India is quietly emerging as a global digital powerhouse. At the heart of this transformation lies the explosive growth of data centres (DCs) — the backbone of every cloud service, financial transaction, AI engine, and streaming platform we use today.
From just over 1.5 gigawatts (GW) in installed capacity in 2024, India is expected to more than double its capacity to 3.4 GW by 2030. And this is no small market — the sector is likely to attract over US$100 billion in cumulative investment by 2027. But the real story isn’t just scale — it’s sustainability.
From infrastructure to intelligence
A landmark policy move in 2022 — granting ‘infrastructure status’ to data centres — opened up the floodgates for low-cost financing and simplified regulatory clearances. Alongside central government efforts, many Indian states have introduced targeted policies to attract data centre (DC) operators and investors.
These policies recognise DCs as essential services and ensure year-round operations through reliable electricity, renewable energy access, and infrastructure support. States also offer financial incentives, fuel subsidies, and support for SMEs and local DC component manufacturing. This has catalysed capacity expansions in Mumbai (396 MW), Chennai (87 MW), and Delhi-NCR (82 MW), which now host nearly 90 per cent of the country’s total DC capacity.
Now that growth is moving inland, Edge data centres — smaller, modular hubs that reduce latency — are being set up in Tier-2 cities like Bhubaneswar, Patna, Jaipur, and Coimbatore. This decentralisation supports India’s growing digital economy while driving regional development.
The sustainability pivot
Data centres are notorious energy guzzlers. Globally, they consume 1 to 1.5 per cent of all electricity, and this could reach 8 per cent by 2030 if unchecked. Indian operators are responding proactively.
A leading data centre developer in India has signed large-scale renewable power agreements, including dedicated solar parks and hybrid wind installations.
The world’s largest tech companies in the DC space are integrating renewable power across their Indian operations, setting global benchmarks for clean cloud infrastructure.
One of India’s largest telecom-backed data centre operators has committed to net-zero emissions by 2031, while another prominent provider is targeting 2040, and global hyperscalers are aligned with a 2030 net-zero trajectory.
Innovations in AI-managed cooling, liquid immersion, and wastewater recycling are improving energy efficiency and lowering water use. Several facilities now report Power Usage Effectiveness (PUE) values as low as 1.4, compared to the global average of 1.55 tp 1.6. Power Usage Effectiveness (PUE) is the globally recognised metric used to assess energy efficiency in data centres. A high PUE means much of the energy is “wasted” on non-computing tasks like cooling and power distribution
Green finance fuels greener infrastructure
This data centre transformation isn’t just operational — it’s financial. AdaniConneX recently secured a massive US$1.44 billion green loan, the largest in Asia’s DC sector. Companies like Yotta, Reliance Jio, Nxtra, and AdaniConneX together plan to add over 15,000 MW of new capacity in the coming decade.
The typical cost of building a hyperscale DC in India is ₹45–70 crore per MW, with electricity and cooling forming the lion’s share of running costs. Developers are choosing locations with low-emission power grids, integrating with on-site solar or wind, and exploring modular builds to reduce embodied carbon.
India’s global moment and the support needed to make it come true
India’s ambitions are global. With increasing investments in subsea cable landing stations, the country is positioning itself as a digital corridor between Africa, the Middle East, and Southeast Asia.
To fully realise the sustainability potential of India’s burgeoning data centre industry, targeted government action is crucial, beginning with accelerating the integration of renewable energy. Globally, regions like the European Union have implemented strong policy frameworks under the European Green Deal, which promote renewable energy adoption specifically for data centres through mandates and incentives, enabling data centre hubs in cities like Frankfurt and Amsterdam to operate nearly entirely on green power (European Commission Green Deal, 2023).
These policy-driven initiatives have fostered robust renewable energy markets and grid infrastructure improvements. India’s government must similarly scale up support for dedicated solar and wind projects, streamline regulatory approvals, and encourage corporate renewable power purchase agreements (PPAs).
Further investment in emerging clean technologies such as green hydrogen and energy storage, specifically for data centres, will be essential to provide reliable, carbon-free power around the clock. These measures will reduce carbon footprints and operational costs, establishing India as a competitive, sustainable data infrastructure hub.
Efficient cooling technologies represent another critical area where government intervention can drive substantial impact. Certain global data centre hubs, such as those in the Nordic countries, leverage favourable natural climates to implement free cooling strategies, dramatically lowering energy consumption for thermal management (CBRE Data Center Market Insights, 2024). Additionally, regulatory frameworks in these regions incentivise innovation in cooling technologies and energy efficiency, setting clear standards for the industry.
To replicate these successes, the Indian government should implement financial incentives and grants for developing and adopting advanced cooling technologies, establish national efficiency standards, and support pilot projects. Facilitating collaboration between research institutions, startups, and the industry will accelerate innovation, reduce energy use, and improve operational reliability, positioning India as a leader in data centre sustainability.
Finally, mandating net-zero emission targets and supporting certification compliance will ensure the industry’s sustainable evolution. The European Union’s data centre regulations require carbon neutrality by 2030, backed by strict certification systems like LEED and TIA-942, which promote environmental and operational excellence across data centre operations (European Commission, 2023).
Similarly, data centre clusters in regions such as Northern Virginia and the FLAP corridor in Europe have integrated sustainability certification requirements into planning and development guidelines, driving accountability and investor confidence (DataCenterDynamics Market Reports, 2023). India can follow suit by setting phased, enforceable net-zero goals aligned with national climate commitments and developing certification frameworks tailored to local needs.
Tax incentives and preferential financing for certified sustainable data centres will further encourage compliance. Transparent monitoring and reporting mechanisms will foster accountability and continuous improvement. Such policies will attract global investment focused on sustainability, enhance India’s stature in the global data infrastructure landscape, and facilitate a transition toward circular economy principles within the sector.
India’s data centres are at a historic inflection point. They are not just fuelling the digital economy — they are becoming symbols of climate-aligned growth. If it were to embed sustainability at the heart of this digital infrastructure boom, India can leapfrog into becoming the world’s greenest digital engine — serving not just users, but also the planet.
This article was authored by Mollshree Garg, Managing Partner at ERM India. Learn more about how ERM supports leading organisations in navigating complex sustainability challenges at www.erm.com.
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