The Union government has significantly revised its projections for AI data centre power demand, with Minister of State for Power Shripad Naik announcing that electricity demand from artificial intelligence data centres is expected to reach 26.3 GW by 2031-32. This estimate is nearly double the government's previous projection made in March 2026, when the power ministry said electricity demand from data centres could reach 13.56 GW by FY32. As per the latest government statement, the additional load of 26.3 GW from artificial intelligence data centres is projected to be integrated into the grid and primarily served by renewable energy capacity. To meet this growing electricity demand, the power ministry is building transmission infrastructure in a phased manner and adding generation capacity, including renewable energy sources. The Central Electricity Authority (CEA) also expects India's peak electricity demand to increase from 289 GW in FY27 to 388 GW by FY32, reflecting rising consumption across the economy including from AI infrastructure.
India's operational data centre capacity has expanded rapidly, with installed capacity increasing from about 375 MW in 2020 to nearly 1.5 gigawatts (GW) in 2025, according to the Ministry of Electronics and Information Technology (MeitY). More recent estimates by Cushman & Wakefield suggest operational capacity has already crossed 1.6 GW, making India the second-largest operational data centre market in the Asia-Pacific region. According to Wood Mackenzie, India's operational data centre capacity is projected to increase more than five-fold to 12 GW by 2030 from 2.2 GW in 2025, driven by rapid adoption of artificial intelligence, hyperscale cloud investments and the country's expanding digital economy. AI-dedicated capacity is expected to surge nearly 24-fold to 6,546 MW by 2030 from 275 MW in 2025, with the report predicting a compound annual growth rate (CAGR) of around 40% over the five-year period. As per Wood Mackenzie, "India's data centre market is entering a structural growth phase that positions the country as one of Asia-Pacific's most attractive infrastructure investment opportunities. The convergence of hyperscale capital, AI workload growth and a decade of policy support have created the conditions for India to rival any market in Asia-Pacific."
India's digital economy, valued at ₹32 trillion (£250 billion) in 2025 and accounting for about 12 per cent of GDP, together with more than 1.03 billion active internet users and around 22 billion monthly UPI transactions, is driving demand for data centre infrastructure, as reported by Wood Mackenzie. The report noted that India's domestic AI market is projected to reach ₹11.7 lakh crore by 2032. According to Souhardya Pal, Research Associate at Wood Mackenzie, "India's data centre market becomes a structural investment thesis. The question for developers and investors is no longer whether to enter India, but where and how." According to the latest Wood Mackenzie report, "India's combination of strong digital demand, supportive policy, expanding renewable energy markets and accelerating AI adoption is creating one of the world's fastest-growing data centre markets." Maharashtra and Tamil Nadu currently account for around 65 per cent of installed IT load, while future investments are expected to expand into Andhra Pradesh, Telangana, Uttar Pradesh and Karnataka.
Major global technology companies have announced substantial investments in India's AI infrastructure development. In February, RIL chairman and managing director Mukesh Ambani said RIL and Jio would invest ₹10 trillion over the next seven years in AI infrastructure. In June, RIL tied up with Meta Platforms for the 168 MW Jamnagar data centre project. In December 2025, Microsoft announced a $17 billion investment in India over four years on cloud and AI infrastructure and skilling, in addition to a $3 billion investment announced in January 2025 in the same area. In October 2025, Google announced its largest investment in India to date of about $15 billion to build an AI hub in the country, in Visakhapatnam. In June, Amazon announced a $13 billion investment to build AI and cloud infrastructure in India, with the investment expanding AWS data centre capacity in Mumbai and Hyderabad. Last week, HCLTech signed a memorandum of understanding (MoU) with Sarvam AI to build a $1.5 billion AI data centre in Odisha, further accelerating the investment momentum. Global data centre operator AirTrunk, backed by Blackstone, has also announced plans to invest around ₹3 trillion in India by 2030, making it one of the country's biggest digital infrastructure commitments.
Real estate developers are capitalizing on the AI data centre boom by developing utility infrastructure called powered shells that generate steady annuity income from technology companies. According to Vimal Nadar, national director & head, research at Colliers India, "We envisage $20-25 billion of planned data centre investments to materialise over the next 4-5 years, driving the capacity to exceed 4,500 MW by 2030." The sector will require around one lakh professionals by the end of the decade in view of the over $126 billion investments committed towards data centre infrastructure and the projected growth in installed capacity from 1.5 GW to 6.5 GW by 2030, as reported by NLB Services. However, only 15-20% of applicants currently meet the skills requirements for modern data centre roles, highlighting the urgent need for workforce development.
Data centre electricity consumption is forecast to rise nearly 20-fold from 10 TWh in 2025 to 191 TWh by 2040, accounting for around 7 per cent of India's total electricity demand, according to the Wood Mackenzie report. According to the International Energy Agency (IEA), data centres consumed around 415 terawatt-hours (TWh) of electricity in 2024, about 1.5 per cent of global electricity supply, with that figure expected to nearly double to 945 TWh by 2030. The environmental impact extends beyond electricity consumption, as medium-sized data centres can consume up to 110 million gallons of water annually, equivalent to the water use of about 1,000 households, while larger facilities can use as much as 5 million gallons of water daily. A study by researchers from the University of Cambridge, Nanyang Technological University and other institutions found that land surface temperatures around AI data centres increased by an average of 2 degrees Celsius after they became operational, with impacts extending up to 10 kilometres away, affecting more than 340 million people living within that distance. Researchers have also found that AI data centres can affect local temperatures, with the sector's water footprint potentially equal to the minimum annual domestic water needs of 1.3 billion people in Sub-Saharan Africa.
