India is betting big on data centres.
Over the past year, domestic companies, global technology giants and independent data centre operators have announced more than $250 billion in investments in new capacity across the country. The rush is being driven by cloud computing, digital services and, increasingly, the huge computing requirements of artificial intelligence.
But despite the size of these investments, the economic payoff may be much smaller than expected.
Moody’s Ratings estimates that India’s data centre sector could contribute only 0.13% to the country’s GDP by 2030, when a significant portion of the planned capacity is expected to be operational.
The reason comes down to a problem that is easy to miss when looking at headline investment figures: much of the money spent on data centres does not necessarily stay in India.
Why will data centres add so little to India’s GDP?
Building a data centre requires enormous amounts of capital. But a large share of the equipment needed for these facilities is imported.
Servers, semiconductors, cooling systems and specialised information technology equipment make up a significant portion of data centre spending. Moody’s said data centre-related imports have accelerated since 2023, particularly in India, Thailand and Vietnam.
That reduces the amount of domestic value created from each dollar invested.
Moody’s estimates that data centre capital expenditure could contribute about 0.10% of India’s 2025 nominal GDP during the construction phase. Investment in additional power generation could add another 0.03%.
Even after the facilities become fully operational, the total contribution is expected to remain around 0.13% of GDP.
So the issue is not that India is failing to attract investment. It is that investment alone does not tell us how much economic value India captures from that investment.
India has announced more than $250 billion in data centre investments
The scale of the expansion is still significant.
Major technology companies, Indian conglomerates and data centre operators have announced large projects across the country.
Google and Adani, for example, have announced a $15 billion, 1-gigawatt data centre project in Visakhapatnam. Tata Consultancy Services has also announced a major data centre investment involving around 1 GW of planned capacity.
Companies including Amazon, Microsoft and Meta are also expanding their data centre and cloud infrastructure presence in India.
The sector is benefiting from India’s rapidly growing digital economy and rising demand for computing capacity. The explosion of AI is adding another reason for companies to build infrastructure closer to users and businesses.
Wood Mackenzie has projected that India’s net active data centre capacity could reach 12 GW by 2030.
Why AI is making data centres more important
Every AI model needs computing power.
Generative AI services, cloud applications and large-scale data processing require specialised infrastructure, including powerful processors and large amounts of storage.
This has turned data centres into a crucial part of the AI economy.
India wants to capture a larger share of this infrastructure because having more computing capacity inside the country can support cloud services, AI applications and data localisation.
The government is also encouraging foreign cloud companies to use Indian data centres. Finance Minister Nirmala Sitharaman announced a complete tax holiday until 2047 for foreign cloud service providers that use Indian data centres to host data or run workloads.
The policy is designed to attract more global cloud and technology investment into India.
But data centres are not big job creators
Another reality behind the data centre boom is employment.
Unlike industries such as manufacturing, data centres are highly capital-intensive. Once a facility is built, it can handle enormous amounts of computing activity without requiring a similarly large workforce.
Moody’s estimates that construction-related employment generated by the sector will equal around 0.01% of India’s 2025 industry employment. Once facilities become operational, the figure could rise to only 0.02%.
The jobs that are created are also likely to be concentrated in specialised areas such as engineering, power management, cooling systems, cybersecurity and data centre operations.
This does not make the industry unimportant. It simply means that India should not expect data centres alone to become a major mass-employment engine.
India Power for Data Boom
Data centres consume huge amounts of electricity, particularly as AI workloads become more demanding. Still, Moody’s does not expect data centres to become a nationwide power constraint for India.
The agency estimates that data centres will account for less than 5% of India’s total electricity demand by 2030. However, connecting new facilities to reliable power and transmission infrastructure will remain important, particularly in major data centre clusters such as Mumbai.
The bigger challenge may therefore be making sure that the electricity is available where the data centres are being built, rather than whether India has enough electricity nationally.
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