India has witnessed an unprecedented boom in data centre investments over the past five to eight years, with nearly $70 billion worth of projects already underway and another $90 billion announced. The country’s installed data centre capacity has risen from about 520 MW in 2020 to nearly 1.5 GW by mid-2025 and is projected to reach 4.5-6 GW by 2030. India generates nearly 20% of the world’s data but currently has the capacity to store only around 3% of global data generation. With rapid growth in artificial intelligence (AI), cloud computing and deep-tech applications, investment in the sector is expected to surge sharply over the next few years.
What is a data centre?
A data centre is a centralised physical facility used to store, process and manage digital data and critical business applications. It houses computing and networking infrastructure that enables companies, governments and consumers to access digital services in real time.
Whenever a person makes a digital payment using a QR code or mobile number, the payment application retrieves the recipient’s details from servers located in data centres. These facilities make such transactions possible instantly through robust telecom networks and internet connectivity.
As India expands its 5G network and AI adoption accelerates, the demand for faster and larger data centres is expected to rise significantly.
What equipment is required?
Setting up a data centre requires a combination of high-performance hardware and software infrastructure. Key components include servers, storage systems, racks, networking equipment and fibre-optic cabling.
Data centres also need uninterrupted power supply (UPS) systems, diesel generators, transformers, chillers, cooling systems and data centre infrastructure management (DCIM) software. Climate control and security systems are essential to ensure continuous operations.
What is driving growth in India?
Several factors are driving India’s data centre expansion. One major reason is the implementation of the Digital Personal Data Protection (DPDP) Act, 2023, which mandates stricter norms for processing and storing digital personal data within India. Violations and data breaches can attract penalties of up to ₹250 crore.
Another key trigger is the 20-year tax holiday for data centres announced in the Union Budget 2026-27. This has encouraged global hyperscalers such as Google, Meta and Amazon to accelerate investments in India.
Google has already begun groundwork for a large hyperscale AI data centre in Visakhapatnam with a planned investment of $15 billion and a proposed 1 GW power facility. Telecom operator Bharti Airtel and Adani Group are expected to be associated with the project.
Meanwhile, Meta is exploring data centre investments in India, while Reliance Industries has announced plans for a massive data centre project in Jamnagar. Amazon Web Services is also expanding its AI-focused infrastructure in Navi Mumbai. Improved telecom penetration and internet connectivity over the past decade have further strengthened the sector’s growth prospects.
Why are data centres seen as environmentally risky?
The rapid expansion of data centres has raised concerns globally over their massive consumption of electricity and water. In many parts of the US and Europe, local communities have protested against large data centre projects, citing fears over environmental degradation and pressure on local resources. On May 9, residents in Utah staged protests against proposed facilities, arguing they could disrupt ecosystems and local communities.
According to the Council on Energy, Environment and Water (CEEW), a typical 100 MW hyperscale data centre using water-based evaporative cooling can consume nearly 8 lakh litres of water daily.
India’s hot climate makes cooling critical for data centres, especially AI-focused facilities that generate high heat loads. Although liquid cooling technologies inside servers often use closed-loop systems with limited water usage, facilities relying on cooling towers can consume enormous quantities of freshwater.
This becomes a major concern in a country already facing recurrent water shortages and extreme summer heat. CEEW noted that many proposed data centre hubs are located in districts vulnerable to heat stress. Excessive dependence on groundwater or municipal water supplies could increase competition with agriculture and residential consumption.
Power consumption is another challenge. India continues to rely heavily on coal and other non-renewable energy sources, with nearly 55% of electricity generation still coming from fossil fuels.
AI-enabled data centres powered by graphics processing units (GPUs) require significantly more electricity and high-speed connectivity than traditional CPU-based facilities. As more such centres come up, electricity demand is expected to rise sharply.
India already experiences acute power shortages during peak summer months. In 2024, electricity demand rose by 9% due to severe heatwaves, leading to frequent outages in several regions.
Experts warn that unless renewable energy adoption, water recycling and energy-efficient cooling technologies improve rapidly, the country’s data centre boom could intensify pressure on both power grids and water resources.
