Microsoft is setting up the new data centers in order to capture the Indian cloud market with a $2 trillion market opportunity. Reuters

Microsoft will invest 14 billion Indian rupees, or $22.7 million, to set up three cloud centers in India. The company said it has started working on the new facilities to be located in three major Indian cities -- Mumbai and Pune in the west, and Chennai in the southeast.

Microsoft, which generated revenues of about $36.7 million from India in 2013-2014, said that the company is setting up the new data centers to capture the Indian market, where cloud Internet services are a growing business segment, Economic Times, or ET, a local business newspaper, reported, adding that Microsoft is currently in talks with Indian telecom companies to connect major enterprises to their data centers.

“The biggest cloud data centers we have globally are capable of handling 600,000 servers in just one region. That's a massive amount of compute. Increasing this scale helps us in being more competitive,” Azure Jason Zanders, corporate vice president for Microsoft, told ET.

In September, Microsoft CEO Satya Nadella said during his India visit that the country’s cloud computing market can produce a $2 trillion market opportunity due to rapidly increasing Internet penetration.

“With more than 250 million Indians using Internet-connected devices today, there is incredible demand and opportunity for India with Microsoft’s cloud services,” Nadella had said in a statement in September.

“Last year, our cloud business in India grew over by 100 per cent,” Agence France-Presse quoted Nadella as saying at the time. “Buoyed by that success, we have now decided to offer cloud services from local data centers.”

According to recent estimates by Gartner, public cloud services revenue in India will reach $638 million by the end of 2014, an increase of almost 34 percent, or $161 million, over 2013 revenues. The research firm also predicted continuing high rates of spending on cloud services in India through 2018 when the market is expected to reach almost $2 billion.