Massive Tech Investments Drive Growth but Raise Sustainability Concerns
The rapid rise of artificial intelligence has ignited a data center boom across India, now Asia’s third-largest economy. These vast facilities, which power everything from ChatGPT queries to streaming platforms, have become the backbone of the country’s digital infrastructure—and a key pillar of its economic ambitions.
Last month, Google announced a record-breaking $15 billion investment in an AI data center in Andhra Pradesh, its largest in India. The move follows major spending sprees by Amazon Web Services, Meta, and Indian conglomerates such as Reliance Industries. Even luxury property developers are entering the market, constructing data centers to meet surging demand.
According to JLL, India’s data center capacity is expected to grow 77% by 2027 to reach 1.8GW. Analysts project $25–30 billion in investments by 2030 as digital adoption accelerates nationwide. Yet, this expansion poses mounting environmental challenges that could complicate India’s push toward sustainability.
Balancing Digital Expansion and Resource Constraints
India generates about 20% of the world’s data but currently accounts for just 3% of global data center capacity. With internet use, mobile penetration, and AI adoption soaring, the country is poised to consume more data than any other nation by 2028. For policymakers, data center investment offers both economic opportunity and strategic necessity.
India’s appeal lies in its low development and energy costs, coupled with abundant tech talent. “Just like we exploited the IT services boom through the 90s and 2000s, this is another opportunity we can use to our advantage,” said Vibhuti Garg, South Asia director at the Institute for Energy Economics and Financial Analysis.
However, these benefits come with steep trade-offs. Data centers are notoriously water-intensive, relying on cooling systems that consume enormous quantities of water and power. The World Bank notes that India has 18% of the global population but only 4% of its freshwater resources, placing it among the most water-stressed nations on Earth.
Water Use Emerging as a Critical Risk
India’s data center water consumption is projected to more than double from 150 billion liters in 2025 to 358 billion liters by 2030. Most facilities are concentrated in already water-stressed hubs such as Mumbai, Hyderabad, Chennai, and Bengaluru—cities where residential and industrial water needs are in direct competition.
In Andhra Pradesh, Google’s massive new project has sparked local opposition. Advocacy groups including the Human Rights Forum have warned that diverting water to support the facility could worsen shortages in Visakhapatnam. While Google says it uses a “peer-reviewed water-risk framework” to assess site impact, researchers warn that water management remains a policy blind spot.
“Water use does not figure prominently in India’s data center or zoning policies, placing high risk on their long-term viability,” said Sahana Goswami of WRI India. An S&P Global study estimates that 60–80% of India’s data centers could face severe water stress this decade.
Experts are urging companies to adopt non-potable or treated wastewater for cooling and to locate new projects in lower-stress regions. “Zero-water cooling technologies are advancing globally and should be deployed consistently in India,” said Praveen Ramamurthy of the Indian Institute of Science.
Energy Demand and Carbon Implications
Beyond water, energy use is another growing concern. The International Energy Agency (IEA) projects that data centers will consume up to 2% of India’s total electricity demand by the end of the decade—double current levels. With most power still derived from fossil fuels, that could significantly raise emissions unless renewable energy adoption keeps pace.
“This could mean increased reliance on coal unless regulations require renewable power sourcing,” said Garg. While some operators have signed green energy contracts, experts argue that mandatory clean energy standards are needed to align the industry with India’s decarbonization goals.
A Delicate Balancing Act for Policymakers
For India, the challenge lies in sustaining its digital growth while safeguarding its environment. The government must weigh the economic benefits of AI-driven data infrastructure against the risks of overtaxed energy grids and dwindling water supplies.
“In the end, we need to ensure that one good is not sacrificed for another,” Garg said. As India powers its AI revolution, it faces a defining question: can the nation lead the next phase of digital transformation without compromising its most essential natural resources?
