December 17, 2025: India’s rapid push to become a global hub for artificial intelligence and cloud infrastructure is raising fresh concerns about the country’s capacity to support the water- and power-intensive demands of large-scale data centres. With billions of dollars committed to new facilities in 2025 alone, policymakers and urban planners are increasingly examining whether natural resources can keep pace with this digital expansion.
Industry estimates indicate that net investments announced this year could add over 6 gigawatts of data centre capacity, amounting to capital commitments approaching $70 billion. Since October, foreign and domestic investors have pledged more than $40 billion towards hyperscale facilities across major metropolitan areas. While the surge strengthens India’s position in AI and digital services, experts warn that water scarcity and electricity reliability could become binding constraints.
Water availability is the most pressing challenge. India’s per-capita freshwater availability has already fallen below commonly accepted stress thresholds, according to policy research organisations. Data centres operate thousands of high-performance servers continuously, requiring intensive cooling to prevent overheating. “Cooling systems remain the Achilles’ heel of data centre infrastructure,” said an urban infrastructure specialist. “Unless operators move decisively towards water-efficient technologies, cities hosting these facilities will feel the pressure.” Large data centres can consume millions of litres of water daily, comparable to a medium-sized urban neighbourhood, potentially competing with municipal and agricultural demands.
Electricity demand is another concern. While India has improved generation capacity and claims a power surplus, data centres require uninterrupted, high-quality energy, much of which is still carbon-intensive. Developers increasingly pledge renewable sourcing, but grid stability, storage, and last-mile reliability remain challenges. Emerging cooling solutions, such as liquid immersion and direct-to-chip systems, reduce water dependence but involve higher upfront costs and are not yet widely adopted.
The government is drafting a comprehensive data centre policy, proposing dedicated zones, mandatory water usage disclosure, renewable energy incentives, and micro-grid integration. Urban planners stress that sustainable growth is possible if cities adopt transparent resource accounting, integrate renewables, and recycle treated wastewater. The success of India’s digital infrastructure ambitions will depend not only on capital investment but on intelligent management of water, power, and land resources critical to both urban life and economic growth.
