India's digital transformation market seen reaching $229.59 billion by 2029 amid AI adoption: Report

New Delhi, Aug 10 (AHN) India's digital transformation market is projected to reach $229.59 billion by 2029 due to rapid artificial intelligence (AI) adoption, cloud computing, enterprise digitisation and the expansion of digital public infrastructure, according to a report released on Monday.

According to a report by smallcase, India's digital infrastructure sector is entering a period of significant expansion, with the country emerging as a potential global hub for AI-ready data centre infrastructure.

It further noted that the country's digital transformation market is estimated to grow at a compound annual growth rate of 20.63-32.1 per cent through 2029.

The country's operational data centre capacity is expected to cross 2 GW by the end of 2026, compared with around 1.6 GW currently, supported by more than $30 billion in confirmed capital expenditure and an investment pipeline of nearly $60 billion.

By 2030, operational data centre capacity could expand to 4.5-7 GW, with some industry estimates putting the potential at around 7.5 GW as AI and cloud investments accelerate, the report said.

It also highlighted that the Ministry of Electronics and Information Technology (MeitY) has expected a total investment in India's data centre ecosystem to exceed $200 billion with nearly $70 billion already at various stages of construction.

"With an investment pipeline exceeding $200 billion, supportive government policies, a strong engineering talent base and rapidly expanding digital public infrastructure, the country is building the foundation to become a global AI infrastructure hub," said Naveen KR, smallcase manager and Senior Director, Windmill Capital.

He said India would need to strengthen power availability, fibre infrastructure, regulatory efficiency and high-density AI-ready facilities to scale sustainably.

In addition, the report identified AI as the biggest driver of data centre demand.

India accounted for 46.2 per cent of AI activity across the Asia-Pacific region and recorded more than 82.3 billion AI transactions in the second half of 2025, it said.

City-wise, Mumbai remains India's largest data centre market, while Hyderabad is emerging as a major alternative because of lower infrastructure costs, connectivity and lower seismic risk, the report said.

It also showed challenges, including fragmented regulatory approvals, shortages of specialised AI infrastructure talent, limited fibre penetration and the need for advanced cooling technologies, while projecting India's data centre ecosystem could generate nearly nine million jobs by 2030, including direct and indirect employment across engineering, manufacturing, logistics and technology services.