India’s AI boom fuels $30bn data centre surge—but water and energy risks loom

India's AI boom fuels $30bn data centre surge-but water and energy risks loom

India's data centre industry is on track for explosive growth, driven by artificial intelligence demand and a $25-30bn investment wave by 2030, but the expansion threatens to strain the country's already scarce water and energy resources, experts warn.

Global tech giants bet big on India

Last month, Google announced a $15bn investment in an AI data centre in Andhra Pradesh-its largest in India-joining Amazon Web Services, Meta, and Reliance Industries in a race to expand the country's digital infrastructure. The sector's capacity is projected to jump 77% by 2027, reaching 1.8GW, according to real estate advisory JLL.

India, which accounts for 20% of global data generation but only 3% of data centre capacity, is poised to become the world's top data consumer by 2028, surpassing the US, Europe, and China. The surge is fueled by rising internet use, local data hosting mandates, and AI adoption-with India hosting ChatGPT's second-largest user base.

Low costs and high stakes

Analysts highlight India's competitive edge: lower development costs than most nations (second only to China) and cheaper electricity than the US, UK, or Japan. The country's tech talent pool further strengthens its appeal as a global data hub.

"This is another opportunity we can leverage, much like the IT services boom of the 1990s and 2000s," said Vibhuti Garg, South Asia director at the Institute for Energy Economics and Financial Analysis.

Water crisis casts a shadow

India's data centre water use is set to more than double-from 150 billion litres in 2025 to 358 billion litres by 2030-exacerbating shortages in a country with 18% of the world's population but only 4% of its freshwater. Most facilities cluster in water-stressed cities like Mumbai, Hyderabad, and Bengaluru, where competition for resources is fierce.

Advocacy groups, including the Human Rights Forum, have criticized the Andhra Pradesh government for diverting public water to Google's Visakhapatnam project, a city already grappling with acute shortages. Google stated it uses a "peer-reviewed water-risk framework" to assess local watershed impacts.

Experts warn of potential backlash. "Shutdowns in peak summer could disrupt banking, healthcare, and transit systems reliant on cloud services," said Sahana Goswami of WRI India, noting that 60-80% of India's data centres may face high water stress this decade.

Energy demands and policy gaps

Electricity consumption by data centres could double to 1-2% of India's total demand, raising concerns over increased fossil fuel reliance. While some firms have adopted renewables, "mandating clean energy use" is critical for sustainability, Garg said.

Solutions like treated wastewater for cooling-already tested in Navi Mumbai-and zero-water cooling technologies could mitigate risks, but adoption remains inconsistent. "Non-potable water must be mandatory for cooling," urged Praveen Ramamurthy of the Indian Institute of Science.

The balancing act ahead

India's policymakers face a dilemma: accelerating digital growth while minimizing environmental harm. "We must ensure one priority isn't sacrificed for another," Garg said, emphasizing the need for stricter water and energy regulations to secure the industry's long-term viability.