India's Data Centre Boom: Power and Infrastructure Challenges

India has an ambitious target of becoming a global hub for data centres and is aggressively pushing the sector through policies such as the Digital Personal Data Protection (DPDP) Act and incentives for companies to set up facilities in Tier-2 and Tier-3 cities.

Since 2020, India has attracted $12-15 billion in data centre investments. “This momentum accelerated after the 2022 Union Budget granted infrastructure status to data centres, opening the door for institutional capital and long-term debt financing,” said Raghu Pareddy, Founder and CEO of Wissen Technology. The country is expected to attract an additional $20–25 billion by 2030. Infrastructure status has helped the sector access easier and cheaper financing.

India generates nearly 20% of the world’s data but hosts only about 3% of global data centre capacity, meaning much of the data generated domestically is stored overseas. Experts estimate that India’s data centre capacity could rise to 10-12 GW by 2030 from the current 1.7 GW, but that would require heavy investment in land, power, and grid infrastructure.

The expansion of data centres is expected to drive real estate growth in Tier-2 and Tier-3 cities as well as semi-urban areas. According to a CBRE South Asia report, India saw investment commitments of over $60 billion between 2019 and 2020, while other estimates suggest around $15 billion has flowed into the sector since 2020.

Deloitte’s report Attracting AI Data Centre Infrastructure Investment in India estimates that the country will need an additional 45-50 million sq ft of land by 2030, compared with about 13 million sq ft in 2023. The analysis also notes that India is among the cheapest locations globally on a per-megawatt cost to set up data centres.

S Anjani Kumar, Partner, Deloitte India, said nearly 60–70% of data centres are located in Mumbai and Chennai due to uninterrupted power supply, undersea cable landing stations, faster internet speeds, lower latency, and availability of skilled talent. “These locations remain in high demand because of superior connectivity and infrastructure. Centres can be set up in remote locations, where land is cheaper, but lack of access to undersea cables can increase latency,” he said.

Beyond water for cooling, uninterrupted power supply is critical for data centres. Around 55% of India’s power still comes from non-renewable sources. Until recently, most facilities were built for CPU-based workloads, but newer centres are increasingly GPU-enabled to support AI, requiring faster connectivity and highly reliable power.

India faces acute power shortages during summers when demand peaks. In 2024, electricity demand rose 9% due to heatwaves, with several regions experiencing regular outages. As of 2024, data centres consumed about 0.8% of India’s total electricity, a figure expected to rise to 2.6% by 2030—around 57 TWh. Since power accounts for nearly 65% of operating costs, operators are increasingly blending multiple energy sources, Raghu Pareddy of Wissen Technology noted.

While the Union government has set a target of 900 GW of power generation capacity by 2030, a TERI report -- Exploring electricity supply-mix scenarios for 2030 -- projects capacity of about 593 GW by then. “Most facilities still depend on state grids dominated by thermal power. To improve reliability, especially in North India, states are offering dual-grid access, special tariffs, and renewable energy incentives,” Pareddy said.

Ensuring uninterrupted power remains a key challenge. Sridhar Mantha, CEO of the Generative AI Business at Happiest Minds Technologies, says AI workloads are highly sensitive to even minor power fluctuations. “Cooling efficiency and fibre redundancy become critical, especially as expansion moves beyond metros. Power, connectivity, water, and land must be planned together, with greater adoption of energy-efficient cooling, renewable integration, and storage,” he said.

Rajesh Chhabra, General Manager, India & South Asia, Acronis, says that the biggest challenge is now resilience and security at scale. “As facilities grow larger and more integrated, ensuring uninterrupted operations and protection against cyber threats becomes harder. The solution lies in building data centres with security by design—integrating redundancy, zero-trust principles, autonomous threat defence, and failback capabilities from day one,” he said.

India’s new Digital Personal Data Protection Act, with rules notified on November 14, 2025, has raised the bar for data centre operations. Chhabra said the DPDP Act marks a paradigm shift in how data protection is implemented. “Compliance now needs to be continuous at every touchpoint rather than periodic. This includes encryption of data at rest and in transit, strict zero-trust access controls, real-time monitoring, and tamper-proof audit logs,” he said.

Following the notification of the rules, data centres are tightening governance frameworks. Sridhar Mantha says operators are embedding privacy by design.