Why Gujarat Wants To Become India's AI Capital

Artificial intelligence has sparked a global race to build the digital infrastructure that powers large language models, cloud computing and high-performance computing. At the centre of this race are data centres. As global technology companies rapidly expand their AI capabilities, Indian states are competing to attract these investments by offering land, reliable power, tax incentives and faster approvals.

Gujarat has now joined that competition with its Viksit Gujarat Data Centre Policy 2026–29, which aims to position the state as India's leading hub for AI-ready data centres. The policy targets around 7.5 gigawatts (GW) of data centre capacity, ₹6 lakh crore in investments and large-scale employment, with Dholera emerging as the flagship location. Here's why Gujarat believes it can emerge as India's next AI infrastructure hub.

What is Gujarat's new Data Centre Policy?

The Gujarat government launched the Viksit Gujarat Data Centre Policy 2026–29 in July 2026 with the objective of making the state India's leading destination for data centres and artificial intelligence infrastructure. The policy aims to create up to 7.5 GW of data centre capacity, attract ₹6 lakh crore in investments, and support the rapid growth of cloud computing, AI and digital services.

To attract developers, the policy combines fiscal and non-fiscal incentives. These include capital subsidies, interest subsidies on term loans, electricity tariff support, tax concessions, faster approvals and single-window clearances. Projects established in Dholera receive additional incentives, reflecting the government's intention to make the city the centrepiece of its AI ambitions.

The policy also introduces sustainability requirements. New facilities are expected to source at least 51% of their electricity from green energy while relying on desalinated water to reduce pressure on freshwater resources.

Why are AI companies racing to build data centres?

Artificial intelligence models require enormous computing power. Unlike traditional cloud applications, generative AI systems are trained using vast datasets and specialised graphics processing units (GPUs) operating continuously for weeks or months. Even after deployment, AI models require substantial computing capacity to respond to millions of user requests.

This has created unprecedented demand for hyperscale data centres—large facilities capable of housing tens of thousands of servers while providing uninterrupted electricity, cooling systems and ultra-fast fibre connectivity.

Major technology companies worldwide are investing billions of dollars in expanding AI infrastructure.

Why is Gujarat betting on Dholera?

The centrepiece of Gujarat's strategy is Dholera Special Investment Region (SIR), a greenfield smart city located southwest of Ahmedabad.

Unlike older metropolitan areas where land is scarce and infrastructure must be retrofitted, Dholera has been planned with wide roads, underground utility corridors and industrial zones capable of accommodating large-scale digital infrastructure.

The Gujarat government believes these characteristics make Dholera particularly suitable for hyperscale data centres.

Reliable electricity is one of the biggest advantages. AI data centres consume enormous amounts of power, and Dholera's proximity to renewable energy projects, including major solar installations, allows developers to meet sustainability targets more easily. Planned utility infrastructure, fibre networks and water systems further strengthen its attractiveness.

Deputy Chief Minister Harsh Sanghavi has described Dholera as a future "data centre city", highlighting its central role in Gujarat's digital infrastructure strategy.

What makes a data centre 'AI-ready'?

Not every data centre is designed for artificial intelligence. Traditional enterprise data centres primarily support websites, databases or business applications. AI-ready facilities must support significantly greater computational intensity.

The biggest difference is computing hardware. AI workloads rely heavily on GPUs and specialised AI accelerators rather than conventional processors. These chips consume far more electricity and generate considerably more heat.

Consequently, AI-ready data centres require higher power density, advanced cooling systems—including liquid cooling in some cases—and highly reliable electricity supplies capable of operating around the clock.

Scalability also matters. As AI models continue growing in size, operators need facilities capable of adding computing capacity without extensive redesign. Because AI facilities are so energy-intensive, developers increasingly seek locations where renewable electricity can be integrated at scale while maintaining uninterrupted operations.

Why is 'green AI' becoming the next big competition?

As AI expands globally, attention is increasingly shifting from computing power alone to the environmental footprint of that computing. Large AI data centres require vast amounts of electricity for both servers and cooling systems. Many also consume significant quantities of water to maintain safe operating temperatures.

Governments and technology companies therefore face growing pressure to reduce emissions associated with AI infrastructure. Gujarat's new policy reflects this shift by requiring data centres to source at least 51% of their electricity from renewable energy and encouraging desalinated water for cooling instead of freshwater supplies.

Can Gujarat overtake Mumbai, Chennai and Hyderabad as India's data centre hub?

Mumbai remains India's largest data centre market due to its financial sector and international connectivity. Chennai has emerged as another major hub because of its extensive international cable infrastructure, while Hyderabad benefits from a strong technology ecosystem and major cloud providers.

Gujarat currently trails these established markets.

Digital infrastructure depends not only on physical facilities but also on customer demand, cloud ecosystems, international connectivity, skilled talent and supporting industries. Gujarat is therefore simultaneously promoting Global Capability Centres (GCCs), deep-tech innovation and broader IT investments to build the wider ecosystem that large data centre operators require.

Whether Gujarat overtakes established hubs will ultimately depend on how quickly projects move from policy announcements to operational facilities. If planned investments materialise, Dholera could emerge as one of India's largest AI infrastructure clusters. But sustained success will require delivering reliable power, world-class connectivity, renewable energy integration and a thriving digital economy capable of supporting the next generation of artificial intelligence.