New Delhi: India’s technology sector is likely to see generative artificial intelligence (generative AI) and related data applications define client orders, financial growth and technical innovation in 2025. In turn, this is expected to generate a spurt in demand for data centres and their services.
Industry stakeholders ranging from the US’s Big Tech firms, as well as data centre and software services companies, are gearing up for a boom in demand amid expectations of easing inflation concerns in the West, and the Indian government’s boost to domestic research and development (R&D) expenditure in the coming year.
On 12 December, Mint reported that the Centre was evaluating plans to roll out $3 billion in incentives to boost R&D in India. The country, already a hub for fresh technical talent, is now looking to invest in innovation to climb up the value ladder—as opposed to being a usage economy so far.
At the core of this push is the establishment of generative AI as a key differentiator in the near term, and its impact on data centres.
On 28 September, Mint reported that the Adani group is likely to pump in $4 billion to establish a net data centre capacity of 1.5GW (gigawatt) within the next two years, a plan that originally had a timeline of five years. This boost is driven by the influx of AI in enterprises, and the anticipated data boom that is expected to come with it.
Ashish Arora, chief executive of Bharti Enterprises’ subsidiary Nxtra, also added that the company is investing $600 million to double its net data centre capacity to 400MW (megawatt) by 2026, a chunk of which will be expanded in 2025 itself.
Earlier this month, Bloomberg reported that Yotta Data Services, a subsidiary of the Hiranandani Group, is close to finalizing a $500-million investment through a group of creditors to expand its data centre ‘parks’, which are already operational in Uttar Pradesh’s Greater Noida and Maharashtra’s Navi Mumbai regions.
The uptick comes even as generative AI has struggled to keep up with its heightened hype of rapidly transforming businesses. Driven by data privacy and copyright concerns, enterprises have largely remained cautious in adopting the technology rapidly through this year.
The early signs of change, however, are here. On 19 December, Accenture, the world’s largest technology services outsourcing and consultancy firm and a bellwether for India’s $300-billion IT services sector, disclosed $1.2 billion in net new generative AI deals with businesses worldwide. generative AI, thus, comprised 6.4% of total new business during the company’s Q1FY25 period, which in its reporting runs from September to November.
The first week of January, thus, will be key to see if India’s IT services stalwarts, led by heavyweights Tata Consultancy Services (TCS), Infosys and HCL Technologies, can keep up with Accenture’s pace of executing generative AI applications with clients.
Earlier this fiscal, K. Krithivasan, chief executive of TCS, had said that the company has a business pipeline worth $1.5 billion for generative AI. During the company’s October earnings call for Q2FY25, Krithivasan further added that the company has 600 active generative AI projects. However, crucially, he declined to comment on the amount of revenue TCS is drawing from AI’s youngest brainchild.
Adoption likely to rise
Industry stakeholders, however, are bullish that 2025 is likely to see generative AI go on a stronger run of adoption, as the technology itself becomes more mature, and businesses find a way to implement them at the core.
On 11 December, Google announced its new generation of generative AI models under the Gemini 2.0 suite, underlining its suitability for ‘agentic’ AI applications, which experts said was a clear sign of the company trying to convince businesses of the technology’s usability.
“AI isn’t just an enabler anymore—it’s becoming the backbone of how industries innovate, scale, and solve their most complex challenges,” said Sindhu Gangadharan, chairperson of Centre-affiliated think-tank Nasscom, and managing director of SAP Labs India. “AI is evolving from being assistive to becoming truly intelligent, with autonomous agents capable of making decisions and orchestrating entire ecosystems.
Gangadharan added that custom AI, in particular, is emerging as a transformative force in 2025, allowing organizations to design AI solutions tailored to their specific needs. “This trend is set to democratize AI innovation. For India, this is an incredible opportunity—we’re perfectly positioned to lead this AI-driven transformation,” she said.
“More organizations are experimenting with building custom AI solutions tailored to industry needs, including custom copilots and AI agents,” said Irina Ghose, managing director of Microsoft India. She added that Indian enterprises are at the forefront of this shift in scaling AI and data use cases to “drive innovation, improve productivity and streamline workflows—bringing India on the brink of an AI-driven renaissance”.
Ghose further added that as far as generative AI is concerned, there is no doubt that with the right combination of data and associated computing power, businesses across industries can be considerably redefined.
“2024 was the year of AI in action, and we saw a transformative shift in how companies approach AI, moving from exploration to execution. Increasingly, more and more organizations are experimenting with building custom AI solutions tailored directly to industry needs, including custom copilots and AI agents. The business opportunity of AI is clear. According to an IDC study, for every dollar a company invests in generative AI, the return on investment is 3.7x. On top of this, 92% of AI deployments are taking 12 months or less at an enterprise level,” Ghose said.
Ipsita Dasgupta, managing director of HP India, said it was important to empower SMBs (small and medium businesses), which contribute about 30% of GDP but face various barriers, with AI technology. “The future of work means a more flexible, inclusive and digitally connected environment where technology empowers individuals and businesses of all sizes. AI PCs and advanced workstations will be at the core of this change,” Dasgupta said.
The key, experts believe, will be in how generative AI grows in the coming year. Pointing out that generative AI is still only a two-year old technology, Jayanth Kolla, partner at tech consultant Convergence Catalyst, said we are still understanding a lot about it.
“That said, the advent of domain-specific applications through generative AI is a key area of business interest, and whichever way you look at it, the boom in data centre demand is unavoidable in India as a result. As enterprises ramp up AI consumption, this demand will only rise, without any concerns of slowdown or saturation at least in the near-term,” Kolla said.
There are also new directions that AI and data centre evolutions can take in the coming year. For AI, much will depend on what the US behemoths of Google, Meta, Microsoft and OpenAI will do in the coming year. 2024 already saw reasoning AI make a debut, although the use cases of the latter will only build over time. For data centres, figuring out the energy consumption conundrum will be key, as net-zero and climate change accord targets inch closer.
The earliest proof of the generative AI pudding, each stakeholder agrees, is likely going to come in the first quarter of the upcoming fiscal—suggesting that the true boom in AI and data centres could take until at least the middle of the year to play out. Despite that, all of them are certain that unlike the promise of 5G or satellite internet, there are no external factors that can stop 2025 from being the year for data centres and generative AI to define India’s tech industries.
