Last month, Google announced a staggering $15 billion investment in an AI data centre in Andhra Pradesh — its largest in India and among the biggest in Asia. The move is part of a wider race by global and local giants — from Amazon Web Services and Meta to Reliance Industries — to tap into India’s fast-growing data infrastructure market. Even luxury real-estate developers are entering the fray, betting on the country’s digital future.
According to global real estate advisory JLL, India’s data centre capacity is projected to grow 77% by 2027 to reach 1.8GW, with total investment expected to touch $25–30 billion by 2030.
A Digital Boom with Heavy Costs
Data centres — the nerve hubs that store and process everything from ChatGPT queries and streaming content to EV charging systems — are now critical to India’s development ambitions. Yet they are also intensifying the strain on the country’s fragile water and energy resources.
India generates nearly 20% of the world’s data but accounts for only 3% of global data centre capacity. With the world’s fastest-growing internet and mobile user base, India is on track to become the largest consumer of data globally by 2028, surpassing even the US, Europe, and China.
There are strong economic incentives to build: data centre construction costs in India are among the lowest globally, and electricity prices are a fraction of those in developed markets. The country’s deep pool of tech talent further strengthens the case.
“Just like we exploited the IT services boom in the 1990s and 2000s, this is another opportunity we can use to our advantage,” says Vibhuti Garg, director for South Asia at the Institute for Energy Economics and Financial Analysis (IEEFA).
Water Woes in a Thirsty Nation
But this boom comes with steep environmental trade-offs. Data centres require enormous amounts of water for cooling, and India — which holds only 4% of the world’s freshwater resources but is home to 18% of its population — can scarcely afford the extra burden.
According to projections, India’s data centre water consumption will more than double from 150 billion litres in 2025 to 358 billion litres by 2030, raising alarms about sustainability.
Most data centres are clustered in Mumbai, Chennai, Hyderabad, and Bengaluru — cities already battling severe water stress.
In Visakhapatnam, where Google’s new facility is planned, the Human Rights Forum has criticised what it calls the “diversion of public resources” amid the city’s ongoing water scarcity.
Google, for its part, says it uses a peer-reviewed, context-based water-risk framework to evaluate watershed conditions before committing to new sites.
Still, experts say India’s data centre policy framework has a glaring blind spot. While it governs data protection, energy use, and zoning, water use is scarcely addressed, says Sahana Goswami of WRI India, a water research organisation.
An S&P Global study estimates that 60–80% of India’s data centres will face high water stress this decade, potentially disrupting everything from banking and healthcare to public transport systems that rely on cloud infrastructure.
“Imagine shutdowns in peak summer due to lack of water for cooling,” Ms Goswami warns. “The ripple effects could be immense.”
Seeking Sustainable Solutions
Experts are calling for innovation and tighter regulation. Many suggest mandating the use of treated or non-potable water for cooling, citing successful examples from Navi Mumbai’s data centre cluster and from India’s power and textile industries.
“Non-potable or treated water must be made mandatory for cooling needs,” says Praveen Ramamurthy, a water recycling expert at the Indian Institute of Science, Bengaluru. “We must also prioritise low-stress water basins for new projects.”
He also advocates zero-water cooling technologies, which are advancing globally but remain underused in India.
The Energy Equation
Beyond water, energy demand is another growing concern. The International Energy Agency (IEA) estimates that India’s data centres will soon account for 1–2% of national electricity demand, up from just 0.5–1% today.
“This could increase fossil fuel dependency, since there’s no regulation mandating renewable energy use,” says Ms Garg of IEEFA. Some operators have already signed renewable energy contracts, but experts argue that formal mandates are needed to ensure sustainability.
Balancing Digital Ambition and Environmental Reality
As India pursues its vision of becoming a global digital and AI hub, policymakers face a delicate balancing act — advancing data infrastructure while safeguarding scarce natural resources.
“In the end, we need to ensure that one good is not sacrificed for another,” says Ms Garg.
For India, the challenge is clear: how to power its digital dreams without draining its ecological future.