India's data centre story is on overdrive. From Google, Microsoft, and Amazon to home-grown IT major TCS, real estate heavyweight Hiranandani and private equity major Blackstone, everyone is racing to claim a share of the country's digital infrastructure space.
India's data centre capacity has expanded more than fourfold in just six to seven years, reaching 1,263 MW across 16 million sq. ft. as of April 2025, a 3.6X jump since 2020. Another 795 MW is expected to come online by 2027. Occupancy levels of 75-80 per cent suggest that demand continues to far outstrip supply. The reason for this explosion is clear. Data centres are the beating heart of India's digital transformation, powering everything from streaming platforms and cloud computing to digital payments, e-commerce, and government services. With 5G, the Internet of Things, artificial intelligence, and government initiatives under Digital India gathering pace, the need for secure, high-speed, and scalable data storage has never been greater. Above all, these centres safeguard data sovereignty by ensuring that user data stays within the country's borders.
Yet, setting up and operating data centres in India remains challenging; unreliable power supply, high real estate costs, and the lack of low-latency fibre optic infrastructure have restricted their presence to a few States. Tier-2 and Tier-3 cities risk being left behind. A new data centre requires close to 30 approvals from Central and State governments. A comprehensive Data Centre Policy has been in the works since 2020, but delays have blunted its potential. The 2025 draft, which offers a generous incentive structure, must now be implemented without further delay. The proposed tax holiday of up to 20 years, GST input tax credits for capital assets, and permanent establishment status for foreign players operating at least 100 MW of capacity are powerful tools to attract global investment. Equally crucial are the operational reforms -- single-window clearance, inclusion under the Essential Services Maintenance Act, and fiscal support for States lagging behind. The Telecom Regulatory Authority of India's recommendations to create a Data Centre-specific portal for time-bound approvals and to offer land and capital subsidies for Data Centre Parks should also be incorporated into the final policy.
However, India must not repeat the mistakes of other countries. A 2024 report from the Lawrence Berkeley National Laboratory estimated that American data centres consumed 17 billion gallons (64 billion litres) of water in 2023 for cooling, with the figure potentially doubling or even quadrupling by 2028. Without transparent mechanisms to track and regulate such usage, India could face a water crisis. Energy consumption poses another challenge. As data centre capacity surges, renewable energy generation must keep pace to avoid locking in carbon-heavy growth. A forward-looking policy must marry ambition with accountability.
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Published on October 16, 2025
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