Capital Economics: India Data Center Expansion May Have Significant Macroeconomic Effects

Capital Economics analyst Shilan Shah said India’s rapid expansion of data centers could have significant and broader macroeconomic effects. According to Jin10, Shah wrote in a report that much of the discussion about AI’s impact on India’s economy has focused on disruption to the services sector, but AI also requires substantial investment in physical infrastructure. Shah noted that announced data center investment for 2026–2030 is only equivalent to 0.5% of annual GDP. However, she said the impact could be much larger if the investment becomes a catalyst for policymakers to upgrade India’s power system and water resources. She added that rising demand for domestic capabilities in electronics and precision engineering would also support India’s move up the manufacturing value chain.