India is preparing a national data centre policy as public opposition grows to major technology projects backed by US companies, with concerns over electricity, water availability and environmental impact threatening to complicate the country’s ambitions to become a global hub for digital infrastructure.
Jitin Prasada, a junior minister for electronics and information technology, announced on 14 October that India would introduce a policy for data centres, describing the country as a “fertile ground for hyperscalers”. The government wants to avoid a situation in which households and businesses face higher electricity costs because they must compete with data centres for power, according to reports of the minister’s remarks.
The proposed policy comes as Amazon, Google and other US technology companies commit billions of dollars to building infrastructure in India. Their projects are intended to support growing demand for digital services and artificial intelligence, but have encountered resistance from communities concerned about how large facilities will affect local resources.
The tensions are not confined to India. Data centre developers in several parts of the world are facing public opposition over electricity consumption, water requirements and land use. For India, the issue presents a challenge to its ambition to attract the world’s data while ensuring that the infrastructure required to host it does not intensify pressure on local communities.
Amazon’s proposed data centre near Mumbai has faced resistance from residents concerned that the facility could receive priority access to water and electricity during shortages, according to local media reports. In Visakhapatnam, environmental activists have demanded the cancellation of permissions granted to artificial intelligence data centre projects, including Google’s planned $15 billion investment.
Amazon has rejected concerns about its facilities’ demands on local resources. The company told CNBC that it was committed to being a “good and responsible neighbor” and was engaging with communities through educational sessions. It said its data centres did not use water for cooling and did not draw electricity from the local distribution network supplying homes, shops and businesses.
The company also said it would participate in consultations with the Indian government on data centre regulations. Google did not respond to CNBC’s request for comment.
Industry experts said the proposed policy could help address local opposition while establishing clearer procedures for approving projects. A consistent national framework could reduce uncertainty for developers, particularly where land acquisition, environmental requirements and differing state-level approval processes complicate implementation.
Jaspreet Singh, a partner at Grant Thornton Bharat, described the proposal as a change in the government’s approach to the sector. The focus, he told CNBC, was shifting from “primarily encouraging the data center investment” towards balancing investment promotion with infrastructure readiness and sustainability.
A framework released last week by Niti Aayog, the Indian government’s think tank, provides an indication of how that approach could develop. It offers state governments a method for evaluating data centre projects and identifying suitable locations based on electricity grid readiness and water availability.
The framework calls for guidelines to be established “before constraints emerge”. It also says faster approvals should be granted only where the availability of resources, local safeguards and public value have been demonstrated. The emphasis is on assessing whether the necessary infrastructure is in place before projects proceed, rather than allowing investment commitments alone to determine where facilities are built.
Shobhit Agarwal, chief executive of real estate consultancy ANAROCK Capital, said India lacked a dedicated national data centre policy and needed to address the gap. Projects are currently approved under existing environmental and building regulations, he told CNBC, while individual states apply their own variations and incentives.
Although the central government has actively encouraged hyperscalers to invest, including through tax concessions lasting 20 years, state governments remain the final decision-makers on the provision of land, water and electricity. This division of responsibility has made coordination between national investment ambitions and local infrastructure conditions particularly important.
Nikhil Narendran, a technology partner at law firm Trilegal who works with US technology companies, said some state governments were proposing projects in locations already facing constraints in electricity, water and other infrastructure. He argued that authorities should be encouraged to identify sites with reliable power, substantial cooling infrastructure, adequate water supplies and high-quality connectivity.
States should focus on those requirements, he said, “rather than simply competing to announce large investments.”
The policy is expected to establish clearer and more consistent rules for developers while helping authorities assess the practical demands of individual projects. Its effectiveness will depend on how approval procedures account for resource availability and local safeguards as India continues to attract major technology investments.
For a country seeking to expand its role in global digital infrastructure, the immediate issue is how to accommodate data centre growth without worsening existing constraints on essential services. The government’s proposed rules and Niti Aayog’s framework both point towards making infrastructure readiness a more explicit consideration in decisions about where new facilities can be built.
