Prime Minister Mr Narendra Modi’s BJP-led government and its corporate allies, such as Gautam Adani, are looking at the lucrative data center market to support the expansion AI led data center infrastructure. According to estimates by Morgan Stanley, the global data center market is valued at around $3 trillion. As part of this market, the Google is planning to invest $15 billion in India, Microsoft around $17.5 billion, and Amazon approximately $35 billion over the next few years. India is targeting nearly $200 billion in total investment in data centers. Modi’s billionaire friend, Adani, and his group are reportedly planning to invest around $100 billion by 2035 to develop infrastructure for AI-focused data centers. Other private companies have also pledged investments in building data center capacity in the country.The Government of India, led by Modi, has already introduced tax holiday provisions through 2027 in the Union Budget 2026–27 to attract foreign companies to invest in data centers. This corporate tax bonanza for platform companies is likely to deepen digital capitalism in India without addressing the country’s fundamental digital and economic challenges.

If operationalised, these investments could create a promising market for the growth of the real estate sector, encourage domestic investment, and generate both direct and indirect employment in data centers and their ancillary industries. They could also energise IT education and expand employment opportunities in the technology sector. Overall, such investments may accelerate the growth of India’s service sector. On the basis of these investment commitments, India is now planning to develop an AI “data city,” which sounds promising—especially at a time when many people are still waiting to see the full benefits of the 100 Smart Cities announced in 2015 by the Modi government. Although substantial funds were allocated and deadlines have passed, many believe the vision of 100 fully realised smart cities has yet to materialise. There is hope that the proposed AI “data city” will become a reality to enhance urban experience in India.

State governments, including the Government of Andhra Pradesh, as well as the Union governments, have failed to provide adequate land to farmers. Landless farmers continue to face multiple challenges, and landlessness among agricultural workers remains alarmingly high in the country. Yet, the Government of Andhra Pradesh has reportedly promising to offer land for such “data city” for data centers projects at rates as low as five rupees per hectare. Such enthusiasm for corporate expansion is rarely seen even in the most advanced capitalist countries.

Many bourgeois intellectuals, journalists, and policymakers compare the AI data center boom to a new industrial revolution. Such comparisons are not only myopic but also ahistorical. Historically, industrial revolutions have generated mass employment and fundamentally transformed the nature of production, the relations of production, and relations in the society itself. The AI data center boom, by contrast, is unlikely to bring about such structural change; at best, it may expand the real estate market and further strengthen the service-sector economy. It is therefore important to carefully examine the economic and environmental impacts of a data center boom in the country. The expansion of data centers, in itself, does not constitute a technological revolution.

India accounts for nearly twenty percent of global data generation and also represents a massive share of data consumption due to the rapid growth of digital users in different sectors from banking to shopping. Therefore, there is a strong case for establishing data centers in the country. While the economic cost of operating data centers may be relatively low in India, the environmental costs must be carefully assessed before aggressively expanding vast amount of data center infrastructure for corporate needs.

Data centers consume vast amounts of energy in a country that is already facing a severe energy crisis. Data centers also require significant quantities of water for cooling their data storage and operational systems, in a nation that is already confronting serious water stress. A 2023 study by the World Bank indicates that India is among the most water-stressed countries in the world. India needs water for irrigation to sustain its agricultural economy. It also requires water for industry and for expanding access to safe drinking water. Major cities such as Bangalore, Chennai, and Hyderabad are already experiencing water scarcity. Ensuring water security is therefore vital for the future of India and its people. In this context, Indian governments must  provide water security to Indians before providing water for corporate expansion in the form of data centers. 

Governments in Scotland, Mexico, and Chile have raised serious concerns about data centers and their environmental impacts. The Indian government needs to be transparent about the effects of these data centers on people, communities, the environment, and on India’s energy and water security. It must also conduct a transparent and comprehensive assessment of their economic impacts. A simple cost–benefit analysis is insufficient to understand the long-term conditions under which these data centers will operate and the broader structural consequences they may entail. 

State and Union governments in India need to ensure both energy and water security for their people before diverting scarce resources to global platform companies. These companies not only promote conspicuous consumption but also foster an unproductive economic culture that relies on digital rent extraction rather than on producing goods and services that meet the everyday needs of people.

The Government of India and state governments in the country must address why developed countries and their corporations are not establishing data centers within their own territories, instead choosing to locate them in India. Understanding this dynamic is crucial for shaping policies that protect national interests, ensure sustainable development, and safeguard the environmental and social well-being of local communities.

How the Government of India and state governments plan to mitigate the negative impacts of data centers will play a critical role not only in constructing infrastructure for data centers but also in shaping the future of the AI-led technological revolution in the country. If policies are designed and implemented effectively, the growth of green and clean energy could meet both the energy demands of data centers and the needs of the general population. However, to address the environmental and social challenges—such as pollution, waste management, and broader ecological impacts—the government must clearly articulate its strategies, including plans to ensure water security for the people of India. These policies and plans are central to determining the sustainable development and long-term viability of AI-driven data centers in the country.

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