NEW DELHI: India’s data centre boom is not a trend. It is a structural shift in where the global digital economy plants its foundations. In five years operational capacity has grown from 375 megawatts in 2020 to over 1,520 megawatts by end-2025 according to the Ministry of Electronics and Information Technology. Amazon Web Services has committed USD 35 billion, Microsoft has pledged USD 17.5 billion and Google has announced USD 15 billion including a 1 gigawatt facility in Andhra Pradesh. Reliance is building gigawatt-scale AI-ready twin hubs in Gujarat and Andhra Pradesh as part of a USD 110 billion group-wide capital plan. India’s data centre boom is the economic story of the decade. Managing its resource footprint is the governance challenge that will determine whether that story ends well.
Why India and Why Now
The demand driving this investment is structural and will not reverse. Indians consumed approximately 22 GB of mobile data per month in 2025 double the 2020 figure. The Unified Payments Interface recorded 19 billion transactions worth Rs 24.58 lakh crore in 2025 alone, each requiring real-time fraud detection and risk modelling. The Digital Personal Data Protection Act mandates that personal data linked to Indian citizens be stored and processed within domestic boundaries forcing multinationals to migrate offshore servers onshore. The IndiaAI Mission, backed by Rs 10,371.92 crore over five years has already onboarded 38,000 GPUs at a subsidised rate of Rs 65 per hour and plans to deploy 20,000 more under AI Mission 2.0.
India currently holds 3 to 4 percent of global data centre capacity, ranking 13th worldwide against producing approximately 20 percent of the world’s data. That gap is closing fast and the economics of closing it are compelling for every party involved.
The Economic Case in Full
Between 2020 and April 2025, India secured USD 14.7 billion in confirmed FDI commitments specifically for data centres, with foreign institutional investors accounting for 86 percent of that capital. Cumulative commitments have since crossed USD 126 billion with USD 56.4 billion deployed in 2025 alone. CareEdge Ratings projects capacity will quadruple to 4,000 megawatts by 2030 requiring Rs 1.5 lakh crore in investment. More aggressive forecasts from Jefferies place the 2030 ceiling at 17,000 megawatts if AI workload integration scales as projected.
The downstream employment impact is substantial. The broader cloud computing ecosystem, which is structurally dependent on physical data centre availability has the potential to contribute 8 percent of India’s GDP, translating to USD 310 to 380 billion in value according to NASSCOM. BCG and NASSCOM project that cloud-enabled jobs could reach 14 million by 2026. Over 700,000 kilometres of fibre optic cable have already been laid in support of this infrastructure, with 1.2 million ancillary jobs in renewable energy and grid support currently tied to the sector.
State governments have recognised this and are competing aggressively. Uttar Pradesh’s Data Centre Policy 2021 offers 100 percent electricity duty exemptions and single-window clearances targeting Rs 30,000 crore in investments. Telangana has signed MoUs for a 400 megawatt cluster with CtrlS and a USD 412 million investment with STT GDC India. Maharashtra has anchored a Rs 5,000 crore campus at Palava through STT GDC India. Union Minister Ashwini Vaishnaw has framed this expansion as a matter of technological sovereignty, positioning India as “both a consumer and producer of AI technologies” rather than a passive recipient of foreign compute infrastructure.
The Environmental Reality Activists Are Right to Raise
The economic case for data centres in India is not contested. What is contested and legitimately so is whether the current growth trajectory is being built on responsible resource foundations.
In 2024, India’s data centres consumed approximately 13 terawatt-hours of electricity, under 1 percent of national grid demand. TERI projects this will rise nearly fivefold to 57 terawatt-hours by 2030, potentially consuming up to 6 percent of India’s total electrical output. The IEA projects global data centre energy demand will double to 945 terawatt-hours by 2030, with AI workloads accounting for nearly half the net increase. India’s average Power Usage Effectiveness rating for data centres currently ranges from 1.3 to 1.6 against an emerging global benchmark of 1.2 or below.
Water is the sharper concern. A single 1 megawatt data centre using conventional evaporative cooling consumes approximately 26 million litres of water annually. A 100 megawatt hyperscale facility can consume upwards of 800,000 litres per day. Total annual water consumption by India’s data centre sector is projected to reach 358 billion litres by 2030. The cities bearing the heaviest data centre load Mumbai, Chennai, Bengaluru, Hyderabad and Delhi-NCR have been identified by multilateral assessments as Day Zero cities where groundwater depletion has reached critical thresholds. In Gautam Buddha Nagar, where major hyperscale parks are expanding groundwater extraction stands at 104.79 percent of the recharge rate. In Tusiana Village nearby residents report that groundwater levels accessible at 20 to 30 feet two decades ago now require drilling to 80 feet.
Satish Chand, a worker in Tusiana, put the community concern plainly: “Groundwater is our only source.” Shaolei Ren, Associate Professor at the University of California Riverside adds appropriate scepticism to corporate reassurances: “Claims about recycled water can be overstated, so careful scrutiny is important.” Pujarini Sen of Greenpeace India has raised the broader concern about grid dependency, noting that continued coal plant approvals put public money at risk while renewable alternatives are already cheaper.
These are not fringe objections. They are grounded in verified data and deserve serious policy responses, not dismissal.
What Responsible Policy Looks Like
India does not need to choose between data centres and environmental responsibility. It needs a policy framework that makes environmental performance the condition of economic participation rather than a voluntary afterthought.
Currently only 15 to 20 percent of the industry’s domestic energy requirements are met by green power though this is expected to rise to 30 to 35 percent by FY28 as ESG mandates from global capital markets intensify. The draft National Data Centre Policy 2025 proposes simplified open-access renewable procurement aligned with data centre load curves, which would allow developers to bypass state utility monopolies and contract directly with green energy developers. This is the right structural move.
The technology solutions already exist closed-loop and direct-to-chip liquid cooling systems eliminate ongoing freshwater consumption after initial filling. CtrlS has reduced its water footprint by 119,662 kilolitres annually by converting facilities to air-cooled architectures. Yotta Data Services and AdaniConneX have designed their Greater Noida parks to rely exclusively on treated municipal wastewater rather than groundwater or drinking water. Addressing software inefficiencies, particularly zombie workloads that represent an estimated 13 percent of global cloud energy consumption offers an additional efficiency gain with no hardware cost.
Singapore’s experience is instructive. After imposing a moratorium on new data centre construction in 2019 it lifted the ban in 2022 with strict conditions: operators must achieve Green Mark DC Platinum Certification, implement liquid cooling and demonstrate low-carbon energy pathways. Germany requires a PUE of 1.2 or below 50 percent renewable sourcing rising to 100 percent by 2027 and 10 to 15 percent waste heat reuse for all new facilities from 2026. The Centre for Science and Environment has recommended that all Indian data centre complexes with an IT load of 5 megawatts or more be subject to mandatory Environmental Impact Assessments before receiving approvals.
The single most important decision India must make in the next two years is to finalise a National Data Centre Policy that ties the 20-year tax exemptions and electricity duty waivers already on offer to independently verified environmental performance benchmarks. Fiscal concessions should be legally contingent on achieving a PUE below 1.4, using closed-loop or liquid cooling and meeting progressively increasing renewable energy procurement targets. As infrastructure investor Gautam Bhandari of I Squared Capital observed, location, power and connectivity are what determine a data centre’s long-term value.
The digital factories of the next decade will be built in India. The question is not whether that investment comes it is coming regardless. The question is whether India builds those factories on a resource foundation strong enough to sustain them and the communities surrounding them for the decades ahead.
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