Hundreds of Billions of Dollars to Be Invested in Data Centers in India, but Further Investment Will Be Required to Meet Their Energy Needs

India has been in the spotlight in 1Q 2026 with the AI Impact Summit taking place in New Delhi and announcements by Reliance Industries and the Adani Group, each worth over US$100 billion, regarding data center provision in the country.

The Adani Group has announced plans to establish renewable energy-powered AI-ready data centers by 2035. The construction and operation of the data centers will be underpinned by the AdaniConneX which is a 50:50 joint venture between Adani Enterprises and the U.S. data center operator EdgeConneX. AdaniConneX is an infrastructure provider concerned with data center construction, the cooling systems, and server racks. The flagship data center campus is in Chennai, which requires 17 Megawatts (MW) of energy. Under development is the campus in Visakhapatnam (Vizag), which is a Gigawatt (GW)-scale AI campus and developed in partnership with Google Cloud. There are other campuses under development in Hyderabad and Pune in collaboration with Microsoft. And there are plans for campuses in Mumbai, Kolkata, Bengaluru, and Bhubaneswar.

Reliance industries announced an investment over 7 years, worth US$110 billion, for what the company refers to as sovereign GW-scale data centers. The intention is for the data centers to meet the need for compute to deliver the growing demand for AI services in India. This follows the announcements in 2023 and 2024 of a growing partnership between Reliance and NVIDIA to develop the compute capability in India to create Large Language Models (LLMs) trained in the country’s diverse languages. The plan is for the new AI services to be integrated with Reliance’s Jio telecom platform.

Driving these and other investments in digital infrastructure is firms’ desire to tap into opportunities to create products and services stemming from India’s rising Gross Domestic Product (GDP) and an online audience and user base of over 900 million individuals.

States such as Tamil Nadu and Telangana are offering incentives to encourage foreign direct investment by the hyperscalers and other technology vendors. These include creating investment-promotion authorities to aid foreign businesses to navigate bureaucratic hurdles and fast-track their acquisition of land. Another attraction for firms considering locations for their data centers is that energy costs in India are lower than in North America and Europe.

Today, data centers in India are clustered in Mumbai, Hyderabad, Delhi, Bangalore, and Chennai with the energy needs of each the equivalent of a hundred thousand homes. The Institute for Energy Economics and Financial Analysis forecasts that data center capacity in India is expected to grow exponentially from 1.4 GW in 2025 to 9 GW in 2030 and account for 3% of India’s electricity demand in 2030 up from 1% currently.

Even without the data center announcements, India’s electricity grid is under strain from increasing rates of urbanization, use of air conditioning units, and the industrialization of the economy. In addition, the Government has a target for 50% of the country’s power capacity to come from non-fossil fuels in 2030.

The electricity grid has reached both urban and rural areas, but not all of the energy produced reaches the customers due to poor transmission cables.

The country’s electricity grid is vast with the Power Grid Corporation of India Limited (PGCIL) responsible for over 1.4 million circuit Kilometers (km) of transmission lines. The grid already accommodates thermal, hydro, wind, and solar energy. To meet the Government’s targets, PGCIL is prioritizing Capital Expenditure (CAPEX) to establish “green energy corridors” for solar and wind energy. Furthermore, PGCIL is investing in Battery Energy Storage Systems (BESS) to manage the intermittent supply.

But these types of initiatives will not necessarily meet the needs of the data centers. Data centers will be competing with manufacturers, consumers, and farmers for supply. If data center operators cannot secure sufficient energy to meet the needs of their 24/7 operations, then establishing a microgrid is a consideration. The local authorities will need to provide a pathway for operators to quickly secure permits. Reliance, for example, already has its own solar farms in Gujarat and Andhra Pradesh.

Data center operators will continue to weigh their options when it comes to their energy needs with energy costs and availability via PGCIL on the one hand and the cost and time needed to establish their own supply via micro grids on the other. Perhaps if data centers in India continue to be in clusters, then data center operators could collaborate by jointly funding and operating microgrids to meet their respective needs.

The energy supply constraints due to the crisis in the Strait of Hormuz mean that energy security is moving higher up governments’ priority list. Countries that are not self-sufficient will need to make choices. Data center operators will not want to hamper their operations due to insufficient energy supply, which will tilt their choices toward making their own arrangements such as microgrids.