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Here is a headline Indian policymakers should pin to their walls. On July 14, New York, which has spent years courting Big Tech, became the first state in the US to hit the brakes on data centres. Governor Kathy Hochul signed an executive order pausing, for up to a year, environmental permits for any new “hyperscale” data centres drawing 50 megawatts or more—enough to power 50,000 homes. Her reasoning was clear: these facilities are “driving up costs for local ratepayers” and threatening “to outpace our grid’s capacity”. Residential electricity prices in New York have risen by 68 per cent since 2019. A poll by Siena University in the state found that 46 per cent of New Yorkers supported the moratorium, compared with just 21 per cent who opposed it. Nationally, as per analytics firm Gallup, 71 per cent of Americans opposed constructing a data centre near where they live.
Now consider India. The Budget for 2026-27 introduced a tax holiday until 2047, for global cloud and artificial intelligence (AI) firms that host their infrastructure in the country, alongside a 15 per cent safe-harbour margin for related party operators. By the government’s own reckoning, US $70 billion has already been committed, with another $90 billion in the pipeline. Uttar Pradesh, Telangana, Andhra Pradesh, Maharashtra and half a dozen other states are vying to attract the next hyperscale campus, offering cheap land, discounted power tariffs and single window clearances. All this despite India lacking a national data centre policy: there is no mandatory efficiency standard, no ceiling on water use and no requirement for public disclosure.
Data centres are often projected as clean futuristic infrastructure, that quietly power everything from UPI transaction (Unified Payments Interface) to Chatgpt queries. What rarely features in the ribbon-cutting speeches is what a AI data centre actually thrives on.
According to the UN Environment Programme’s (UNEP’s) 2025 guidelines on sustainable data centre procurement, data centres worldwide consumed 460 terawatthours (TWh) of electricity in 2022— about 2 per cent of global electricity demand. By 2030, that figure could rise to 3,000 TWh—a fourto-tenfold increase in less than a decade, driven largely by the AI boom. One comparison is particularly striking: Meta’s data centres alone consumed more electricity in 2022 than the whole of Costa Rica.
Then there is the question of water consumption—a subject largely absent from discourses on data centres in India. Data centres consume vast amounts of electricity, generating heat that must be removed to protect the servers they house. Since cooling is the second largest source of electricity demand, after the servers, data centres in hot climates rely on evaporative or adiabatic cooling which works by evaporating water into the air and thus consumes less electricity. But the trade-off is that the process works by evaporating large quantities of clean, often drinking quality, water into the air.
According to unep, such systems typically consume 2 litres of water for every unit (kWh) of IT electricity consumed. A 100-megawatt campus operating around the clock can thus consume millions of litres of water each day, in a country where dozens of cities already ration municipal water supplies for months in a year. UNEP also warns that evaporative cooling “is unsuitable for regions where water is scarce”.
This is the trade-off Hochul flagged in her order: a facility can appear energy-efficient by reducing its energy consumption at the expense of higher water use. To address this unep recommends benchmarks, such as a Power Usage Effectiveness of 1.1-1.2, where water consumption falls towards 0.2 litres per kWh and renewable energy accounts for 80 per cent of supply. India has adopted none of these as binding national standards.
This is not a fringe worry dreamed up by activists. UNEP’s global review found that while most countries have some green procurement rule for ordinary office electronics, only six countries— about 17 per cent of those surveyed, mostly in Europe—have any sustainability criteria for data centres at all. India is not one of them.
India, however, has the benefit of hindsight that New York did not have a decade ago. Ireland now finds a fifth of its entire national electricity supply going to data centres, forcing its grid operator to freeze new connections around Dublin for years. The Netherlands imposed its own moratorium back in 2019. Virginia, the world’s biggest data centre market, is only now dealing with the ratepayer backlash that a decade of unchecked growth created. Every one of these places tried the “grow first, regulate later” model. Every one of them is now scrambling to undo the damage. India has the rare chance to skip straight to the “regulate alongside growth” model—but it appears, so far, to be declining the offer.
This is not an argument against data centres, AI, or against India competing for global technology capital; the economics and employment opportunities are real. It is rather an argument against setting up data centres blindly. Here is what the state governments courting a hyperscaler should analyse before allotting land:
• Where is the water coming from, and has anyone modelled what that facility does to the local water table during a drought year?
• Who pays for the transmission lines and substations this facilityneeds—will it show up quietly on your household electricity bill the way it has in the US, or will the developer bear that cost, as New York is now explicitly requiring?
• Is there any independently verified efficiency commitment—a power usage effectiveness (PUE) or renewable-energy number—or is “green data centre” just a line in a press release with nobody checking?
• What happens to servers, e-waste and refrigerants at the end of their lives? unep notes that many refrigerants used in data centres have global-warming potentials measured in the thousands. Lowimpact alternatives exist and cost little more, but nothing requires Indian operators to use them.
• Where is the state or national data centre policy that a citizen can actually read? All that is publicly available, it seems, are tax notifications and a string of memoranda of understanding.
New York’s about-turn should be read as a warning. India is still at the start of its data-centre build-out, making this precisely the moment to get the rules right: binding standards for efficiency and wateruse, honest public disclosure and a grid-pricing formula that does not quietly shift costs onto households. UNEP has written much of the playbook, which sits in a document that many state governments have probably never opened. The tax holiday runs until 2047. The question is whether, by then, India will have built a sustainable digital backbone—or merely learnt New York’s lesson two decades too late, and at a much higher cost.
(Shruti Sharma is associate professor and head, department of management studies, TERI School of Advanced Studies, New Delhi)
This column was originally published in the August 1-15, 2026 print edition of Down To Earth