l What’s behind the mega investments?
THE RISING USAGE of artificial intelligence (AI), surging data traffic, data localisation and lower latency needs have all triggered a big demand for data centres. Data centres essentially house computer servers, information technology (IT) infrastructure and network equipment to power everything from ChatGPT queries to electric vehicles and streaming services. India now boasts 276 data centres and ranks seventh in the world just behind France and Canada, according to market research firm Datacentermap.
However, the density—at just around 65 MW per exabyte—is among the lowest globally, a factor that will support utilisation levels of 90–95%, in line with the past three fiscals. The government has granted data centres infrastructure status. Jefferies estimates India’s data centre capacity will jump 5x to 8GW by 2030 necessitating a capital investment of $30 billion. Data centre operators are projected to generate around Rs 20,000 crore in annual revenue by FY28, a compound annual growth rate of 20–22% between FY26 and FY28, says Crisil.
l Why does India need so much data centre capacity?
DATA CENTRES ARE needed because of the increasing use of data. The consumption of data is being driven by the massive growth in internet and mobile use, the government’s regulatory thrust on hosting user data locally and rapid adoption of AI, which has greater computing needs. Given the extent of data localisation and the spread of AI, experts say,
building data centres is a must. As of now, India’s share of the global data generated is about a fifth, but it owns just 3% of global data centre capacity, leaving a demand-supply gap. India is expected to consume the most data in the world by 2028, more than some developed markets. AI chatbots like ChatGPT have their second largest user base in India. There’s a strong business case for Indian policymakers to push for such investments and for global firms to commit the money.
l National Data Centre Policy 2025
IN A PERFORMANCE-BASED approach that ensures investment translates to measurable outcomes, the draft National Data Centre Policy proposes conditional tax exemptions of up to 20 years for data centre developers. It links incentives to targets on capacity expansion, energy efficiency, and employment generation. It also proposes input tax credits on goods and services tax (GST) for capital assets such as construction, heating, ventilation and air conditioning (HVAC) systems, and IT equipment, which would lower capital costs for investors.
Permanent establishment status for foreign firms with a capacity of over 100 MW is proposed. The policy also aims to align disparate state-level data centre regimes under a national framework, introduce single-window clearances and dedicated economic zones across metros and smaller cities. Infrastructure-status recognition will enable better access to power and skilled labour, alongside land subsidies and reforms in power procurement as added incentives.
l Power & water supply challenges
INCREASING INTERNET PENETRATION, mobile use, e-commerce, electric vehicles, data centres and AI will accelerate demand for energy. India’s data centre sector now has an IT load—total electricity consumed by computing equipment—exceeding 1.7 GW, with an additional 2.5–3 GW under development. The growth in data centre capacity from 1.4 GWW last year to 8-9GW in 2030 means consumption of about 3% of India’s electricity in 2030, up from less than 1% currently, say experts. They believe the challenge is to meet such demands sustainably and that the answer lies in battery storage and renewable energy.
According to the World Bank, India has 18% of the world’s population, but only 4% of its water resources, making it among the most water-stressed countries in the world. India’s data centre water consumption, meanwhile, is expected to more than double from 150 billion litres in 2025 to 358 billion litres by 2030, putting further pressure on its water table.
l Impact on the environment
MIHIR SHAH AND Sunil Mani, respectively, distinguished professor, Shiv Nadar University, and visiting professor, CDS, Trivandrum University, believe the environmental implications are considerable. The industry is concentrated along the western and southern coasts with Mumbai hosting 41% of live capacity and Chennai 23 %. Coastal areas are among India’s most ecologically vulnerable areas. Google’s Visakhapatnam project is expected to expand east coast capacity, strengthen-ing India’s position as a regional Cloud and AI infrastructure hub. The potential coastal risks of water over-use include salinisation of freshwater and increased vulnerability to flooding. India’s coastal zone has a high groundwater table with a thin upper lens of potable fresh water. Therefore, over-extraction of groundwater for these new IT initiatives risks saline intrusion into the aquifers, which can permanently contaminate groundwater. These impacts may be compounded by land subsidence in areas where water tables are declining.
