Data centres are emerging as critical infrastructure for India's AI ambitions, yet they strain water and energy resources. Discuss how States can balance investment attraction with resource sustainability.

Demand from AI and cloud computing has pushed India's data-centre capacity from about 375 MW (2020) to about 1.5 GW (2026) [1]. NITI Aayog's Data Centre Evaluation Framework (October 2026) asks States to shift "from investment attraction to investment readiness" [1]. That shift is the key to balancing growth with scarce power and water.

Why a balance is needed

• Energy: The CEA projects data-centre power demand of about 17 GW by 2031–32 [2]. This load runs round the clock and falls on State discoms that also supply homes and farms.
• Water: Cooling needs vary with the technology used. Yet data centres fall only under the general groundwater notification S.O. 3289(E), with no data-centre-specific reporting [3].
• Competitive federalism: At least 15 States offer similar single-window clearances and tax exemptions [4], which risks a race to the bottom. Water and land are State subjects, so the Centre can only advise.

How States can strike the balance

• Grid readiness first: Assess net grid draw and require renewable-plus-storage power before allotting land [1].
• Water-sensitive siting: Screen projects for basin-level water stress and impact on public supply [1]. Ask for the cooling design (direct-to-chip, immersion) at the approval stage [3].
• Data-centre zones: Cluster projects where power, water and connectivity already exist [1].
• Outcome-linked incentives: Give smaller benefits to plain colocation and larger ones to active compute services and Make in India hardware [1]. This complements ISM 2.0 and ECMS [5].
• Circular economy: Require lifecycle plans for e-waste, batteries and hazardous waste, plus rainwater harvesting and on-site water treatment [1].
• Governance: Use time-bound approvals and monitor investor commitments [1]. The MeitY notification already required for the 2047 tax holiday could also carry resource-reporting duties [5].

Data centres can drive Viksit Bharat@2047 only if their growth stays within resource limits. States should write the Framework's five pillars into their own data-centre policies and land-allotment rules. They should compete on readiness rather than subsidies. This would be cooperative federalism in practice, advancing SDGs 6, 7 and 9 while securing India's AI future.