The rapid advancement of artificial intelligence (AI) is driving a remarkable surge in the growth of data centres across India, Asia’s third-largest economy. These data centres—centralised physical facilities housing computer servers, IT infrastructure, and network equipment—are the backbone of the digital age. They power everything from AI applications like ChatGPT to electric vehicles and streaming services, underpinning the expanding digital ecosystem that is reshaping how people live and work.
In a striking demonstration of confidence in India’s data centre potential, Google recently announced a massive $15 billion investment in an AI-focused data centre in the southern state of Andhra Pradesh. This is Google’s largest investment in India to date and highlights the country’s rising importance on the global technology map. Google’s move is part of a broader wave of investments from global tech giants such as Amazon Web Services and Meta, alongside major Indian companies like Reliance Industries. Even luxury real estate developers have entered the fray, investing heavily in building state-of-the-art data centres to meet the surging demand.
Industry analysts foresee “explosive growth” for India’s data centre sector. According to global real estate advisory firm JLL, the country’s data centre capacity is projected to increase by 77% by 2027, reaching 1.8 gigawatts (GW). Estimates suggest that between $25 billion and $30 billion will be spent on expanding capacity by 2030. This expansion is crucial to support India’s rapidly digitalizing economy and growing data consumption, but it comes with significant challenges—particularly regarding environmental sustainability and resource management.
India faces a unique paradox: while it is a major data generator, producing roughly 20% of the world’s data, it accounts for only about 3% of global data centre capacity. The gap between demand and supply is widening as India is expected to become the world’s largest data consumer by 2028, surpassing developed markets such as the United States, Europe, and even China. This surge in data demand is driven by several factors, including the explosive growth of internet and mobile phone usage, government regulations that mandate local hosting of user data, and the rapid adoption of AI technologies with their intensive computing requirements. Notably, India has the second-largest user base for AI chatbots like ChatGPT globally.
Beyond the sheer scale of demand, there is also a compelling economic rationale for nurturing India’s data centre industry. According to Kotak Research, the cost of developing data centres in India is among the lowest in the world, second only to China. Electricity prices—a major operational expense for data centres—are significantly cheaper in India compared to countries like the US, UK, and Japan. Furthermore, India boasts a large pool of highly skilled technology professionals, making it well-positioned to capitalize on the AI and digital infrastructure boom. Experts like Vibhuti Garg, director for South Asia at the Institute for Energy Economics and Financial Analysis, suggest that just as India leveraged the IT services revolution in the 1990s and 2000s, the country can similarly benefit from the current data centre and AI expansion.
However, the rapid growth of India’s data centre industry raises complex policy and environmental dilemmas. Data centres are notoriously resource-intensive, consuming vast amounts of electricity and water. Globally, concerns have been raised in countries like Chile, Mexico, the US, and Scotland about the impact of data centres on local water supplies and energy grids. These concerns are particularly acute in India, which is already grappling with severe water scarcity and energy shortages.
India is home to 18% of the world’s population but has access to only 4% of the world’s freshwater resources, making it one of the most water-stressed nations globally, according to the World Bank. Data centre water consumption in India is projected to more than double from 150 billion litres in 2025 to 358 billion litres by 2030. This massive water demand threatens to exacerbate existing shortages, especially because many data centres cluster in major urban hubs such as Mumbai, Hyderabad, Chennai, and Bengaluru—cities that already face intense competition for water among residential, industrial, and agricultural users.
Experts warn that the growing water stress could lead to public backlash or regulatory hurdles that might impact the industry’s long-term viability. Already, advocacy groups like the Human Rights Forum have voiced concerns over Google’s Andhra Pradesh data centre project, highlighting fears that it could worsen water scarcity in Visakhapatnam, a city already under acute water