India data centre strategy: balancing growth, energy and scale

India’s digital economy is scaling at an unprecedented pace. From UPI transactions and OTT streaming to 5G-enabled factories and AI-driven platforms, the sheer volume of data generated in the country is exploding. By 2030, India’s data traffic will be many times greater than today, driven by half a billion new internet users, the expansion of connected devices, and the rapid rise of AI applications. At the centre of this surge lies one critical infrastructure: data centres.

These facilities—warehouses of servers that process, store, and distribute information—are the beating heart of the digital economy. Yet they are also energy-hungry behemoths, consuming electricity at levels comparable to small cities. For India, building a sustainable data centre strategy is not just about server racks and fibre-optic cables. It is about securing the energy that powers them, while balancing economic growth, climate commitments, and global competition with giants like China and the United States.

Market Growth and Investment Momentum

India’s data centre sector is already booming. Industry estimates show that the country’s capacity stood at about 1,263 megawatts (MW) in April 2025 and is projected to exceed 4,500 MW by 2030—a more than threefold rise at a CAGR of 35–40%. The real estate footprint is expected to reach nearly 55 million square feet by the end of the decade.

This expansion is being matched by capital. According to IBEF, the sector has attracted USD 14.7 billion in investment since 2020, with another USD 20–25 billion expected by 2030, much of it from foreign institutional investors. Mumbai (41%), Chennai (23%), and Delhi NCR (14%) continue to dominate India’s data centre landscape, while Tier 2 and Tier 3 cities such as Lucknow and Patna are now emerging as new destinations for edge facilities.

Leading players include Amazon Web Services, Microsoft Azure, Google Cloud, AdaniConneX, Yotta, and CtrlS. Notably, the Adani Group alone has announced USD 10 billion in new investment to build 10 GW of capacity over time.

Policy Reforms and Data Sovereignty

India’s Digital Personal Data Protection Act mandates that sensitive personal data and critical personal data be stored domestically, though cross-border transfers are permitted under strict conditions. These rules are prompting companies to expand local infrastructure and making India one of the most attractive destinations for hyperscale investment.

Policy is also intertwined with sovereignty: data localisation is not just about efficiency—it is about safeguarding citizen data, reducing dependence on foreign jurisdictions, and strengthening control over national digital infrastructure.

Rising Energy Demand and Sustainability

This boom carries a significant energy cost. According to Mercom India’s estimates, as of 2023, data centres consumed around 2% of India’s total electricity —about 139 billion kWh—and demand is expected to surge as AI workloads intensify.

Reports also reveal that the bulk of power for data centres in India still comes from coal, though renewables account for about 30% of the supply. This means the country’s COP26 commitment to achieve 50% non-fossil electricity by 2030 will require the sector to integrate far more renewable energy.

Cooling alone accounts for nearly 40% of total energy use, according to Eco-Business, underscoring the need for sustainable design as a core priority. Encouragingly, IBEF projects that green-certified facilities will increase from 25% today to 30–40% by 2030—evidence that operators are beginning to align climate goals with commercial expansion.

Strategic Priorities for the Next Decade

Securing clean and reliable energy: India must ensure that low-carbon sources power its data centres. Long-term power purchase agreements (PPAs) with renewable developers, hybrid solar-wind-battery models, and incentives for green energy integration will be critical. In the medium term, India should also explore nuclear options, such as small modular reactors, something that the US and China are piloting to ensure stable baseload power for digital infrastructure.

Designing green data centres: Cooling offers the most immediate gains. Technologies such as liquid immersion and evaporative cooling, along with AI-optimised thermal management, should become standard. Locating facilities in cooler geographies or near renewable corridors can further reduce costs and emissions. Tax incentives and green certifications will accelerate adoption.

Expanding distributed infrastructure: Three-quarters of India’s current data centre capacity remains concentrated in Mumbai, Chennai, and Delhi NCR, but this imbalance will shift as Tier 2 and Tier 3 cities expand. Distributed infrastructure will reduce stress on metro power grids and bring capacity closer to users. Edge data centres—smaller facilities sited closer to demand—will be critical for latency-sensitive applications such as AR/VR, smart manufacturing, and connected mobility.

Aligning energy and data policy: Today, project approvals for data centres often focus on land and fibre, while power supply is treated as secondary. Coordinated planning between the Ministry of Power, the Ministry of Electronics and IT, and state governments will be essential. Blended renewable purchase obligations and infrastructure financing frameworks must explicitly integrate the data centre sector.

Building indigenous technology: India still depends on imported servers, chips, and cooling systems for hyperscale deployments. To mitigate supply risks, it must invest in indigenous R&D for energy-efficient chipsets, domestic server manufacturing, and green cooling technologies. Public–private R&D partnerships, backed by academia and startups, will be key to long-term self-reliance.

Leveraging geopolitical advantage: Data centres are not just digital infrastructure—they are strategic assets and tools of diplomacy. The US leverages hyperscalers, while China backs state-run mega-farms. India can build its own leverage by hosting sovereign cloud platforms, protecting undersea cables, and offering regional partners access to its data capacity. This, however, requires robust domestic infrastructure, backed by secure, renewable energy supplies.

Lessons from China and the United States

China has scaled rapidly, building vast data farms in Guizhou and Inner Mongolia powered by hydropower and coal. The US, meanwhile, has relied on hyperscalers signing nuclear and renewable PPAs to guarantee carbon-free power for decades.

India must take a hybrid path by encouraging private investment while maintaining strategic oversight. Unlike China, it cannot rely on coal without undermining its climate goals. Also, unlike the US, the country lacks abundant venture capital and flexible power grids. Its approach must therefore blend regulation, incentives, and innovation to create a sustainable path.

Pursuing a Sustainability-First Approach

India’s net-zero 2070 pledge places the data centre industry firmly within the national decarbonisation agenda. Sustainability must not remain an optional metric but become a defining standard. If embraced as a guiding principle, India could emerge not only as a digital powerhouse but also as a global model for green data infrastructure.

This opportunity extends beyond national borders. Other emerging economies in Africa and Asia face the same dual challenge of data growth and energy constraints. By developing sustainable, cost-effective models, India could export its know-how in digital infrastructure, much like it has with UPI and Aadhaar in digital public platforms.

Balancing Growth with Responsibility

The coming decade will test India’s ability to reconcile expansion with sustainability. Policymakers will need to decide whether scarce renewable power should be prioritised for data centres or for manufacturing. Industry will need to balance rapid growth with ecological responsibility. Hence, India must manage hyperscaler dominance while encouraging investment.

These challenges are not deterrents—they are a call for strategic planning. If India balances its energy and data ambitions effectively, it can avoid the pitfalls seen elsewhere and build a resilient, sovereign, and competitive digital ecosystem.

Data centres are the cathedrals of the digital age—monuments not of glass and stone, but of servers, fibre, and electricity. For India, building them at scale is a necessity, not a choice. But powering them sustainably, securely, and strategically is a greater challenge.

As China and the United States race for both digital dominance and energy independence, India must craft its own model—anchored in clean energy, distributed and green infrastructure, indigenous innovation, and geopolitical foresight. The stakes are high, but so are the rewards. Success would not merely make India a participant in the global digital order—it would make it one of its architects.

The author is the Founder and CEO of PygmalionGlobal. He collaborates with multiple cybersecurity companies, including NPCore in South Korea, and engages with government agencies and conglomerates across Asia.

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