India’s data centre sector is booming due to AI advancements and massive investments from global tech giants, but this rapid expansion is intensifying the country’s water scarcity issues, threatening long-term sustainability. The extraordinary growth, driven by artificial intelligence, has seen companies like Google, Meta, and Amazon pour billions into new facilities, with Google’s recent $15 billion investment in Andhra Pradesh marking a significant milestone. This surge is part of a broader trend where even luxury real-estate developers are entering the market, fueled by projections that India’s data centre capacity will jump 77% by 2027 to 1.8GW, with an estimated $25-30 billion expected in capacity expansion by 2030.
Several factors are propelling this boom, including explosive growth in internet and mobile use, government regulations mandating local data hosting, and the rapid adoption of AI technologies like ChatGPT, which has its second-largest user base in India. The country is poised to become the world’s largest data consumer by 2028, surpassing the US and China, thanks to low development costs and electricity prices that make it an attractive investment hub. According to Kotak Research, India’s data centre development costs are among the lowest globally, coupled with access to world-class tech talent, creating a strong business case for both policymakers and global firms.
However, this growth presents severe environmental trade-offs, particularly around water consumption for cooling systems. Data centres are water-intensive, and in a country where the World Bank notes India has only 4% of the world’s water resources for 18% of its population, the strain is acute. Projections indicate that water use by data centres will more than double from 150 billion litres in 2025 to 358 billion litres by 2030, exacerbating pressure on already stressed water tables and raising concerns about sustainability.
The concentration of data centres in urban clusters like Mumbai, Hyderabad, Chennai, and Bengaluru, which have high competing water needs, heightens these challenges. Experts warn that local pushback or loss of operating licenses due to water scarcity could jeopardize the industry’s long-term viability. For example, advocacy groups such as the Human Rights Forum have raised “alarm” over Google’s project in Visakhapatnam, where acute water stress could worsen with the new investment, highlighting potential conflicts over resource allocation.
Policy gaps are a critical concern, as water use is not prominently addressed in India’s data centre regulations, creating a blind spot that risks operational disruptions. Sahana Goswami of WRI India emphasizes that this oversight could lead to cascading impacts on other sectors, such as banking and healthcare, if data centres face shutdowns during peak summer due to water shortages. An S&P Global study predicts that 60-80% of India’s data centres will encounter high water stress this decade, underscoring the urgency for integrated water management strategies.
To address these issues, experts recommend innovations like using treated domestic and industrial wastewater for cooling, adopting zero-water cooling technologies, and selecting low-stress water basins for new projects. Praveen Ramamurthy from the Indian Institute of Science advocates for mandating non-potable water use and points to successful examples in Navi Mumbai where such practices are already in place. These measures could help reduce reliance on freshwater sources and ensure more resilient operations amid growing water constraints.
Beyond water, energy consumption is another significant concern, with the International Energy Agency forecasting that data centres’ electricity use in India could double from 0.5-1% to 1-2% of total demand. This increase might lead to greater reliance on fossil fuels without regulations enforcing renewable energy use. While many data centres have voluntary clean energy contracts, formal mandates could make growth more sustainable, as noted by Vibhuti Garg of the Institute for Energy Economics and Financial Analysis.
In conclusion, Indian policymakers face a delicate balancing act between fostering digital growth and safeguarding environmental resources. The need for proactive measures, including stronger regulations on water and energy use, is critical to ensure that the data centre boom does not come at the expense of water security or climate goals. As Garg aptly puts it, the goal is to ensure that one good is not sacrificed for another, requiring a collaborative approach among government, industry, and communities to achieve sustainable development.
