U.S. technology companies are hesitant to lease large data centers in India due to recent trade tensions between New Delhi and Washington, D.C.
U.S. technology firms are currently delaying decisions regarding the leasing of large data centers in India, reflecting concerns over the recent deterioration of trade relations between New Delhi and Washington, D.C.
According to Alok Bajpai, managing director of India for NTT Global Data Centers, orders from major tech companies for hyperscale data centers—facilities that require substantial computing power—are still in the pipeline. However, these companies are exercising caution, opting to hold off on finalizing agreements. “They are holding the pen and saying let me not sign it just yet,” Bajpai noted.
The situation has been exacerbated by new U.S. tariffs on Indian exports, which have unsettled global supply chains and complicated the costs associated with equipment and inputs. Jitendra Soni, a partner in the technology and data privacy practice at Argus Partners, remarked on the impact of these tariffs, stating that they have made it increasingly difficult to pin down costs.
Despite these challenges, India’s data center capacity is projected to nearly triple over the next five years, increasing from 1.2 gigawatts to over 3.5 gigawatts by 2030, according to various industry estimates. Soni emphasized that while the underlying appeal of India remains compelling, the pace of deal closures has slowed significantly, with negotiations now requiring more legal scrutiny regarding responsibility for potential global shocks.
Data centers play a crucial role in the digital economy, housing computer systems and related infrastructure necessary for storing, processing, and managing vast amounts of data. They support essential digital services such as cloud computing, social media, online banking, and enterprise applications. Depending on their function, data centers can be privately owned, rented, cloud-based, or strategically located near end users to minimize latency. Essentially, they are vital for the seamless operation of modern digital services.
The current reluctance among U.S. tech giants to finalize data center agreements in India underscores the intricate balance between geopolitical tensions and the long-term potential of the market. While trade friction, particularly the imposition of new tariffs, has introduced short-term uncertainty, it has not fundamentally shaken confidence in India’s ambitions for digital infrastructure.
Global technology firms are adopting a more cautious approach, delaying decisions and seeking stronger legal and commercial protections. This trend indicates a shift towards more risk-aware investment strategies, rather than a diminished interest in the Indian market.
India continues to present strong fundamentals, including a large and expanding internet user base, favorable government policies that support digital infrastructure, and a strategic position within the global IT ecosystem. The anticipated growth in the country’s data center capacity, expected to nearly triple by 2030, suggests that the overall trajectory remains positive, even as timelines extend and negotiations become more complex.
This moment represents both a challenge and an opportunity for India. The country must address investor concerns by establishing clear and stable policy frameworks while enhancing trade diplomacy. Concurrently, India can leverage this period to bolster domestic capacity, encourage local partnerships, and position itself as a more self-reliant digital hub.
Ultimately, how India navigates this phase of cautious optimism will be crucial in determining its ability to fully realize its potential as a global leader in the data infrastructure sector.
Source: Original article