India’s growing investment in artificial intelligence and data centres could significantly increase the country’s import bill, according to a report by HSBC Global Research. 

The bank estimates that the planned expansion of data centre capacity could require imports worth around $105 billion, equivalent to nearly 2.5% of India’s GDP. India currently has around 1.5 GW of data centre capacity and is expected to add another 5 GW, taking the total to approximately 6.5 GW. This expansion will require large quantities of imported chips, servers, cooling systems and electrical equipment.

HSBC estimates that building 1 GW of data centre capacity could cost around $30 billion, with nearly $21 billion coming from imports. This means around 75% of the total construction cost could depend on foreign equipment and technology.

Out of the projected $105 billion import bill, semiconductor chips alone could account for approximately $90 billion. The remaining amount would cover cooling infrastructure, electrical equipment and regular hardware replacements.

India already has around $70 billion in data centre investments underway, while another $90 billion worth of projects are in the pipeline.

Higher imports could widen India’s current account deficit because the equipment will need to be purchased upfront, while revenue from these facilities will take time to generate.

However, HSBC believes the pressure can be managed through foreign investments, overseas borrowings and foreign direct investment. A staggered expansion would also allow existing data centres to start generating revenue from cloud computing, data processing and AI services while new facilities are being built.

India’s data centre expansion could strengthen its position in the global AI industry, but it will require careful planning. Attracting foreign capital, developing domestic manufacturing and spreading investments over several years will be important to manage the import burden without putting excessive pressure on the rupee.

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