India's data centre boom raises alarms over water and energy scarcity

India's rapidly expanding data centre industry, fuelled by artificial intelligence (AI) growth, rising internet demand and government rules to host user data locally, is driving record investment but heightening concerns about water scarcity and energy use.

The country's data centre capacity is projected to surge by 77% by 2027 to reach 1.8 gigawatts, according to industry estimates. Global technology companies including Google, Amazon Web Services (AWS) and Meta, along with local conglomerates such as Reliance Industries, are investing billions of dollars in the sector, reports the Guardian.

Google recently announced a $15 billion AI data centre in Andhra Pradesh, its largest investment in India to date. Analysts project that $25 billion to $30 billion will be spent on data centre capacity expansion by 2030.

India's appeal lies in its low development and electricity costs - among the cheapest globally, after China - and its pool of skilled technology professionals.

"Just like we exploited the IT services boom through the 90s and 2000s, this is another opportunity that we can use to our advantage," said Vibhuti Garg, director for South Asia at the Institute for Energy Economics and Financial Analysis.

Water stress concerns

The expansion, however, raises concerns about environmental sustainability. India has 18% of the world's population but only 4% of its freshwater resources, making it one of the most water-stressed nations globally.

Data centre water use is expected to more than double from 150 billion litres in 2025 to 358 billion litres by 2030, with most facilities located in urban clusters such as Mumbai, Hyderabad, Chennai and Bengaluru - areas already struggling to meet competing water demands.

Advocacy groups have voiced alarm over the diversion of public water resources for large private projects, including Google's proposed site in the water-scarce city of Visakhapatnam. An S&P Global study estimates that 60–80% of India's data centres will face high water stress this decade.

"Water use does not figure prominently in any of these policy groups, and is a significant blind spot that places high risk on the long-term functioning of these centres," said Sahana Goswami of WRI India, a water research organisation.

"Imagine shutdowns of data centres in peak summer due to lack of water for cooling - how might this impact banking services, medical systems in hospitals using cloud services, transit system operations and more," she added.

Calls for regulation and innovation

Experts are urging both companies and policymakers to adopt sustainable cooling strategies, such as using treated domestic and industrial wastewater instead of freshwater.

"Non-potable or treated water must be made mandatory for cooling needs," said Praveen Ramamurthy, a water recycling expert from the Indian Institute of Science in Bengaluru. He added that India must also select "low-stress water basins for new projects."

Goswami said India already has examples of innovation in Navi Mumbai, where industries partner with municipal water utilities to recycle water. "Various power and textile industries are much ahead in partnering with municipal authorities and water utilities," she said.

Energy demand doubles

Energy consumption by data centres is another challenge. Power demand from the sector is expected to double, rising from around 0.5–1% of India's total electricity use to as much as 2% in the coming years.

"This could mean increased use of fossil fuel-based energy, because right now there is no regulation that forces data centres to use renewable energy," Garg said. She added that formally "mandating the use of clean energy" would make this growth more sustainable.

"In the end, we need to ensure that one good is not sacrificed for another," she said.

As Delhi looks to balance its digital ambitions with environmental protection, experts warn that the sustainability of India's data centre boom will depend on whether water and energy considerations are built into the country's long-term infrastructure planning.