India’s burgeoning data center market, fueled by billions of dollars in investment from U.S. tech giants like Amazon and Google, is encountering significant public opposition over concerns about water and power consumption. In response, the Indian government is developing a new policy aimed at balancing aggressive data center growth with crucial infrastructure readiness and environmental sustainability, seeking to quell community tensions and streamline project approvals.
Hello, this is Priyanka Salve, writing to you from Singapore. Welcome to the latest edition of "Inside India" — your definitive source for stories and developments from the world's fastest-growing major economy.
India is fast becoming a global hotspot for data centers, attracting billions in investment from major U.S. tech companies eager to build digital infrastructure. However, this rapid expansion has sparked public outcry over intense demands on water and power resources, leading to project backlashes. The Indian government is now moving to address these concerns. Will its new approach succeed?
The Big Story: Navigating the Surge in Data Center Investment
As U.S. tech giants pour billions into establishing digital infrastructure across India, they face escalating public resentment over resource allocation and environmental impact. This growing tension has prompted the Indian government to intervene and soothe anxieties.
On October 14, Jitin Prasada, the junior minister for electronics and information technology, announced India's plans to unveil a comprehensive policy for data centers, affirming the country's status as a "fertile ground for hyperscalers." The minister reportedly emphasized the government's desire to prevent a scenario where consumers face higher power costs due to competition with data centers.
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Globally, data center operators are confronting public resistance as communities voice concerns over electricity, water, and land usage. India is grappling with similar challenges that threaten its ambition to host the world's data.
Local media reports indicate that Amazon's data center near Mumbai is meeting opposition from residents worried that the facility will receive preferential access to water and electricity during shortages. Simultaneously, environmental activists in Visakhapatnam are demanding the revocation of permits for AI data centers, including Google's ongoing $15 billion project.
Amazon informed CNBC that it is committed to being a "good and responsible neighbor," engaging with communities through educational initiatives. The company refuted claims of using water for cooling and stated that its data centers "do not draw electricity from the local distribution network that supplies homes, shops and businesses." Amazon also confirmed its participation in "industry consultations with the government to advise on India's data center regulations." Google did not respond to CNBC's request for comments.
Experts suggest that the government's planned policy directive aims to defuse local opposition to projects nationwide. It is expected to establish clear approval guidelines, thereby reducing risks for data center developers stemming from public pushback and operational hurdles.
A Crucial Policy Shift
Jaspreet Singh, a partner at Grant Thornton Bharat, told CNBC that the proposed policy marks a strategic shift from "primarily encouraging data center investment" to now balancing it with essential infrastructure readiness and sustainability considerations.
Just last week, Niti Aayog, an Indian government think tank, released a framework to help local governments assess data center projects for sustainability and identify suitable locations based on grid readiness and water availability. This framework emphasized the need for guidelines "before constraints emerge," advocating for expedited approvals only when resource readiness, local safeguards, and public value are unequivocally demonstrated.
Experts involved in policy consultations anticipate that the new framework will introduce clear and consistent rules, helping the industry overcome challenges like land acquisition and simplifying a currently fragmented approval process.
"India lacks a dedicated national policy for data centers, and it is imperative that this void is addressed," stated Shobhit Agarwal, chief executive of real estate consultancy ANAROCK Capital. He explained that current projects are approved under existing environmental and building regulations, with each state imposing its own "variations and incentives."
While the Indian government has eagerly welcomed hyperscalers with incentives like 20-year tax breaks, regional governments ultimately control the provision of land, water, and power resources.
Nikhil Narendran, a technology partner at law firm Trilegal, who works with U.S. Big Tech companies, pointed out that local governments often propose data center projects in areas already facing constraints in electricity, water, and other infrastructure. He stressed that state governments should be encouraged to pinpoint locations with reliable electricity, substantial cooling infrastructure, ample water, and high-quality connectivity, "rather than simply competing to announce large investments."
Need to Know
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India's Liquid Market Facilitates Investor Exits: Finance Minister Nirmala Sitharaman highlighted that the high liquidity in India's equity market offers foreign portfolio investors easier avenues for exit.
Jio IPO Attracts Major Investors: Jio Platforms' initial public offering has seen its anchor investor quota oversubscribed by more than 30 times, with leading asset managers like BlackRock, Capital Group, and GIC submitting bids.
Rupee Forecast to Weaken: Despite the Reserve Bank of India's efforts to curb currency depreciation, strategists predict the rupee will likely weaken towards the end of the year and into mid-2027, potentially reaching 100 rupees per dollar.
Coming Up
Oct. 23: HSBC composite Flash PMI for October
Oct. 28: India Industrial output for September
