But constraints on resources - from power to water - are prompting analysts to question the sustainability of the boom.
A majority of the data centre capacity is currently being built in cities where resources are already stretched, a key risk cited by analysts.
Mumbai - India's financial capital - hosts 40% of the country's operational data centre capacity, followed by Chennai which has 20%. Both cities are landing ports for undersea cables, which gives them a leg-up in hosting large data centres.
But competition is hotting up with states such as Andhra Pradesh, ruled by a key ally of Prime Minister Narendra Modi, drawing recent large data center projects, including Google's.
Read this deep dive on the state's investment push.
The rapid growth of data centers in India will result in their share of electricity demand more than tripling to about 2.6% in 2030 from 0.8% in 2024, said S&P Global Commodity Insights in a September report.
India's power demand over this period is expected to grow at a 5.3% annual average rate but demand from data centers will grow at a much faster clip of 28%, S&P said.
Water, already a constraint for Indian households and businesses, will also be a concern.
"With high water demand from data centers for cooling needs estimated at about 25.5 million liters per year for a 1 MW load, according to data from the Uptime Institute, the computing infrastructure in these cities may face operational disruption risks without government intervention," S&P said.
India's average annual water availability per capita is likely to drop to 1,367 cubic meters by 2031 from an already-low 1,486 cubic meters in 2021, Moody's Ratings had said in a report last year, adding this is detrimental to the credit health of the economy and key sectors that heavily consume water.
Resource constraints have previously derailed large investments including in mega power projects, which in the early 2000s failed because of inadequate gas and delayed permissions.
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