India's data centre boom will succeed only if it stays sustainably green

The Iran war has triggered unprecedented disruption in energy supply, and phrases like “near-term headwinds”, “margin pressure”, and “deferred capex” are echoing in boardrooms as a result.

 

But there is one ray of sunshine. Capex is not being deferred in building data centres (DCs). India had roughly 1 Gw of DC capacity by end FY26. That is set to double this financial year and it will reach 8 Gw by 2030. Multinationals like Google, Meta and Microsoft have big India-specific DC plans, along with the Adani group, Reliance, Bharti and Tata. 

 

Put together, that is over $30 billion in capital expenditure alone. There are multiple drivers in this massive scaleup. India has a humongous, growing base of smartphone users. It’s the world’s most data-intensive population, and 5G availability is further accelerating data consumption.

 

As of now, India is home to 17 per cent of the global population. But it generates 20 per cent of global data, and holds only around 3 per cent of global DC capacity. There’s a government mandate for data sovereignty, and that cannot be met without building capacity. And, of course, there are the demands of artificial intelligence (AI).

 

Policy aspirations to becoming a big player in AI cannot be fulfilled without the necessary DC capacity. The smartphone base makes India a wonderful test-bed for all digital services, and the availability of a technically competent workforce makes it a potential centre for AI innovation.

 

Many companies are salivating at the prospect. The DC buildout is driving demand for turbines (Triveni Turbine), specialty cables (APAR Industries), transformers (Siemens Energy, CG Power), chillers and cooling towers (Thermax) and skids (Praj Industries). Diesel Genset maker Cummins says DCs already contribute 30-35 per cent of domestic revenues. Plus of course, there’s an opportunity in construction.

 

Once operational, DCs generate employment. Workers include mechanical and electrical engineers, cooling plant operators, cybersecurity experts, and a whole bunch of specialised operatives for Data Centre Infrastructure Management (DCIM). DCIM involves using the software and tools required to monitor and manage servers, power units, cooling systems, etc. Given appropriate skilling, DCs could help mitigate the unemployment crisis.

 

All this seems win-win and states are competing to host DCs. If semiconductors’ fab plans also fructify, and PLI (production-linked incentive) schemes result in the local manufacturing of some of the gear, that would add more domestic layers to the ecosystem.

 

So where are the hurdles? DCs are sinkholes when it comes to power and water consumption. By 2030, they would generate 8-10 per cent of global power demand. They require huge quantities of water for cooling. Moreover, they can be very noisy and polluting because the nature of power demand (100 per cent uptime) leads to the use of diesel gensets.

 

India is water-stressed, and it struggles to meet peak power demands. It is also the world’s most polluted place. While policymakers are pushing DCs, doing so without due regard to addressing these challenges could lead to a sustainability crisis, and, ultimately, political backlash.

 

Recent experience in the United States (US) is worth quoting. In the first half of calendar 2025, Harvard economist Jason Furman calculated that investment in DCs and cloud-related infrastructure accounted for roughly 4 per cent of US gross domestic product (GDP) and contributed over 90 per cent of GDP growth.

 

But a recent Gallup poll showed that 71 per cent of Americans now oppose the construction of DCs in local communities, with 48 per cent strongly opposed. Only 53 per cent of Americans oppose nuclear plants. Forty-eight US DC projects, worth $156 billion, were blocked or stalled in 2025, and another 20 were killed by March 2026. Germany, Japan, the United Kingdom, and other nations have seen similar civil-society pushback against DCs. These are now the major flashpoint for NIMBY (Not in My Backyard) activism.

 

This growing resistance is being driven by concern over water and energy consumption, inflated utility bills, and noise pollution. Those worries will inevitably arise in India as well and rolling out DCs without due regard would be inconsistent with sustainability goals.

 

These concerns can be addressed by good design policies that pay heed to sustainability by, for instance, using and recycling wastewater, inducting renewables with battery storage to reduce the need for diesel gensets, etc. But sustainability has to be built into the policy structure and it must be stringently enforced in design. Otherwise the DC buildout could be derailed.