(MENAFN) India’s rapid expansion in artificial intelligence and digital services has fueled a surge in data centre construction, highlighting a looming environmental dilemma. Data centres, which host servers, IT infrastructure, and network equipment, are essential for powering everything from AI chatbots to streaming platforms and electric vehicles.

Tech giants like Google, Amazon Web Services, and Meta, alongside local firms such as Reliance Industries, are investing billions into India’s data infrastructure. Google alone recently pledged $15bn for an AI data centre in Andhra Pradesh, its largest in the country. Luxury real estate developers have also entered the market, eyeing computing facilities as a lucrative venture.

Industry analysts project India’s data centre capacity to grow 77% by 2027, reaching 1.8GW, with an estimated $25-30bn spent on expansion by 2030. With India responsible for 20% of global data creation but only 3% of data centre capacity, the demand for infrastructure is surging. By 2028, India is expected to be the largest consumer of data worldwide, driven by internet adoption, mobile usage, government regulations mandating local data storage, and rapid AI uptake.

From a business perspective, India is highly attractive. Development costs are among the lowest globally, second only to China, while electricity prices remain far below those in the US, UK, and Japan. The country also boasts world-class tech talent capable of supporting industry growth.

However, the sector’s expansion raises serious environmental concerns, particularly around water usage. Data centres rely heavily on water-intensive cooling systems. In a country where 18% of the world’s population relies on just 4% of global freshwater resources, this has become a critical issue. India’s data centre water consumption is projected to more than double from 150 billion litres in 2025 to 358 billion litres by 2030, placing immense pressure on local water supplies, especially in urban hubs like Mumbai, Hyderabad, Chennai, and Bengaluru.

Local pushback is already emerging. Advocacy groups have criticized plans for Google’s Andhra Pradesh facility, warning that Visakhapatnam’s existing water stress could worsen. Google has stated it uses a context-based water risk framework to assess potential impacts on local watersheds before tapping freshwater sources.

Experts note that India’s regulatory framework for data centres emphasizes data protection and energy efficiency but largely ignores water usage, creating a blind spot that could jeopardize long-term operations. A recent study predicts that 60-80% of India’s data centres could face high water stress this decade, potentially affecting critical services such as banking, healthcare, and transportation that rely on cloud infrastructure.

Solutions are being explored. Companies are encouraged to reuse treated domestic and industrial wastewater and adopt zero-water cooling technologies, though deployment remains inconsistent across the country. Experts advocate selecting low-stress water basins for new facilities and mandating non-potable water use for cooling, a practice already adopted by some industries in Navi Mumbai.

While India seeks to harness its digital potential, balancing rapid data centre growth with sustainable water management will be crucial to prevent resource conflicts and ensure resilient infrastructure.

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