India is aiming to position itself as a global hub for data centres, including facilities designed to support artificial intelligence (AI), but the Economic Survey 2025–26 has warned that rapid and unchecked expansion could place heavy pressure on electricity grids and water resources.
“AI data centres are double-edged swords,” the survey said, pointing out that they consume very large amounts of electricity and water. According to the report, a single AI data centre can consume up to 20 lakh litres of water per day, while such facilities together consume around 56,000 crore litres of water globally each year.
As of the second quarter of 2025, India’s data centre capacity stood at about 1.4 gigawatts and is projected to rise to around 8 gigawatts by 2030.
AI data centres are specialised, high-performance facilities built to handle the intensive computing needs of AI, machine learning and deep-learning systems.
The survey highlighted that India already faces binding constraints in power availability, financing and, in particular, water resources. It warned that scaling up AI computing capacity without adequate planning could add extraordinary stress to already strained groundwater and freshwater reserves.
Concerns were also raised about the impact of large data centres on power grids. The Survey referred to an incident in July 2024 in Northern Virginia in the United States, where the sudden loss of 1,500 megawatts of data centre load caused major voltage and frequency disturbances in the power system, narrowly avoiding a widespread blackout.
For India, the survey said, such risks underline the need for careful consideration of how AI data centres are integrated into the power system. It noted that investment in large-scale AI infrastructure competes directly with other demands for electricity, including households and industries.
The report also observed that despite generating nearly 20% of the world’s data, India hosts only about 3% of global data centres, or around 150 out of an estimated 11,000 worldwide.
This gap highlights both a significant growth opportunity and a competitiveness challenge, especially as countries such as Malaysia, Japan and Vietnam step up their own data centre investments.