Metros like Mumbai, Delhi, and Bengaluru have long been the flag bearers of India’s data economy. It is now Tier 2 and Tier 3 cities that are emerging as the unexpected heroes of our digital transformation journey.

From Jaipur and Indore to Kochi and Mohali, these rising cities are rapidly turning into hotspots for data center development, edge computing, and digital innovation. Once considered peripheral, they are now central to the vision of a decentralized digital India. According to a recent report, Tier 2 and Tier 3 cities currently contribute about 82 MW, or 6% of India’s total data center capacity, but this is expected to grow to 300–400 MW by 2030. Overall, India’s total data center capacity is projected to exceed 4,500 MW by 2030, underscoring the vital role these emerging cities will play in bolstering the nation’s digital economy.

At the core of this transformation is a convergence of supportive policies, the push for decentralized enterprises, and the growing demand for local data. This combination is fueling investments in cities that provide advantages like proximity, lower costs, and a smoother business environment.

The forces reshaping data center geography

Four major trends are driving this shift towards decentralization:

AI needs localized speed: Whether it’s powering facial recognition in smart cities or enabling real-time language models, AI workloads need data transfer that’s almost instantaneous. With India’s AI market expected to hit $17 billion by 2027, positioning computing resources closer to users in Tier 2 and 3 cities like Kochi, Indore, and Jaipur is essential for speed and scalability.
Edge computing is essential: With the rise of applications like video streaming, connected factories, smart homes, and real-time analytics, there’s a growing need for low-latency infrastructure. By setting up edge data centers in emerging cities, businesses can cut down on network reliance and boost their responsiveness. These decentralized nodes are shaping the foundation of a digitally connected India.
Policy support is paving the way: Government programs like Digital India, PM Gati Shakti, and the Smart Cities Mission are driving the demand for real-time, localized data processing. These programs are creating strong incentives for investment in regional hubs. Central policies like the National Data Center Policy, along with other state-level initiatives, are actively encouraging decentralization.
Smaller Cities, Stronger Foundations: India’s fiber optic network surpassed 3 million route kilometers in 2024. With improved power reliability in non-metro areas, along with lower land costs and proactive state policies, cities like Bhubaneswar, Jaipur, Vijayawada, and Surat are emerging as prime spots for edge data centers.
Tier 2 cities: Moving from cost advantage to strategic edge
While the lower costs of land and energy make Tier 2 cities attractive, the true game-changers are better fiber connectivity, faster time-to-market, and being closer to users, especially important for industries that rely on low latency, like gaming, OTT, and eCommerce.However, these emerging hubs need infrastructure that’s flexible and robust. With limited space, cooling challenges, and minimal local support, modular, pre-engineered data center solutions are becoming essential. Innovations like liquid cooling and AI-optimized airflow are helping edge sites handle high-density computing needs efficiently.

Smart, sustainable, and scalable: Rethinking data center infrastructure
As smaller cities join the forefront of India’s digital evolution, the emphasis is shifting from sheer scale to a focus on efficiency, resilience, and sustainability. Emerging cities are calling for infrastructure that not only boosts capacity but also optimizes power usage, cooling systems, and energy monitoring.

Innovative solutions like smart power distribution, real-time energy insights, and AI-driven cooling are becoming crucial to support AI and (HPC) high-performance computing workloads while also aligning with climate objectives.

The Opportunity is here and it’s local.

India’s digital growth is no longer just about the big cities. Tier 2 and Tier 3 cities are stepping up as vital parts of the country’s data infrastructure, thanks to edge computing, AI, and the increasing need for secure, localized data processing.

These rising hubs offer more than just lower costs; they bring us closer to users, open new markets, and are supported by friendly policy frameworks. As we build infrastructure in these areas, we’re not just responding to digital demand; we’re also paving the way for a more inclusive, agile, and connected India.
The author is Sanjay Motwani, VP, APAC – White Space, Data Centers – Legrand Data Center Solutions

Disclaimer: The views expressed are solely of the author and ETCIO does not necessarily subscribe to it. ETCIO shall not be responsible for any damage caused to any person/organization directly or indirectly.

Published On Aug 12, 2025 at 09:00 AM IST

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