E-Paper
Is India’s data centre boom at a crossroads?
This article is authored by K Ramanathan, Distinguished Fellow Emeritus and Aniket Tiwari, research associate, TERI.
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India’s Data Centre (DC) capacity is poised for a massive boom in the coming years, driven by the surge in internet users, artificial intelligence, cloud computing workloads and the country’s transition toward a fully digital economy. It has reached about 1.5 GW by August 2026, and is estimated to go up to 28.8 GW by 2031–32, covering several states including Maharashtra, Andhra Pradesh, Madhya Pradesh, Chhattisgarh, Odisha, UP, Telangana, Rajasthan and West Bengal. Union minister Piyush Goel foresees that India as a global hub for DCs inviting over $200 billion in investments.
All this sound well; but at the same time concerns are arising on several counts like power consumption, water stress, cyber security, social unrest, and legal hurdles. So, is the DC boom at cross roads? There is an urgent need to assess the situation and look at strategic pathways to go ahead.
Governments expect DCs and AI will promote economic growth, attract massive multi-billion-dollar investments, and generate high-value technology job creation, and digital sovereignty, while also expecting social benefits like improved health care, education, and governance. Several states are aggressively competing to attract AI developers and hyperscale data centre projects by offering a mix of power subsidies, land concessions, tax holidays, renewable energy mandates, capital support, etc. Gujarat (Viksit Gujarat Data Centre Policy 2026–29) and Uttar Pradesh (Data Centre Policy 2026) have also notified their own dedicated state-specific DC policies to attract investments, offer single-window clearances, and provide fiscal incentives. It is estimated that AI could add $1.7 trillion to India’s economy by 2035 (PIB note October 2025). Government sees DCs as an important and integral component of the overall Digital India Infrastructure ecosystem.
The major challenges facing large scale DC ad AI growth relate to ensuring 24X7 reliable power supply, avoidance of water stress used for cooling, meeting sustainability targets, data security compliance risks and associated social and legal hurdles. This is seen not only in India but also in developed countries.
As of now, in India most visible public protests are seen in Andhra Pradesh and Maharashtra. These protests led by citizen groups, environmental activists, and local residents are focusing on water scarcity, location of project, environmental damage, lack of public consultation, etc. For example, protesters in Andhra point out that water for the projects would be sourced from the Polavaram dam project or through desalination, which would be unsuitable for a city that is already water-stressed. Promises on employment are also being questioned. A PIL on the subject is now pending in the AP High Court.
Reports of protests against DC and AI are getting reported in developed countries like US, Europe, Australia, and protests against DCs and AI infrastructure as well driven by concerns over energy use, water consumption, land displacement. Power utilities are also reportedly struggling to process massive interconnect requests. Several countries and regions have already enacted or are planning moratoriums on new DCs, which include the US, Netherlands, and Australia (Reuters). According to Bloomberg, up to 50% of all planned US DC projects are now at risk of being delayed or cancelled altogether. Microsoft has also recently acknowledged the environmental and community impact of the company’s DC expansion. South African civil rights groups are also now calling to halt construction of additional DCs in the country until the use of scarce water, land and electricity resources has been investigated.
The concerns highlighted above cannot be wished away. Sustainable development of DCs would need:
- ensuring uninterrupted high-quality green power supply matching with the DC growth
- managing cooling loads, and
- public outreach strategy to address/ dispel public concerns.
The power sourcing options generally are grid power, solar/ wind plus Battery Energy Storage System (BESS) in a hybrid model alongside the traditional power grid, and Small Modular Reactors (SMR). These have to be evaluated based on reliability, stress on the grid, ability to meet the load fluctuations, besides cost and GHG emissions. (SMRs) appear a better option for providing continuous, high-density baseload power, though not from the point of view of immediate availability and upfront costs. Several hyperscale cloud operators have included SMRs in their future power procurement strategies.
Sustainable development of DCs and AI infrastructure would also require efficient management of water used for cooling. Advanced technologies like closed-loop liquid cooling systems, high density racks, chiller-based cooling systems, use of recycled water, etc. would merit consideration in this context.
Building trust of public at large would be crucial for development of DCs. This should be started early. The most effective strategies combine knowing the pulse of the people and transparent two-way communication about environmental, social, and economic impacts.
Data centres are an important and integral component of the overall Digital India Infrastructure ecosystem. In order to ensure sustainable growth of DCs, it would be important to have strategic roadmap to evaluate and address the likely roadblock well in advance.
(The views expressed are personal)
This article is authored by K Ramanathan, Distinguished Fellow Emeritus and Aniket Tiwari, research associate, TERI.
