India’s Data Centre Gold Rush, Bridging the Gap Between Data Production and Storage
Less than 6 per cent of the world’s data storage infrastructure is located in India, despite the country producing almost a fifth of the world’s data. This striking disparity sits at the heart of India’s digital transformation challenge. As the most populous country in the world generates ever-increasing volumes of data, the infrastructure to store, process, and leverage that data is struggling to keep pace.
Applications across a variety of industries, including finance, healthcare, education, transportation, defence, and e-commerce, are now powered by AI. Modern data centres are essential to this expanding use of artificial intelligence. Without adequate data centre capacity, India risks not only losing control over its own data but also missing out on the economic benefits that come from data processing and analysis.
The Scale of the Gap
According to a Macquarie Research report dated October 27, India now has 1.4 GW of operating data centre capacity, 1.4 GW under development, and another about 5 GW in the planning stage. This expansion is significant, but it must be viewed against the backdrop of India’s data production. A country that generates nearly 20 per cent of the world’s data cannot afford to store only 6 per cent of it domestically.
The disparity between India’s data and data centres offers both an opportunity and a challenge. Costs are reduced, speed is increased, and control over data flows is strengthened when data centres are built closer to users. For a country with aspirations of digital sovereignty, closing this gap is not just an economic imperative but a strategic necessity.
The Big Tech Rush
American tech giants like Microsoft, Amazon, Google, and Meta are investing $67.5 billion in India’s AI and data centre infrastructure as the gold rush for setting up data centres continues. These companies are wagering on India’s expanding role as a global digital hub. India’s scale and the business opportunity are undoubtedly at the core of this movement.
Long-term infrastructure investments by multinational technology companies have gained impetus due to data localisation and governmental pushes. When data is stored locally, it becomes subject to local laws and regulations. For governments concerned about data sovereignty, this is a significant advantage.
For the tech companies themselves, local data centres offer practical benefits. Lower latency means better user experiences. Greater control over data flows means better compliance with regulations. Reduced costs mean better margins. The incentives align.
The Economic Impact
Data centres are crucial not just for India’s economy but for the US economy as well. The US GDP grew by just 0.1 per cent in the first half of 2025 without data centres. Indeed, nearly all of the growth is being driven by data centres and technological investment, according to Harvard economist Jason Furman. The growth of the US GDP would be almost stagnant without this technological surge.
This observation has profound implications for India. If data centres are driving growth in the world’s largest economy, they can do the same in the world’s most populous country. The investments being made by American tech giants are not just about serving Indian users; they are about participating in India’s growth story.
The Resource Challenge
However, data centres face significant challenges, particularly around the supply of water and electricity. Data centres are massive consumers of both resources. They require reliable, high-quality electricity to power servers and cooling systems. They require vast amounts of water for cooling. In a country like India, where water stress is already a reality in many regions and where the electricity grid faces periodic strains, these challenges are acute.
The economic and environmental effects of massive data centres that use a lot of water and electricity have drawn more attention to AI companies. As public awareness of these issues grows, so does political sensitivity. Companies building data centres must now contend with local communities concerned about resource depletion and regulators focused on sustainability.
The Space Solution
In fact, tech billionaires now want to relocate AI’s enormous energy demands outside the planet. There are huge engineering challenges, though. However, SpaceX’s ambitious plans for a more than $30 billion IPO in 2026 concentrate on raising capital for Elon Musk’s most recent ambitious project: launching a wide range of data centres into space.
In recent months, rival space billionaire Jeff Bezos has also spoken a lot about developing this technology, which may sound like a proposal from science fiction. The concept involves placing data centres in orbit, where they could be powered by solar energy 24/7 without the constraints of terrestrial electricity grids or water cooling.
Such technical advancement may render current concerns about resource consumption obsolete in the future. But that future is not yet here. For now, data centres must be built on Earth, with all the attendant challenges.
The Path Forward
For India, the path forward requires a multi-pronged approach. First, continue to attract investment in data centre infrastructure from both domestic and international players. The 5 GW in the planning stage is a good start, but it must be executed efficiently.
Second, address the resource challenges head-on. This means siting data centres in locations with adequate power and water, investing in renewable energy to power them, and developing innovative cooling solutions that minimise water consumption.
Third, leverage the data that will be stored in these centres. Data is not just a cost to be stored; it is an asset to be analysed. Building AI capabilities on top of this data infrastructure will determine whether India becomes a leader in the AI age or merely a provider of raw data to others.
Conclusion: Bridging the Gap
Less than 6 per cent of the world’s data storage is located in India, despite the country producing about a fifth of world data. This gap is both a challenge and an opportunity. Closing it will require sustained investment, innovative solutions to resource constraints, and a clear vision of India’s digital future.
The gold rush for data centres is underway. The question is whether India will emerge as a major player in this space or remain a junior partner. The investments being made today will shape the answer for decades to come.
Q&A: Unpacking India’s Data Centre Challenge
Q1: What is the gap between India’s data production and storage capacity?
India produces nearly a fifth of the world’s data but has less than 6% of global data storage infrastructure. This disparity means most Indian data is stored abroad, raising concerns about data sovereignty, latency, and control. Currently, India has 1.4 GW operating data centre capacity, with another 1.4 GW under development and 5 GW planned.
Q2: Why are American tech giants investing heavily in Indian data centres?
Microsoft, Amazon, Google, and Meta are investing $67.5 billion in India’s AI and data centre infrastructure. They are betting on India’s role as a global digital hub. Local data centres reduce costs, improve speed, strengthen data control, and help comply with data localisation requirements. India’s massive scale and business opportunity make it an attractive market.
Q3: What is the economic significance of data centres?
Data centres are major economic drivers. Harvard economist Jason Furman notes that US GDP grew only 0.1% without data centres in early 2025—nearly all growth came from data centres and tech investment. For India, similar investments could drive growth, create jobs, and build digital infrastructure essential for AI development.
Q4: What resource challenges do data centres face?
Data centres consume enormous amounts of electricity and water for cooling. In water-stressed regions, this raises environmental and political concerns. Companies must address these challenges through renewable energy investment, innovative cooling solutions, and careful site selection to minimise resource strain.
Q5: What is the “space solution” for data centres?
Billionaires like Elon Musk and Jeff Bezos are exploring launching data centres into space, where they could be powered by constant solar energy without terrestrial resource constraints. SpaceX’s planned $30 billion IPO in 2026 would fund such projects. While technically challenging and futuristic, this could eventually address Earth-based resource concerns.
