New Delhi — The rapid expansion of artificial intelligence in India is fueling unprecedented growth in the country’s data centre sector, attracting billions in investments even as concerns rise over water and energy sustainability.
Data centres facilities that house servers, IT infrastructure, and network equipment essential for digital services have become the backbone of India’s fast growing tech economy.
From powering AI applications like ChatGPT to streaming platforms and electric vehicles, these centres are central to the nation’s digital transformation.
Last month, Google announced a $15 billion investment in an AI focused data centre in Andhra Pradesh, marking the largest such commitment in India.
The move is part of a broader trend, with global companies including Amazon Web Services and Meta, alongside local players such as Reliance Industries, expanding data centre operations across the country.
India’s data centre market is projected to grow 77 percent by 2027, reaching a capacity of 1.8 gigawatts, according to global real estate advisory JLL. Analysts estimate that between $25 billion and $30 billion will be spent on capacity expansion by 2030.
Experts say India has little choice but to attract data centre investments. While the country generates roughly 20 percent of the world’s data, it only accounts for 3 percent of global data centre capacity.
Rising internet and mobile use, government mandates to host user data domestically, and AI adoption are expected to drive India to become the world’s largest data consumer by 2028, surpassing the United States, Europe, and China.
“Just as we capitalized on the IT services boom in the 1990s and 2000s, this is a strategic opportunity for India,” said Vibhuti Garg, director for South Asia at a global tech consultancy.
Lower development costs and competitive electricity rates further enhance India’s appeal. According to Kotak Research, data centre construction costs in India are among the lowest globally, with electricity expenses only a fraction of those in the US, UK, and Japan.
The country also boasts a deep pool of skilled IT professionals to support the sector’s growth. Despite the economic promise, data centre expansion poses significant environmental challenges.
Globally, concerns have arisen over these facilities consuming vast quantities of water for cooling and generating high energy demand. For water scarce India, these issues are particularly pressing.
India holds 18 percent of the world’s population but only four percent of its water resources, making it one of the most water-stressed nations worldwide.
Data centre water consumption is expected to more than double from 150 billion liters in 2025 to 358 billion liters by 2030, threatening local water availability, experts warn.
“Many Indian data centres are clustered in urban hubs like Mumbai, Hyderabad, Chennai, and Bengaluru, where water competition is already intense,” said Sahana Goswami, senior researcher at the World Resources Institute India.
High water stress could jeopardize the long term operations of these centres. Sustainable practices remain limited. Some companies, including Google, use context based frameworks to assess water risk at potential sites, yet there are no binding regulations in India that require the use of treated or nonbpotable water for cooling.
Praveen Ramamurthy, a water recycling expert at the Indian Institute of Science, emphasized the need for mandatory adoption of recycled water and selection of low-stress basins for new projects.
He also advocated for zero-water cooling technologies, which are still inconsistently deployed across legacy facilities in India. An S&P Global study predicts that between 60 and 80 percent of India’s data centres could face high water stress this decade.
Energy consumption is also expected to rise, with data centres projected to consume 1 & 2 percent of the nation’s electricity by 2030, up from less than 1 percent currently, according to the International Energy Agency.
Many centres currently rely on fossil fuels, although some have signed renewable energy contracts. Experts suggest that formal mandates to adopt clean energy could make growth more sustainable.
Local advocacy groups have raised concerns about data centre projects. The Human Rights Forum has criticized the Andhra Pradesh government for prioritizing Google’s facility in Visakhapatnam, citing acute local water shortages.
“Diverting public resources for corporate data centres in a water stressed region will intensify local scarcity,” said Anjali Menon, a spokesperson for the forum.
In response, Google indicated that its planning includes peer reviewed assessments of local watershed risks and emphasizes minimizing freshwater use.
India faces a delicate balancing act: attracting global data centre investment to fuel its AI and digital ambitions while protecting critical water and energy resources.
Experts argue that adopting recycled water, selecting lower stress sites, and investing in renewable energy could mitigate risks while enabling sector growth.
“Policy frameworks must evolve to ensure that technological progress does not come at the expense of environmental sustainability,” said Goswami.
India’s data centre boom reflects the country’s growing role as a digital powerhouse, with massive AI driven demand driving unprecedented investment.
However, rising water and energy pressures underline the need for sustainable practices. The coming decade will test whether India can simultaneously foster technological growth and safeguard vital resources.