According to a Deloitte report, India has the potential to become a key data center hub in the Asia-Pacific region, provided it can resolve complex power and grid challenges and align renewable integration with rapid digital growth.
While India accounts for nearly 20% of global data consumption, it hosts less than 5% of the world's data centers, highlighting significant potential for expansion, according to Debasish Mishra, Chief Growth Officer at Deloitte South Asia, during the India AI Impact Summit.
India has a "unique structural opportunity" to become one of the world's leading data center hubs.
Factors such as lower construction and land costs, competitive power tariffs, and a large workforce skilled in AI, position the country favorably.
Government support is also increasing, with the 2026-27 budget proposing a tax holiday until 2047 for foreign companies offering cloud services from India, along with preferential tax treatment to encourage data center investments.
The report projects that the Asia-Pacific region will attract approximately $800 billion in data center investment by 2030, increasing its share of global capacity to 40% and making it the largest market outside North America. India is seen as one of the strongest contenders to capture a significant portion of this growth.
Mishra expects India's data center capacity to expand from around 1.5 GW in 2025 to 8-10 GW by 2030. "The expansion driven by AI will significantly increase electricity demand."
The expansion of AI-related data centers could require an additional 40-45 terawatt hours (TWh) of power by 2030, up from 10-15 TWh in 2024, increasing the sector's share of national electricity consumption from about 0.8% to 2.5-3%.
AI-focused racks can consume 10-15 times more power than traditional racks, increasing energy requirements. While India benefits from relatively low electricity costs and a comparatively modern grid, rapid capacity addition could create a supply gap if generation and transmission infrastructure do not scale in tandem, he said.
Data centers require a dedicated, uninterrupted power supply with minimal transmission losses. However, variations in renewable energy regulations, open access charges, cross-subsidies, and tariffs across states create uncertainty for developers.
Major data center hubs such as Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka, Telangana, and Andhra Pradesh could each see an additional 2-3 GW of peak demand by 2030, equivalent to 5-20% of their current peak load, putting pressure on state grids.
"India has a unique structural opportunity to rise as one of the world's leading data center hubs, powered by its cost competitiveness, deep talent pool, and rapidly expanding renewable energy base. The key will be how quickly power availability and transmission readiness scale with the country's digital ambitions," he said.
With the right alignment of policy, grid infrastructure, and renewable deployment, India can build AI infrastructure that is globally competitive, sustainable, and future-ready, and position itself at the heart of the next era of digital growth, he said.
The report highlighted several structural challenges in powering AI-led data center growth in India. While new data centers are expanding rapidly, power generation capacity is not keeping pace, creating a potential energy supply gap.
Grid stability limitations and constrained substation capacity in high-growth corridors could further strain operations. Transmission upgrades often have longer development timelines compared to renewable generation projects, leading to bottlenecks.
In addition, regulatory differences across states in renewable banking, tariffs, and policy incentives create uncertainty for operators, while the absence of a unified national framework to support renewable integration for data centers remains a key gap.
To address these issues, Deloitte recommended accelerating renewable integration through solar-wind hybrid models combined with storage solutions to ensure round-the-clock reliability for high-density AI workloads.
Expanding long-term green power purchase agreements (PPAs), group captive structures, and captive renewable installations can provide tariff certainty and reduce cost volatility.
The report also called for upgrading transmission networks and expanding high-capacity substations near growth clusters, along with the creation of power-ready, dedicated Data Center Economic Zones equipped with pre-built substations and standardized grid connection timelines.
Standardizing state-level renewable banking policies would help create predictable clean power portfolios, while leveraging AI to schedule non-urgent computing tasks during periods of low-cost and high renewable availability could further optimize energy use.
Incentivising decentralized renewable models, including co-located solar and storage infrastructure in emerging data center corridors, was also highlighted as a key enabler.
If implemented effectively, Mishra said, India can position itself as a global leader in sustainable AI infrastructure while strengthening long-term energy security and supporting its broader digital economy ambitions.
