Middle East Instability Seen Accelerating India’s Data Centre Investments: Industry Sources
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Indian industry told Sputnik India said that more big-scale investors powering the AI revolution could make their way to India to set up data-centres and other cloud infrastructure after data centres in the Middle-East became targets of Iranian strikes.
India's data centre boom is expected to receive a further fillip in the wake of Iranian strikes against Amazon Web Services (AWS) data centres in the UAE and Bahrain, industry sources aware of the conversations in some of India's top corporates told Sputnik India.
"The sense of uncertainty created by attacks on data centres in UAE and Bahrain is expected to linger even if the US operations end. For years, the safe haven appeal of Middle-East's hubs like Dubai was premised on law-abiding and predictable tax regime societies. The Iranian attacks on cloud infrastructure and other civilian infrastructure targets have damaged the perception of a safe haven," industry sources said.
These sources reckoned that Indian policy-makers will look to "capitalise" on the opportunity. Further, corporate investment targets in data centres are expected to be further revised upwards to feed the global AI boom.
A report by PriceWaterhouse Coopers (PWC) last April projected the Middle-East as the global "data centre powerhouse", with hundreds of billions of dollars of investments lined up in the UAE, Saudi Arabia and Kuwait among other nations. The US-Iran War makes a case for revising these projections, Indian industry sources assessed.
According to a new report by a real estate consultant CBRE this week, India's data centre industry could witness a cumulative investment totalling $54 billion by end of 2026 calendar year, with total 500 MW of new supply addition expected to be created this year.
In recent months, Big Tech like Google and Microsoft, in partnership with local partners, have announced investments to the tune of $10 billion to set-up data centres in the country. In February, Reliance Industries Limited (RIL) announced an investment pledge of $110 billion over the next seven years to develop data centres and other cloud infrastructure in the country. The same month, Adani Enterprises announced a $100 billion pledge to develop renewable-energy-powered, hyperscale AI-ready data centres by 2035.
Further, industry sources noted that India has shown that it could take care of its energy security through diversified sourcing. "We have the space. We are creating additional avenues of energy, besides the conventional forms. We have the software prowess and a talent pool. So, Big Tech investments could be expected to be ramped up even more to create and subsist a five-layer AI stack catering to India's technological sovereignty," sources said.
They noted that countries like Singapore, which have traditionally served as data centre hubs for India, are increasingly saturated. "India is one of the best positioned countries to be the next big global data centre hub".
These sources also credited India's multi-aligned foreign policy approach adopted under Prime Minister Modi and EAM Jaishankar for making India an "attractive and a safe investment destination".
"The wait-and-watch approach during the Iran war and not taking sides is expected to pay off. More investments into data centres is just one side of the story. There are other areas as well. One may see more global energy giants making India the hub of their refining operations in coming months and years.
Bharatiya Janata Party (BJP) politician Savio Rodrigues also believes that India is a "natural alternative" to the Middle-East when it comes to investments in the digital infrastructure sector.
"For years, the Middle East positioned itself as an emerging digital hub, leveraging energy availability and geographic advantage. However, the recent escalation involving Iran and the resulting instability across the Gulf introduce a new variable - geopolitical vulnerability. When cloud infrastructure is directly or indirectly exposed to kinetic threats, global enterprises are forced to reassess not just cost efficiency, but continuity, resilience, and sovereign control over their data," Rodrigues told Sputnik India.
The Indian politician said that "disruption of data centres linked to Amazon Web Services in the Gulf highlights a new reality - digital infrastructure is now a strategic target".
Escalations involving Iran have introduced serious risk to regional stability, prompting global firms to rethink location strategies, he said
"Under PM Narendra Modi, India’s push for digital sovereignty, stable governance, and scalable infrastructure positions it as a natural alternative. This moment will accelerate India’s emergence as a trusted hub for data centres and sovereign AI, driven not by crisis, but by consistent policy foresight and long-term strategic planning," Rodrigues concluded.
