Are Data Centres Being ‘Dumped’ on India? Why Energy, Water and Governance Matter

In global trade, “dumping” is often dismissed as a red herring. After all, if a country imports a product cheaply, it is usually because domestic laws permit it and buyers want it. Yet dumping becomes a real concern when governments push policies that favour narrow commercial interests despite broader public costs — a pattern not unfamiliar in India’s development trajectory. Today, as data becomes the “new oil”, a similar risk is emerging: not of cheap goods, but of poorly designed, resource-intensive data centres being concentrated in jurisdictions least able to resist them.

Why data centres are not inherently the problem

Data centres are essential to the digital economy. When well planned, they can support cloud services, artificial intelligence, and domestic digital growth with manageable environmental footprints. A good data centre is typically located where power supply is reliable, grid upgrades are paid for by the project itself, and utilisation levels are high enough to avoid idle servers wasting energy.

Design is critical. Efficient airflow management, higher inlet temperature thresholds, liquid cooling for intensive AI workloads, and the use of naturally cool air or water where feasible can drastically reduce energy demand. Equally important is minimising potable water use, relying on recycled water, limiting diesel backup generation, and continuously measuring performance parameters so efficiency improves over time.

What makes a ‘bad’ data centre

Problems arise when facilities look efficient on paper but are flawed in practice. A centre located in a water-stressed region but designed around evaporative cooling can severely worsen local scarcity. Older cooling systems without proper airflow controls inflate energy overheads, pushing costs onto the grid and nearby communities.

The experience of “Google”’s proposed Cerrillos data centre in Santiago, Chile, is instructive. Local opposition highlighted risks to an already stressed aquifer. A Chilean environmental court required the company to factor in climate change impacts and consider alternative cooling methods, prompting a shift to an air-cooled design. The case illustrates how scrutiny and regulation can force better outcomes — but only where such checks exist.

Why resistance is growing in richer countries

The United States, far ahead of India in data centre capacity, is now seeing organised local resistance. Municipal boards are questioning whether energy- and water-intensive facilities fit zoning rules. Residents worry about property values, water security, and grid strain.

In North Carolina, a mayor’s signal that a proposal would be unanimously rejected led developers to withdraw despite promises of environmental safeguards. In Minnesota, a large project was put on hold after residents protested opaque approvals and inadequate environmental review. Industry groups now concede that community pushback is becoming routine, forcing developers to rethink transparency and early engagement.

The Global South’s vulnerability to ‘data dumping’

This context matters for countries like India. Many Global South states have weaker zoning enforcement, limited community participation in planning, and uneven environmental regulation — yet strong aspirations to attract IT investment. When capital faces friction in jurisdictions with participatory processes, it may seek locations where land is cheaper and political resistance lower.

Data centres cannot be built just anywhere — they still need reliable power, fibre connectivity, and stable land titles. But the most resource-intensive and least locally beneficial facilities may gravitate towards places where environmental and social costs can be externalised more easily.

Why India faces a real risk

India is actively positioning itself as a major data centre hub. Independent forecasts point to rapid capacity expansion this decade. JLL projects growth of around 77% to 1.8 GW by 2028; CRISIL estimates 2.3–2.5 GW by FY2028; and Colliers suggests capacity could exceed 4.5 GW by 2030.

The policy environment is also generous. Several States offer land and power concessions, expedited approvals, and fiscal incentives. Combined with geopolitical stability and a large domestic market, India appears highly attractive to global developers.

Yet the externalities are unusually pronounced. Many Indian cities and river basins are already water-stressed. Large, clustered power loads demand grid upgrades, raising questions about who bears the cost. Oversight remains uneven: the “Comptroller and Auditor General of India”, the “Supreme Court of India”, and the “National Green Tribunal” have all flagged gaps in monitoring, enforcement, and post-clearance compliance.

Why dumping is not inevitable

India is not destined to become a dumping ground. Hyperscale data centres require substantial public coordination — substations, transmission upgrades, fibre routes — which makes total opacity difficult. India also has relatively strong judicial pathways, which, while slow, can create deterrence. Civil society organisations and local movements remain vocal and capable of scrutiny.

The issue, therefore, is not whether to allow data centres, but how they are governed.

Red flags communities and regulators should watch for

Certain warning signs merit close attention. First, incentives that race to the bottom: excessive land and power subsidies, fast-tracked permits, exemptions from environmental processes, and weak sustainability norms. Zoning laws should treat data centres as heavy infrastructure, with buffer zones and noise limits.

Second, unclear cost-sharing for grid upgrades. Data centres must disclose peak loads, water sources, cooling methods, and generator use, with clear rules preventing households from cross-subsidising industrial demand.

Third, siting in arid or seasonally stressed areas without binding water budgets. Each facility should have publicly disclosed water ceilings based on basin conditions, with mandates for recycled or waterless cooling where necessary.

Finally, opacity itself is a red flag: non-disclosure agreements involving public utilities, shell entities, or hard-to-access environmental filings. A public registry of audits, incidents, and compliance records should be non-negotiable.

Rethinking growth in the digital economy

Data centres can be assets or liabilities. The difference lies in governance. As with trade dumping, the real issue is not foreign capital per se, but whether domestic institutions protect public interest when powerful commercial incentives are at play. India’s challenge is to ensure that digital infrastructure growth strengthens — rather than drains — its energy systems, water security, and local communities.