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India's data centre boom lifts IT investments, but challenges persist

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Data centre projects lift investment announcements, but power and water constraints pose execution risks

Data centre projects and higher project costs push India’s IT services investment announcements to a record share of new projects, Nomura says. | Image: Bloomberg

Shubham Kumar New Delhi

2 min read

Last Updated :

Oct 21 2026 | 11:17 PM

IST

New data centre projects and an upward revision in the cost of projects has led to a rise in investments in India’s information technology (IT) services sector to 4.5 per cent of the gross domestic product (GDP) over the recent 12 month period (Q42025 through Q32026), up from 0.8 per cent during the same period a year ago, Nomura said in a research note.

The record share accounting for about 28.4 per cent of total new investment projects announced was buoyed by a tax holiday for foreign companies mentioned in Union Budget 2026-27, Nomura said, citing data from the Centre for Monitoring Indian Economy. While the rise in announcements is encouraging, availability of power and water remain key constraints to project execution, Nomura cautioned.

India is experiencing a structural shift in rising services imports constraining its services trade surplus, Nomura said in a research note. Rising imports of consultancy, digital, technical and trade services could be due to the rising importance of Global Capability Centres (GCC), artificial intelligence (AI) adoption and focus on data centres along with rising intellectual property (IP) imports, it added. Nomura attributed rising IP imports in part to lower research and development spending domestically. Business and income mobility have also led Indians to spend significantly more on personal and business foreign travel.

India’s current account deficit, in the April-August period of FY27 increased by $3.5 billion year-on-year. An increase of $12 billion in remittances and a $6.4 billion increase in services surplus cushioned the $19.6 billion spike in the merchandise trade deficit during the five month period.

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First Published: Oct 21 2026 | 11:17 PM IST

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