India’s rapidly growing data centre industry is drawing attention not only for its role in artificial intelligence and digital infrastructure, but also for the environmental and policy challenges it may create in the coming years.
Experts say the country urgently needs a national data centre policy to regulate energy use, water consumption, land allocation, and sustainability standards as investments continue to rise.
India pushes for digital and AI sovereignty
India’s total data centre capacity has reportedly grown from around 375 MW in 2020 to nearly 1.5 GW in 2025.
The expansion is closely linked to India’s ambition to strengthen digital sovereignty and develop domestic artificial intelligence capabilities.
Sharad Agarwal, CEO of Sify Technologies, said keeping data within India is important not only for digital independence but also for “intellectual sovereignty” as AI systems increasingly depend on massive data processing infrastructure.
The Union Budget 2026-27 has also introduced tax incentives for eligible foreign cloud service providers operating through India-based data centres.
Environmental pressure becoming concern
Despite the growth, researchers and activists warn that data centres consume large amounts of electricity and water, especially for cooling systems.
A report by the Council on Energy, Environment and Water (CEEW) noted that many Indian data centres are located in water-stressed regions, increasing pressure on local resources.
Experts also raised concerns about lack of transparency, environmental monitoring, and public information regarding the impact of these facilities on nearby communities.
Industry adopts greener technologies
Data centre companies say they are increasingly investing in energy-efficient systems and renewable power sources.
Advanced technologies such as direct-to-chip liquid cooling and closed-loop water chiller systems are helping reduce energy and water consumption.
Industry leaders noted that Power Usage Efficiency (PUE) in Indian data centres has improved significantly in recent years, with some facilities moving closer to globally efficient standards.
Experts call for national framework
Currently, 15 Indian states have separate data centre policies, but experts say the absence of uniform national standards could create long-term environmental and infrastructure problems.
Researchers stressed the need for mandatory benchmarks on water and energy efficiency, improved coordination between central and state governments, and stricter long-term sustainability goals.
Experts warned that decisions taken now regarding data centre expansion could shape India’s environmental footprint for decades.