India’s digital growth is no longer confined to metros like Mumbai, Delhi, and Bengaluru. Tier 2 and Tier 3 cities are emerging as the new drivers of the country’s data economy.
Cities such as Jaipur, Indore, Kochi, and Mohali are transforming into hubs for data centre development, edge computing, and digital innovation. Once seen as peripheral, they are now central to the goal of a decentralised digital India.
According to a recent report, these cities contribute about 82 MW, or 6% of India’s total data centre capacity. This figure is expected to grow to 300–400 MW by 2030. Overall,
India’s total capacity could exceed 4,500 MW by then, highlighting the vital role of these emerging hubs.
Supportive policies, decentralised enterprises, and rising local data demand are attracting investments. Proximity, lower costs, and business-friendly environments add to their appeal.
Trends Shaping the Shift
AI’s rise demands speed. From facial recognition in smart cities to real-time language models, AI workloads need instant data transfer. With India’s AI market projected to hit $17 billion by 2027, placing computing resources in cities like Kochi, Indore, and Jaipur is critical for scalability.
Edge data centres are becoming essential for video streaming, connected factories, smart homes, and real-time analytics. By setting them up in smaller cities, businesses cut network dependence and improve responsiveness.
Government programmes such as Digital India, PM Gati Shakti, and the Smart Cities Mission are boosting demand for localised data processing. Central and state policies are actively supporting decentralisation.
India’s fibre optic network crossed 3 million route kilometres in 2024. Improved power reliability, lower land prices, and proactive state measures are positioning Bhubaneswar, Jaipur, Vijayawada, and Surat as prime edge data centre sites.
From Cost Advantage to Strategic Edge
Lower land and energy costs make Tier 2 cities attractive. However, the real edge lies in better fibre connectivity, faster deployment, and proximity to users. Industries such as gaming, OTT, and e-commerce benefit most from low-latency operations.
These hubs need flexible and robust infrastructure. Limited space, cooling challenges, and minimal local support have made modular, pre-engineered data centres vital. Liquid cooling and AI-optimised airflow are enabling them to manage high-density workloads.
As smaller cities take centre stage, focus is shifting from scale to efficiency, resilience, and sustainability. Smart power distribution, real-time energy monitoring, and AI-driven cooling are now crucial for supporting AI and high-performance computing while meeting climate goals.
Tier 2 and Tier 3 cities now offer more than cost benefits. They bring infrastructure closer to users, open untapped markets, and align with supportive policies. Building in these regions strengthens the foundations of a more connected, inclusive, and agile India.
Also Read: Indian GenAI Startups Attract Record Investments In 2025
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