major metropolitan areas, are increasingly exploring tier-2 and tier-3 cities. The combination of advanced digital infrastructure, cost advantages, and available talent is turning cities like Gandhinagar, Kochi, and Jaipur into hubs of innovation,” he comments.

Compelling economic logic

As previously highlighted, the economic advantages of the heartland are compelling. Land prices in regions such as Vidarbha or Bundelkhand are a fraction of those in Mumbai; energy is more affordable and, importantly, more readily available.

Latency also plays a crucial role in this transition. A commonly accepted guideline suggests that one millisecond of round-trip delay is equivalent to approximately 100 miles of fibre. An Indore-based server farm is positioned almost equally between Delhi, Mumbai, Hyderabad, and Ahmedabad, allowing it to reach half of India's population in under 10 milliseconds. “For a streaming service or a payment gateway, that level of latency is adequate,” Sen remarks.

AI serves as the final driving force behind this shift. Training a large language model can consume more energy than what a thousand households in India would use in a year and requires meticulously coordinated GPUs. “AI represents a completely different battleground,” Sen observes. “The United States is in the lead, China is following closely, and India must establish its own sovereign computing infrastructure if we wish to remain competitive.” RackBank intends to implement Nvidia's upcoming Blackwell chips within the next six months and promote a sovereign “supercloud” for Indian developers. CtrlS is integrating hybrid renewable energy sources, Nxtra is experimenting with fuel-cell technology, and Infibeam's facilities are designed to accommodate phased GPU upgrades as demand increases.

Collectively, these initiatives could serve as models for rapidly developing regions in places like Africa and Latin America. “If computing resources remain expensive, only large corporations will be able to innovate,” Sen argues. “By providing affordable GPUs in tier-two cities, even a college student could refine a healthcare model using local data. This approach is how we can uncover the UPI or Aadhaar equivalents for the AI era.” He believes this principle is applicable to many nations globally.

Challenges still huge
Nevertheless, the trailblazers in this sector do not underestimate the challenges ahead. Issues like reliable grid power, fibre backhaul, and the availability of skilled technicians remain ongoing concerns. “The reliability of power infrastructure continues to be a major issue in various locations,” Kumar concedes, highlighting the necessity for significant investments in redundancy. Mehta echoes this sentiment, noting that many tier-2 areas still lack the grid stability and integration of renewable resources required for large-scale data centre operations.

However, technological innovation is aiding in bridging the reliability gap. RackBank's pre-engineered, single-story structures can be constructed within six months—one-third of the time it would take to build a vertical city centre tower—and the company’s patented immersion cooling tanks can reduce energy consumption for cooling by 60%. Similarly, CtrlS and Nxtra are adopting modular strategies; Infibeam distributes its IT load across several micro-grids to eliminate single points of failure.