India is rapidly ascending as a global pillar of digital infrastructure, projected to multiply its data center capacity fivefold to 8GW by 2030, attracting an estimated $30 billion in capital expenditure. Cities like Mumbai, leveraging competitive operational costs and crucial subsea cable connectivity, lead this charge. “India has the potential to offer an incremental 5 GW of data centre capacity in the medium term, provided we are able to address AI infrastructure needs at a broader Southeast Asia level,” said Prateek Jhawar, Managing Director and Head, Infrastructure and Real Assets Investment Banking, Avendus Capital.
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However, this explosive growth confronts an immediate and existential paradox: the digital boom is set to collide directly with the country’s escalating ecological challenge, driven by water scarcity and a severe deficit in corporate transparency.
The investment frenzy, fueled by mandates like the Digital Personal Data Protection (DPDP) Act and the surging adoption of AI and cloud services, has drawn hyperscale giants including Google, Meta, and Amazon, alongside domestic titans like AdaniConneX and Reliance.
The immediate strategic edge for India rests heavily on its low comparative costs for land and power, making it a top global data center market. Yet, the nature of new demand, particularly from AI workloads, significantly escalates the environmental risk. AI servers require five to six times more power and necessitate advanced liquid cooling, systems that are profoundly water-intensive. This pivot means that infrastructure efficiency, rather than just initial low cost, will determine long-term viability.
The Ecological Conflict
Data centers consume vast quantities of water primarily for evaporative cooling, a process essential for dissipating heat efficiently. Industry benchmarks suggest that large hyperscale facilities can draw between two million and nineteen million liters of water daily, a volume comparable to the needs of tens of thousands of homes.
The critical challenge arises because approximately 70% of India’s current data center capacity is concentrated in heavily water-stressed coastal and urban centers like Mumbai and Chennai. “Data centres consume large volumes of water for cooling. With expansions planned in water-stressed cities such as Mumbai, Chennai and Bangalore, summer shortages could disrupt operations unless alternative cooling technologies or government interventions are implemented,” the Macquarie report said, adding that data centres need about 25 million litres per 1 megawatt load annually.
As data centers increasingly rely on fresh or potable water supplies, they intensify competition with local communities already facing strained municipal resources and declining groundwater levels. This operational model transforms a perceived national cost advantage into a localized social and ecological liability.
The Governance and Transparency Gap
Compounding the resource conflict is a widespread lack of mandatory, standardized transparency regarding water usage. Despite major operators touting claims of “water-neutral” or “water-positive” facilities in their Environmental, Social, and Governance (ESG) reports, the disclosure of essential metrics like Water Usage Effectiveness (WUE) remains inconsistent, often vague, and rarely verified at the facility level.
This opacity prevents effective policymaking, hinders external scrutiny, and allows corporations to avoid full accountability for their environmental footprint. Without clear, comparable data on water withdrawal, consumption, and recycling, governmental bodies struggle to enforce resource allocation rules or incentivize necessary technological shifts.
A Mandate for Sustainable Growth
The sustainability of India’s digital economy hinges on a strategic policy shift. The current regulatory fragmentation across states must be harmonized, and mandatory, rigorous disclosure of water and energy performance metrics must be implemented.
For the sector to realize its $30 billion growth potential without compromising water security, public policy must actively incentivize the immediate adoption of closed-loop, water-efficient cooling technologies, or systems utilizing recycled and non-potable water sources. The long-term competitiveness of India as a digital hub will not be secured by cheap land, but by demonstrating measurable, sustainable, and transparent resource stewardship.
