India’s artificial intelligence ambitions are set to trigger an unprecedented wave of investments in data centres, with Morgan Stanley estimating that the country could attract nearly $80 billion in investments by FY2031 as AI adoption accelerates.
The global brokerage expects India’s installed data centre capacity to surge from 1.8 GW currently to 10.5 GW by FY31, with AI workloads accounting for nearly 6.8 GW, while conventional data centres will contribute the remaining 3.7 GW. The expansion will be driven by global hyperscalers, domestic conglomerates, rising AI adoption, data localisation requirements and growing demand for low latency computing.
“We expect India’s data centres to attract investment led by global hyperscalers and domestic conglomerates,” Morgan Stanley said in its report on India’s industrial capex cycle. “Against this backdrop, we expect India’s installed data centre capacity to scale from 1.8 GW now to 10.5 GW by FY31, with AI accounting for 6.8 GW.” The brokerage estimates that the data centre buildout represents an approximately $80 billion opportunity, with industrial companies supplying high grade electrical infrastructure and utilities providing long term power emerging as key beneficiaries.
According to Morgan Stanley, the structural drivers behind the boom extend beyond AI alone. “We believe growth will be structurally underpinned by rising low latency demand in light of a stronger digital push, tighter localisation norms and the need for high compute intensity with rising AI workloads,” the report said. It added that India is emerging as an increasingly attractive destination for hyperscale data centres as enterprises and cloud providers expand their AI infrastructure.
The brokerage believes the ripple effects of AI infrastructure will extend well beyond data centre developers. It expects strong demand for transformers, switchgear, transmission equipment, electrical infrastructure and long term power generation as AI facilities require uninterrupted electricity and high quality grid connectivity.
Morgan Stanley also noted that data centres are emerging as a significant new source of electricity demand, alongside green hydrogen projects, reinforcing the need for higher investments in transmission infrastructure. The brokerage estimates that India’s transmission network will require massive capital expenditure over the coming decade to support renewable energy, industrial growth and AI driven digital infrastructure.
