India's data centre boom is straining power and water resources even as investment surges. Examine the case for a national regulatory framework governing resource allocation to data centres.

India's data centre capacity has grown roughly fourfold, from about 375 MW in 2020 to around 1,500 MW by 2025, with the Ministry of Power projecting 13.56 GW of data-centre electricity demand by 2031-32 [1]. This surge is outpacing the institutional machinery that allocates power and water.

The resource strain is real and concentrated

• Water: data-centre water use, about 150 billion litres in 2025, is projected to more than double by 2030, driven by cooling loads of high-density AI racks [2].
• Geographic clustering: capacity concentrates in Mumbai, Hyderabad, Chennai and Bengaluru — cities where municipal supply already faces competing demands [2]. NITI Aayog's Composite Water Management Index records nearly 600 million Indians under high-to-extreme water stress [3].
• Grid stress: data centres demand guaranteed round-the-clock supply with sharp load ramps, complicating transmission planning under the National Electricity Plan (Transmission) [4].

Why a national framework is warranted

• Preventing a race to the bottom: States compete through tax exemptions, cheap land and "essential services" status, with no common assessment of the grid and water costs they underwrite.
• Enforceable efficiency norms: mandatory water- and power-usage-effectiveness disclosure, recycled or non-potable cooling water, and renewable/round-the-clock clean sourcing.
• Siting discipline: locating capacity away from water-stressed districts, using CWMI-type indicators as a screening tool [3].

Countervailing considerations

• Water and land are State subjects; electricity is Concurrent — a rigid central mandate risks federal friction.
• Excessive compliance load could divert announced hyperscaler investment abroad. Hence an enabling framework — model state policy, mandatory disclosure, coordinated grid planning — is preferable to prescriptive licensing.

The case for national coordination is therefore strong but must be cooperative, not coercive. A centre-state framework integrating land-water-energy planning, negotiated through bodies like the Forum of Regulators, would let India host the digital economy it seeks while honouring its water-security and net-zero commitments.