India's data centre rush hits a roadblock: Cooling in a water-scarce nation

Companies are rushing to build data centres in India, bringing billions in investment, but a key sustainability challenge looms: cooling these power-hungry facilities in a water-scarce country

India’s data centre industry reached a major milestone last month when technology giant Google announced plans to set up a 1 gigawatt (Gw) artificial intelligence (AI) data centre in the port city of Vishakhapatnam, Andhra Pradesh, investing $15 billion over the next five years. 

The industry has become prominent over the last one-and-a-half decades, helped by the onset of cloud technology, ecommerce boom, use of smartphones and social media, and the government’s push for a digital economy. 

India’s information technology (IT) spend is projected to touch $176.3 billion in 2026, rising 10.6 per cent from 2025, and outpacing the 9.8 per cent growth expected globally, according to the latest forecast by Gartner Inc, a business and technology insights company. 

The growth is being propelled by investments in data centres and software, according to its latest forecast. The data centre segment in India is projected to record the highest annual growth rate of 20.5 per cent in 2026. It would continue to outpace all other IT segments despite moderating from 29.2 per cent in 2025, said the report. 

A 2019 report by real estate consultancy company JLL projected India’s data centre capacity to touch about 780 megawatt (Mw) in IT power load by 2024, up from 350 MW in 2018-19 to meet the rising demand arising from data localisation and rising data usage. This expansion was expected to provide a $4 billion greenfield investment opportunity in setting up such centres. 

That target has been breezed past and Asia’s third-largest economy now boasts of a load capacity of 1.5-1.7 Gw in 2025, which is expected to expand five-fold to 8 Gw by 2030, according to research firm Jefferies. Almost 70 per cent of it is now being driven by hyperscalers. 

The huge demand, the JLL report says, will be driven by growing adoption of AI technologies as AI servers consume five to six times more power than traditional setups and require advanced liquid cooling systems. In addition, regulatory developments such as the Digital Personal Data Protection (DPDP) Act, 2023, and the RBI’s data localisation guidelines are driving enterprises to host and process data within India. 

JLL expects the capacity to touch 9 Gw by 2030. Global hyperscalers such as Amazon Web Services (AWS), Microsoft, and Google Cloud, Meta and Indian conglomerates such as Reliance and Adani are expected to invest over $50 billion. This could also add $8 billion in leasing revenue, buoying the real estate sector.

 

“The latest rush is all due to AI. The software as a service (SaaS) and cloud rush helped put applications in the cloud, but this one is larger than other booms because it impacts all underlying industries,” said Sunil Gupta, chief executive officer of Yotta Infrastructure, a major data centre player. 

Yotta, backed by Hiranandani Group, has three data centres in Navi Mumbai, Delhi NCR, and Gift City in Gujarat with an IT capacity of about 90 Mw. It expects to add another 96 Mw in new facilities in Navi Mumbai and Delhi in the next six months. The Mumbai facility will have a total capacity of 1 Gw and Delhi 250 Mw. In all, Yotta itself will have a combined capacity of about

1.3 Gw in the next few years. 

AI data centres are also more demanding in terms of resources as they require a large amount of compute to train the models: The cleaner and larger the data, the better the output. “Initially, when Chat GPT started, it was more text-to-text based, but with native languages and video-based AI, we need more computational power,” said Gupta.

 

Enter hyperscalers 

The five highest-spending US hyperscaler technology companies — which run and deliver mega-sized applications — will have a combined capital expenditure of $736 billion between 2025 and 2026, compared with $250 billion between 2022 and 2023, a Goldman Sachs report says. 

Google is only the latest entrant in India’s booming data centre industry, which has already seen the march of AWS and Meta, though the size of the investment is one of the largest foreign direct investments ever in India. To meet the country’s surging digital demands, the Visakhapatnam AI hub will be built to the same exacting standards that power global Google services like Search, YouTube, and Workspace. 

AWS said in January it plans to invest $8.3 billion in building its Mumbai cloud services. The project is expected to add $15.3 billion to India’s GDP and create 81,300 jobs annually. Meta, which owns Facebook, WhatsApp and Instagram, is due to set up its first data centre in India at the Reliance Industries campus in Chennai. It is expected to reduce transmission costs from global data hubs. Currently, data of Indian users of Meta products is managed in Singapore. The 10-acre campus in Chennai’s Ambattur industrial estate, a joint venture of Brookfield Asset Management, Reliance Industries and Digital Realty, will handle loads of up to 100 Mw.

 

Indian players too Besides the hyperscalers, Indian conglomerates have also joined the bandwagon. Nxtra Data, Bharti Airtel’s data centre arm, is looking to invest about ₹4,500-6,000 crore in the next three to four years to take a pole position in the country, Business Standard reported in July. Nxtra operates 14 large data centres in key metros and over 120 edge data centres across 65 cities in the country. The company aims to expand both categories, with a stronger focus on large data centres. 

Reliance is setting up the world’s largest data centre, a 3 Gw facility, in Gujarat’s Jamnagar, while Adani ConneX, a joint venture between Adani Group and EdgeConnex, aims to build a 1 Gw data centre infrastructure platform by 2030. 

Other Indian players include CtrlS, Sify Technology, Equinix, and NTT Global Data Centres. CtrlS Datacentres, Asia’s largest rated-4 operator, has a target of 1 Gw capacity by 2030, up from 250 Mw across its 15 data centres now, by investing about $2 billion, Ashok Mysore, president of sales and business development, said. Singapore’s real estate and infrastructure major CapitaLand is also in the fray, having lined up investments of $1 billion by 2030 to build its data centre of 245 Mw, with plans to double the capacity. 

Most of these data centres are located in Mumbai and Chennai, as they are coastal cities, making it convenient for landing stations and sub-sea cables.

 

Water woes 

The rapid growth of data centres around the world has raised serious questions about sustainability, considering the amount of power they consume and the millions of litres of water needed to cool these mammoth centres. Data centre power demand will increase to 3-4 per cent of the overall global power demand by 2030, from 1-2 per cent in 2023, according to a report by Goldman Sachs. 

In countries such as Mexico, Ireland and Chile, this is resulting in frequent power outages and higher electricity costs in households and depletion of water aquifers, which has led to agitations. 

That should make India tackle the data centre growth issue far more carefully, experts said, considering most of the data centres are in water-stretched areas. 

Sunil Mani, visiting professor of Centre for Development Studies at Trivandrum and Ahmedabad University, said the government should address the issue of sustainability at a policy level, considering the National Data Centre Policy 2025 is currently under consultation. The government has already granted infrastructure status to data and energy storage systems. 

India had a total installed electricity capacity of 500 Gw as of September 30. That puts the demand from data centres at less than 1 per cent, far better than countries such as Ireland (20 per cent) and the US (4.4 per cent in 2023). 

Yotta’s Gupta said the overall power demand from these centres relative to the country’s total capacity will not be a concern. “The concern is when a data centre with a large capacity starts coming up in a specific region. Then the local power supply is impacted because if the facility takes up so much of power, other houses in the areas may be devoid of it or their unit rate for electricity may go up.” 

A Moody’s report in July said as data centres become more widely dispersed geographically to train AI models, integrating with the grid and ensuring a consistent power supply will remain crucial for site selection. “China and India are likely to invest 0.4-0.9 per cent of their real GDP in grid expansion and storage over the next decade.” 

The most critical issue remains water — 25.5 million litres per year are needed for just a 1 Mw load and computing infrastructure — Indian cities may face operational disruption risks without government intervention. Experts cite the need for a data centre policy that accounts for water use in addition to other critical infrastructure support for land and electricity. 

Google’s proposed investment in Vizag has been criticised by advocacy group Human Rights Forum (HRF), which warns that the project will intensify groundwater depletion in a region where erratic rainfall and climate variability have already created acute water stress. 

The World Bank says India has 18 per cent of the global population but only 4 per cent of its water resources, making it one of the most water-stressed countries in the world. At the same time, India’s data centre water consumption is expected to more than double to 358 billion litres by 2030, from 150 billion litres in 2025. 

Cooling accounts for nearly 30-40 per cent of a data centre’s total energy usage. But Yotta, CtrlS, and Equinix say they use air-cooled chillers to cool the system, where water remains in a closed loop and a constant supply of fresh water is not needed. 

But global companies usually use water cooled chillers — which is the most effective and power-sustaining way to cool these systems. It remains to be seen what kind of infrastructure Google adopts for its new AI centre in India. The company aims to replenish 120 per cent of the freshwater used by 2030 in all its data centres globally, according to its Data Centre Impact Report 2023. 

“It’s a mix and match between whether you need more water or power. Water would be a more sensitive issue as far as usage is concerned when you have to balance it with your residential needs,” said Jitesh Karlekar, research director, APAC and India data centres at JLL.