India’s data centre capacity reached 1.57 GW in 2026, with projections to hit 9 GW by 2030. While AI and cloud demand drive this rapid expansion, investors should track rising operational risks related to power grid stability, heavy water usage, and tightening environmental regulations.
India is rapidly expanding its digital infrastructure, with data centre capacity reaching approximately 1,575 MW by mid-2026. This is a significant jump from 375 MW in 2020. With major entities, including global cloud providers like Amazon Web Services (AWS) and local operators such as Nxtra and AdaniConneX, committing billions to the sector, total capacity is projected to rise to between 9 GW and 17 GW by 2030. The primary driver for this growth is the increasing demand for artificial intelligence, 5G, and cloud computing services across the country.
However, this fast-paced expansion is hitting operational roadblocks. Data centres are resource-heavy facilities that require reliable, round-the-clock electricity and massive amounts of water for cooling systems. As the industry scales, power demand is expected to balloon to over 13 GW by 2031-32. This places immense pressure on the existing electricity grid, raising concerns about energy stability and the ability of utility providers to meet such high demand without affecting other sectors.
Water usage is another critical monitorable for investors. A standard 100 MW data centre can require up to 2 million litres of water every day to keep servers cool. With total annual water consumption across the industry estimated to hit 358 billion litres by 2030, this heavy usage often competes with municipal needs, particularly in water-stressed urban areas. While companies are looking into water-efficient cooling systems, the cost of implementing these technologies can put pressure on operating margins.
Regulatory scrutiny is also tightening. Recent data shows that many projects have faced challenges regarding environmental clearances and public hearings. Noise pollution from cooling equipment and power transformers, especially when facilities are located near residential zones, has become a frequent point of contention. As authorities increase their focus on sustainable development, companies may face stricter compliance requirements, which could lead to delays in project approvals or higher compliance costs.
For investors, the sector offers long-term growth potential, but it also carries specific operational risks. While many operators reported healthy revenue and profit margin growth in FY26, the sustainability of this performance will depend on how efficiently they manage resource constraints. The most important factors to track include the progress of grid infrastructure integration, the ability of companies to secure sustainable water sources, and their success in navigating changing environmental regulations. Projects that fail to account for these resource needs early on may face higher execution risks, including potential cost overruns and delays.