Model Answer

Data centres are facilities that provide computing, storage and networking infrastructure for digital services. With India’s installed data-centre capacity reaching about 1.57 GW in August 2026, they are becoming the backbone of its rapidly expanding digital economy.

Significance for India

1. Digital services require reliable computing and storage. e.g: Banking, e-governance and cloud services.
2. AI development depends on large-scale computing infrastructure. e.g: IndiaAI Mission.
3. Data security improves through greater domestic hosting of critical information.
4. Digital sovereignty reduces dependence on overseas infrastructure.
5. Investment opportunities are expanding rapidly. e.g: Global hyperscalers and cloud providers.
6. Supporting industries gain demand. e.g: Semiconductors, servers, telecom and cooling systems.

Major Challenges

1. High electricity demand can increase pressure on power grids.
2. Water-intensive cooling can create sustainability concerns in water-stressed regions.
3. Cybersecurity risks increase as critical data becomes concentrated.
4. Geographical concentration can create infrastructure vulnerabilities. e.g: Mumbai, Chennai and Hyderabad.

Way Forward

1. Promote renewable energy and energy-efficient cooling for green data centres.
2. Develop data-centre clusters with reliable power, connectivity and disaster resilience.
3. Strengthen cybersecurity while expanding indigenous servers and semiconductor capacity.

Data centres are becoming as essential to the digital economy as physical infrastructure is to the industrial economy. India must combine rapid capacity expansion with security, sustainability and technological self-reliance.