Gujarat has unveiled an ambitious plan to become India’s leading destination for data centres with the launch of the Viksit Gujarat Data Centre Policy 2026-29. Chief Minister Bhupendra Patel announced the new policy on July 9, saying it is expected to attract nearly ₹6 lakh crore in investment and create 7.5 gigawatts (GW) of data centre capacity over the next few years.
The government hopes that most of these projects will come up in Dholera Smart City, which is being developed as a major industrial and technology hub near the Gulf of Khambhat.
Launching the policy, Patel said Gujarat wants to become the country’s preferred location for data centres. According to him, the initiative will strengthen sectors such as cloud computing, artificial intelligence (AI), e-commerce, digital governance and smart manufacturing.
Dholera Being Positioned as a Global Data Centre City
Deputy Chief Minister Harsh Sanghavi said Dholera is moving towards becoming the world’s largest data centre city.
The city already has several large infrastructure projects under development. Wide roads, underground utility networks and a large solar park are being built. Tata Group is constructing a semiconductor manufacturing plant, while the upcoming Dholera International Airport is expected to begin partial operations later this year.
However, Dholera is still in the early stages of development. Out of its planned 920 square kilometre area, only around 5% has been developed so far as an “activation area.” Six companies have already been allotted land there, while more space remains available for future investors.
What Exactly Is a Data Centre?
A data centre is a large facility filled with powerful computers and servers that store, process and manage digital information.
Every email sent, online payment made, video streamed, cloud file saved and AI chatbot response depends on data centres. As digital services continue to grow worldwide, governments are competing to attract these facilities because they form the backbone of the modern internet economy.
Having more data centres also helps support emerging technologies like artificial intelligence and strengthens a state’s digital infrastructure.
Huge Investments, But Limited Employment
While data centres require massive investments, they do not create large numbers of permanent jobs.
Construction of a new facility can temporarily employ thousands of workers. But once operations begin, even very large data centres usually require only a few hundred employees to manage and maintain them.
Governments therefore expect economic benefits in other ways, including land development, electricity sales, tax revenues from businesses that grow around these facilities, and increased investment from global technology companies.
Water and Electricity Remain the Biggest Challenges
Despite the excitement surrounding the policy, experts say the biggest hurdle is not attracting investors—but ensuring enough electricity and water.
Data centres generate enormous heat while operating. Their servers must be cooled continuously, and this often requires large quantities of water. They also consume electricity on the scale of a small city.
The Gujarat government says the state currently has surplus electricity and plans to use desalinated seawater rather than freshwater meant for agriculture or drinking purposes.
However, producing freshwater from seawater through desalination plants is expensive and requires major infrastructure.
Dholera Will Need Much Larger Water Supply
At present, Dholera has a desalination plant capable of supplying 20 million litres of water per day (MLD). This is enough only for the existing activation area.
Recognising future demand, Dholera Industrial City Development Limited (DICDL) issued a tender on July 9 to appoint consultants for a much larger 200 MLD seawater desalination plant.
Officials admit that the final water requirement for the entire Dholera Special Investment Region (DSIR) is still unknown. As more industries and data centres begin operations, the demand for water will continue to rise.
The speed at which desalination facilities are expanded could become one of the most important factors in determining whether Gujarat’s ambitious targets can actually be achieved.
Government Offering Attractive Incentives
To attract global technology companies, Gujarat has announced several financial incentives under the new policy.
Eligible projects will receive:
A ₹1 discount per unit of electricity for up to 20 years
Complete exemption from stamp duty
Reimbursements on several taxes and charges
These incentives are available only for very large projects with a minimum capacity of 150 MW, meaning the policy is primarily aimed at global hyperscale companies rather than smaller firms.
Competition From Other States
Gujarat is entering a highly competitive race. Several states—including Maharashtra, Tamil Nadu, Karnataka, Telangana, Uttar Pradesh and Odisha—introduced dedicated data centre policies years ago.
Among them, Maharashtra, led by Mumbai, currently remains India’s largest data centre market.
Across the country, technology companies have already announced investments worth billions of dollars. One of the biggest examples is Google’s planned 1 GW data centre project in Andhra Pradesh, reportedly involving around $6 billion in investment.
Can Gujarat Deliver on Its Massive Target?
One feature that makes Gujarat’s policy stand out is the scale of its ambition.
While the official policy targets 7.5 GW of data centre capacity, State Science and Technology Minister Arjun Modhwadia said proposals received by the government already total 10 GW.
For comparison, India’s total operational data centre capacity today is estimated to be around 2 GW. Gujarat alone is aiming to build several times that amount.
State Science and Technology Secretary P. Bharati said India currently generates nearly 20% of the world’s data, but has only around 3% of global data centre capacity, creating a major opportunity for future growth.
The Road Ahead
Globally, the largest concentration of data centres is located in Northern Virginia’s “Data Center Alley” in the United States. That region has built between 16 and 20 GW of data centre capacity over several decades.
Gujarat’s vision for Dholera is highly ambitious and could transform the state’s digital economy if successful.
However, experts believe the real test will not be announcing investment targets, but ensuring that critical infrastructure—especially reliable electricity and sufficient water supply—is ready on time.
If Gujarat can overcome these challenges, Dholera could emerge as one of India’s biggest technology hubs. If not, the ambitious ₹6 lakh crore investment plan may remain a vision that takes much longer to become reality.
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