Statsguru: India's Cloud push hits a waterwall as data centres expand

The Budget has proposed a tax holiday until 2047 for foreign firms offering global cloud services from India-based data centres, a move expected to attract up to $200 billion in investment. By reclassifying cloud infrastructure as core infrastructure and compute as capital, the Budget signals a long-term bet on India becoming a global digital factory. But the physical footprint of this expansion is colliding with a hard constraint: water and energy.

 

India’s data centre capacity has risen sharply over the past five years, reflecting accelerating investment momentum.  

 

Yet this growth is geographically narrow. Nearly all capacity is clustered in just five cities, with Mumbai alone accounting for more than half of the national total.  

 

Demand-side drivers remain strong. India’s internet subscriber base has expanded steadily, pushing up data consumption and compute needs across sectors.  

 

Most major data centre hubs are located in cities that are already water-scarce or approaching absolute scarcity, limiting room for sustainable expansion.  

 

Water stress is already structurally high around India’s data centre locations and is projected to worsen under future climate and development scenarios.  

 

Energy demand compounds the problem. Data centres’ share of India’s electricity consumption is expected to treble by 2030.