India’s domestic artificial intelligence market is projected to reach ₹11.7 trillion by 2032, triggering a sharp expansion in high-performance computing infrastructure and positioning data centres among the country’s most attractive investment opportunities.
Operational data-centre capacity is forecast to rise more than fivefold from 2.2 GW in 2025 to 12 GW by 2030, recording a compound annual growth rate of around 40%, according to Wood Mackenzie’s report, India’s Data Centre Landscape: Powering the Digital Economy.
AI-dedicated capacity is expected to expand nearly 24-fold over the same period, from 275 MW to 6,546 MW, as hyperscale cloud providers, enterprise digitalisation and AI workloads drive demand for computing capacity.
“India’s data centre market becomes a structural investment thesis,” said Souhardya Pal, research associate at Wood Mackenzie. “The convergence of hyperscale capital, AI workload growth and a decade of policy support have created the conditions for India to rival any market in Asia-Pacific. The question for developers and investors is no longer whether to enter India, but where and how.”
The expansion is being supported by India’s ₹32-trillion digital economy, which contributed around 12% of GDP in 2025. The ecosystem serves more than 1.03 billion active internet users and processes about 22 billion UPI transactions every month.
Surge in Power Consumption
The investment wave will, however, create a major new load on India’s electricity system. Data-centre electricity consumption is forecast to rise twentyfold from 10 TWh in 2025 by 2040, when it could account for 7% of the country’s total power demand.
Minister of State for Power Shripad Yesso Naik told the Rajya Sabha that AI data centres alone are projected to add 26.3 GW of power demand by 2031-32.
“An additional load of 26.3 GW from artificial intelligence data centres is projected by 2031-32, which is expected to be integrated into the grid and primarily served by renewable energy capacity,” Naik said.
The additional requirement will come as India’s peak electricity demand has already touched 270.8 GW. It is projected to reach 272 GW this year and 300 GW in the next financial year.
Power Security
Wood Mackenzie said access to reliable and competitively priced electricity has overtaken land and capital as the primary constraint for data-centre development. Captive generation and long-term renewable power purchase agreements are increasingly becoming the preferred procurement strategies.
“Land and capital are no longer the limiting factors for data centre developers in India. What determines site selection and delivery timelines now is access to firm, round-the-clock power at the node level,” said Rashika Gupta, vice-president of research at Wood Mackenzie.
Developers securing captive generation or long-term renewable PPAs early would gain a structural cost and sustainability advantage over the life of their assets, she said. States offering liberalised open-access frameworks and competitive intra-state transmission charges are consequently better placed to attract projects.
Maharashtra and Tamil Nadu currently account for around 65% of installed IT load. The next investment phase is expected to expand across Andhra Pradesh, Telangana, Uttar Pradesh and Karnataka, which are attracting commitments from Amazon Web Services, Google and domestic operators. AdaniConnex has announced a 2.6-GW development pipeline.
Water availability is also emerging as a strategic risk as AI workloads raise rack densities and cooling requirements, particularly in water-stressed Tamil Nadu and Karnataka. Developers adopting closed-loop cooling and zero-liquid-discharge technologies are reducing freshwater consumption and preparing for potential regulation.