Reliance Industries Ltd (RIL) is set to invest Rs 1.6 lakh crore (over $17 billion) to build a 1.5 gigawatt AI-driven data center cluster in Visakhapatnam, Andhra Pradesh. Earlier, US tech giant Google held a ground-breaking ceremony for a 1 GW cluster with an investment of $15 billion in the same region. Other companies, including Digital Connexion (1 GW) and Anant Raj Cloud (around 300 MW), are also setting up facilities in the port city.
Several firms such as Sify Technologies, Nxtra by Airtel, Yotta and NTT Global are expanding data center capacity in major Indian cities such as Mumbai, Chennai, Delhi-NCR and Hyderabad. This raises a key question: why are so many data centers coming to India?
What is a data center?
In simple words, a data center is a facility where technology companies like Google, YouTube and other online platforms, including ChatGPT and chatbots, store their data. Every time we stream a movie, make a UPI payment or scroll through Instagram, we generate data that needs to be stored somewhere.
These facilities are filled with computers and storage systems that hold digital information such as websites, emails and cloud data. Basically, they act as huge hubs that process and store everything people do online.
Why is it booming in India?
India’s data center market, estimated at around $10 billion in 2025, is expected to double to $22 billion by 2030. Between 2020 and 2024, the sector attracted investments of around $13-15 billion, with foreign institutional investors contributing nearly 80% of the total.
Growth is being driven by the rapid growth of cloud computing, artificial intelligence and other data-intensive technologies. India’s huge digital base – over 800 million internet users – also makes it a key market for global technology companies.
Government regulations requiring sensitive data, such as banking and health records, to be stored within India have further increased demand. At the same time, cheap mobile data has increased consumption of video and social media content, creating a need for faster, local data storage.
Artificial intelligence (AI) requires high computing power, prompting companies like Google and Microsoft to build specialized AI-focused data centers in India. The government has also given the “Infrastructure Status” to the sector, making it easier for companies to access financing and land. The Union Budget 2026 has further extended a tax holiday till 2047 for foreign companies investing in the sector.
What are the energy and water requirements?
Globally, data center capacity stands at 40–50 GW and is expected to cross 100 GW by 2030 due to increased demand from cloud computing and AI. In India, installed capacity is projected to reach 1.7–2.0 GW by the end of 2026, supported by nearly $30 billion in investment. Deloitte estimates this could increase to 8-10 GW by 2030 – a sixfold increase in just four years.
However, this rapid expansion comes with significant resource demands. Data centers require large amounts of electricity to run servers and keep them cool.
According to a report authored by public policy researcher Sagari Gupta, published in Down to Earth magazine, most data centers in India use evaporative cooling, a method suitable for high-temperature environments. This process uses water to cool the servers, and about 80% of the water evaporates and is lost.
With India’s current operating capacity of about 1.5 GW, this translates to approximately 37.5 billion liters of water use per year—even before planned expansion. A September 2025 Morgan Stanley report estimates that global AI data center water consumption could reach 1.068 billion liters per year by 2028, an eleven-fold increase from 2024 levels, depending on cooling technology and energy sources.
