The government of India is positioning the country as a global hub for digital data traffic. The 2026 Union Budget has proposed a 20-year tax holiday for foreign cloud providers using India-based data centres, while domestic transactions continue to get a 15% (safe harbour) margin. Other reasons include encouraging the storing of sensitive data within national borders, and shielding critical data from foreign surveillance and third-party access.
It’s fair to now expect enhanced FDI for these long-gestation infrastructure projects and lower-cost institutional capital, leading to increased electronic and electrical manufacture. Lower latency, support for 5G and IoT devices, enhanced multi-cloud set-ups, and improved streaming are other benefits that will accrue. A positive spin-off will be the creation of many direct and indirect jobs.
Google has committed $15 billion, Microsoft about $17.5 billion in artificial intelligence (AI) investments, and Amazon $35 billion over five years, towards this.
Global response: Generally, while developing digital economies have welcomed displaced compute capital, there has been widespread public resistance in the developed world to large data centre set-ups. This is because of perceived hyper-consumption of power and water, leading to scarcity, emissions, land use conflict, and price hikes for consuming utilities.
New York has imposed a temporary pause on environmental permits for large-scale data centres. Virginia’s Loudoun County, considered the world’s data-centre capital, is also considering a moratorium, owing to widespread pushback from residents. There have also been demonstrations to protest against data centres across the US, as perceptions become rigid.
In Chile, Santiago’s environmental court is revisiting a permit granted to Google for a $200-million data centre, due to aquifer depletion concerns. Germany is enforcing its Energy Efficiency Act which requires data centre operators to source 100% energy from renewables by 2027, and server heat re-use for municipal heating systems.
Meanwhile, West Asia is thinking like India. Abu Dhabi, for instance, is investing billions to build gigawatt-scale data centres.
Leveraging tech to mitigate side-effects: Traditional air and tower cooling consume massive volumes of water and electricity. Now, direct-to-chip cooling to CPUs and GPUs reduces cooling energy and evaporative losses. Server racks are completely submerged in synthetic fluids to drastically limit water consumption and rack noise. Closed-loop coolers ensure continuous recirculation of water.
Data centres are also adopting independent clean energy sources. Like compact nuclear reactors that can provide 100-500 Mw of zero-carbon baseload power directly. Or advanced grid-interactive lithium-ion and battery flow arrays.
AI and orbital data centres: The Indian government’s original estimates put electricity demand from data centres at 13.6 Gw by 2031-32. But with new plans veering towards AI data centres, the fresh projection, presented to Parliament by the ministry of power on July 27, increases estimates to 26.3 Gw, based on consultations with utilities and data centre developers. The gap is sought to be served by renewables.
With next-generation AI agents potentially consuming up to 40,000 times more computing power per task, a report from Wood Mackenzie says that the world’s largest tech companies are considering putting data centres in space. That grid connections in the US can take seven years, that gas turbine equipment delivery faces long wait times, and construction costs are rising rapidly, polarises the discussion. The economics don’t justify it either, with a 1-Gw orbital data centre likely to cost $170 billion, many times a terrestrial alternative — 60% of that are launch and satellite costs. Exponential cost declines could favour a change in thinking.
Mitigating vulnerabilities: Data centres in India show a concentration risk with 65% of the capacity in Navi Mumbai, Chennai, and Hyderabad, creating transmission congestion for state distribution companies. Meanwhile, our fast expanding renewable sector is struggling, as power evacuation is deficient, relying on temporary grid connections at many places. In FY26, around 6,900-gigawatt-hours of clean energy reportedly faced such curbs.
Our dire water situation is heightened by high ambient summer temperatures, apart from municipal deficits, and states are beginning to mandate that recycled water should be used at data centre parks.
Government incentives encourage the setting up of data centre parks in secondary and tertiary cities that have headroom vis-à-vis grid density and land access.
State policies are getting better. With the classification of data centres as essential public utilities, they get single-window clearances, special FDI considerations, and protection against industrial unrest.
Job creation: During the development phase, depending on the data centre’s size, hundreds of tradespeople would be employed, including specialists for high-voltage mechanical, electrical, and plumbing work, concrete and steel crews, and fiber optic and IT installers. Once live, facility engineers, cooling specialists, high-voltage power engineers, and environmental health and safety specialists are essential, apart from network and cyber operations experts, site reliability engineers, maintenance technicians, and physical security teams. Then there are those in the upstream supply chain, including ones supplying and servicing generators, transformers, chillers, server racks, subsea cables, and fiber optics. And those in downstream tech acceleration areas like SaaS firms, cloud platforms, e-commerce, and AI/ML, including startups.
Considering India’s data centre growth plans, which should cross 6.5 Gw before 2030, we will need at least 100,000 specialised engineering and tech roles. Of course, the bigger job creation multiplier is in allied areas across the broader economy.
India produces 1.5 million engineering graduates annually. It’s time to step up — sharp, job-aligned courses and specially designed integrated data centre courses for engineers — in addition to many more focused apprenticeships, certifications, and research grants for sustainable solutions in water and power management.
For India, powering the future without straining our current resources is a prerequisite. And building gigawatt-scale infrastructure without a workforce trained to run it efficiently is a strategic risk.
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.