India's Data Center Policy Landscape – Regulations, Incentives, and Infrastructure Growth

India has emerged as one of the fastest‑growing data center markets globally, supported by rapid digitalization, cloud adoption, and regulatory emphasis on data sovereignty. Government policies play a central role in shaping domestic data infrastructure development.

Data Localization Requirements

Data localization requirements are a key regulatory driver. The Reserve Bank of India mandates that payments data be stored domestically, reinforcing the need for local data processing and storage capacity ^[7].

This is complemented by the Digital Personal Data Protection Act, 2023, which establishes governance standards for personal data handling and regulated cross‑border transfers ^[8].

Infrastructure Status Recognition

At the national level, data centers have been granted infrastructure status under India's Harmonized Master List of Infrastructure Sub‑sectors. This designation improves access to long‑term financing and supports large‑scale capital investment into the sector ^[9].

The IndiaAI Mission

India's technology strategy also includes a strong focus on artificial intelligence. The IndiaAI Mission promotes domestic AI capability development, including access to compute infrastructure through public‑private partnerships, which is expected to further increase demand for data center capacity ^[10].

State-Level Incentives

State governments contribute through tailored data center policies offering industrial electricity tariffs, tax incentives, capital subsidies, and single‑window clearance mechanisms. Sustainability considerations such as renewable energy usage and water management are increasingly influencing policy frameworks and infrastructure planning.