Google’s AI Data Center Deal in Andhra Pradesh: A Detailed Analysis of Implications, Disadvantages, and Interstate Competition#
Overview of the Deal#
In October 2025, Andhra Pradesh signed one of India’s largest foreign direct investment agreements with Google, committing approximately $15 billion over five years to establish a gigawatt-scale artificial intelligence data center in Visakhapatnam. The project, to be developed through Google’s subsidiary Raiden Infotech India Pvt Ltd, involves a cumulative investment of ₹87,520 crore and will create India’s first 1-gigawatt data center campus. The facility will be built in partnership with the Adani Group through AdaniConneX and Airtel, representing Google’s largest AI infrastructure investment outside the United States.
The Andhra Pradesh government has committed substantial incentives totaling ₹22,000 crore to attract this investment. This deal has sparked intense debate across India, with neighboring states like Karnataka and Tamil Nadu criticizing the incentive package, while environmental activists and opposition parties within Andhra Pradesh have raised concerns about resource allocation and actual economic benefits.
Massive Financial Incentives: The ₹22,000 Crore Subsidy Package#
The most controversial aspect of the Google deal is the unprecedented incentive package offered by the Andhra Pradesh government. According to official government orders, the state has committed ₹22,000 crore in subsidies over time, structured as follows:
Land Concessions: The government allocated 480 acres across three locations—200 acres in Tarluvada, 120 acres at Adavivaram and Mudasarlova in Visakhapatnam district, and 160 acres at Rambilli in Anakapalli district. These lands are being provided at a 25% discount from market rates.
Capital Subsidy: A direct capital subsidy of ₹2,200 crore has been approved for the project.
Power Subsidies: The state committed to provide electricity at a discount of ₹1 per unit for 15 years, with the total power incentive component limited to ₹4,800 crore. Additionally, the government granted a 15-year electricity duty waiver and a 20-year transmission charge waiver.
Tax Exemptions: Complete 100% reimbursement of State GST for an extended period, representing a significant portion of the incentive package.
Water Subsidies: A 25% concession on water tariffs has been granted.
Karnataka IT Minister Priyank Kharge has been particularly vocal in criticizing these incentives, calling the deal an “economic disaster in disguise”. He argued that while Andhra Pradesh celebrates the investment, it conceals the unsustainable financial burden these subsidies place on the state treasury. Kharge emphasized that Bengaluru built its IT ecosystem “without selling its future,” focusing instead on innovation, talent, and policy stability.
Limited Employment Generation: The Jobs Myth#
One of the most significant disadvantages of the Google data center deal is the stark gap between employment promises and reality. While the Andhra Pradesh government claims the project will create approximately 1,88,220 direct and indirect jobs annually during the initial five years of operations (2028-2032), global evidence suggests data centers generate far fewer permanent jobs than traditional industries.
Research consistently shows that data centers are highly automated facilities requiring minimal human oversight once operational. A medium-sized data center typically employs only dozens to a few hundred workers, not thousands. According to the Wall Street Journal, AI data centers are “job deserts”—while they require thousands of workers during construction, they need just a fraction of that number to operate, creating a low number of jobs per square foot.
Comparative examples illustrate this reality. In Abilene, Texas, approximately 1,500 workers are building OpenAI’s Stargate AI data center, but upon completion, the facility will employ only around 100 full-time workers. A cheese-packaging plant of just 286,500 square feet in the same city was expected to create 500 jobs—five times more than a million-square-foot data center.
Analysis of Google’s data center projects elsewhere reveals similar patterns. Almost half of U.S. state data center subsidies—16 out of 36—do not even require job creation. When Indiana’s governor announced a Google data center promising 200 jobs, the actual local subsidy agreement required Google to create only 30 jobs. Furthermore, many data center jobs are not direct company employees but temporary contract positions through specialized agencies, often limited to two-year terms without full benefits.[^16]
The opposition YSR Congress Party in Andhra Pradesh has seized on this issue, with former minister Botcha Satyanarayana stating that data centers “do not generate significant employment globally,” citing acknowledgments even from industry leaders. The party questioned why the government didn’t demand a Google Development Center instead of a data center, which would have created substantially more engineering and technical jobs.[^11]
Environmental and Resource Concerns: Water and Power Consumption#
The environmental impact of Google’s AI data center poses perhaps the most serious long-term threat to Andhra Pradesh, particularly regarding water and electricity consumption.
Water Crisis: The Human Rights Forum (HRF) has raised alarms about the project’s water demands, warning that the data center complex poses a significant threat to residents of Visakhapatnam and Anakapalli districts. Data centers are extraordinarily water-intensive facilities. A medium-sized data center consumes approximately 110 million gallons of water annually, with some facilities using up to 5 million gallons of drinking water per day. Google’s own data shows that in 2024, their Council Bluffs, Iowa data center alone consumed 1 billion gallons of water. In 2021, the average Google data center consumed approximately 450,000 gallons of water per day.
Critics point out that the Google-Adani facility is projected to consume 1 million units of power per hour—equivalent to the entire electricity demand of Visakhapatnam city—and require 5 TMC (thousand million cubic feet) of water from the Polavaram project. This raises serious concerns given Visakhapatnam’s existing water infrastructure challenges. A 2016 report noted that the district lacks adequate facilities to store the 25 TMC of water allocated from the Polavaram project, with existing storage capacity of only 5 TMC.
The HRF warned that Visakhapatnam, located on a cyclone-vulnerable coastline sensitive to climate change, has already suffered from unchecked real estate development that removed tree cover and disrupted natural drainage systems. Creating a large-scale, energy-intensive facility in this environment is “ecologically irresponsible,” according to the organization.
While Google has committed to clean energy integration and sustainability initiatives, specific commitments to use seawater cooling in Visakhapatnam remain unclear. Community discussions reveal concerns that while Google mentions sustainability investments, there is no explicit commitment to seawater utilization in the Andhra Pradesh agreement, unlike their Finland facility.
Electricity Demand: AI-driven data centers consume staggering amounts of electricity. A typical AI-focused data center consumes as much electricity as 100,000 households, with the largest facilities under construction consuming 20 times that amount. India’s data center load is projected to jump from 1.2 GW in 2024 to 4.5 GW by 2030, with AI-driven facilities alone consuming an additional 40-50 terawatt-hours (TWh) annually by 2030.
The 1-gigawatt Google facility will place enormous strain on Andhra Pradesh’s electricity grid. Up to 40% of a data center’s energy is consumed not for computation but for cooling systems to manage heat. This raises questions about whether the state can reliably supply this demand without affecting other consumers or whether residential and small business ratepayers will bear disproportionate infrastructure costs through rate hikes, as has occurred in Georgia and Virginia with similar projects.
Fiscal Sustainability and Opportunity Cost#
The ₹22,000 crore incentive package represents a significant fiscal burden that raises questions about long-term sustainability and opportunity cost for Andhra Pradesh.
Ballooning Subsidy Costs: Global evidence shows that data center subsidies often exceed initial estimates. In Virginia, estimated costs ballooned five-fold during Fiscal Year 2022, from $81 million to $411 million. Illinois spending on data center subsidies rose from $10 million in 2022 to $370 million in 2024. By 2030, data centers in the United States are estimated to receive $1.7 billion in subsidies annually, totaling $9 billion between now and 2030.
At least 10 U.S. states lose more than $100 million per year in tax revenue to data centers, with Texas losing an estimated $1 billion in FY 2025 and Virginia forgoing $732 million in 2024. These figures demonstrate that data center incentives can spiral out of control, straining state budgets far beyond initial projections.
Limited Direct Revenue Generation: While data centers consume significant public resources, they generate limited direct tax revenue and employment compared to other industries. The complete reimbursement of State GST means Andhra Pradesh forgoes substantial tax income for decades. The 20-year transmission charge waiver and 15-year electricity duty waiver further reduce state revenue.
Opportunity Cost: The ₹22,000 crore in incentives represents resources that could have been invested in education, healthcare, infrastructure, or industries that create more jobs per rupee invested. Manufacturing facilities, for example, typically create thousands of jobs per project, compared to the dozens of permanent positions at data centers.
Why Other States Rejected or Criticized the Deal#
The question of why states like Karnataka rejected similar incentive packages reveals important insights into the disadvantages of such deals.
Karnataka’s Position: Karnataka IT Minister Priyank Kharge explicitly stated that extending similar incentives would be criticized as “destroying the state’s financial stability”. He argued that Karnataka built its IT strength through innovation, talent development, and policy stability rather than unsustainable subsidies. The state chose to maintain fiscal discipline rather than engage in what critics call a “race to the bottom” in offering tax breaks.
Karnataka’s opposition stems from understanding that short-term investment announcements do not necessarily translate into long-term economic prosperity. The state already hosts a thriving technology ecosystem in Bengaluru that attracts investment based on talent availability, infrastructure, and innovation culture—factors with enduring value beyond temporary tax holidays.
Political and Economic Calculations: Other states like Tamil Nadu also expressed disappointment at not securing the Google investment, with opposition parties criticizing the DMK government. However, Tamil Nadu Minister T.R.B. Raja acknowledged that “political factors” and “global political scenarios” influence such decisions, suggesting that incentive packages alone don’t determine investment locations.
The competitive dynamics between Indian states for data center investments has intensified, with states offering increasingly generous packages. However, evidence from the United States shows this competition can be economically destructive. The “race to the top” in offering incentives means states engage in bidding wars that ultimately benefit corporations while draining public treasuries.
Infrastructure Concerns: Karnataka also faces its own infrastructure challenges, with critics pointing to Bengaluru’s pothole-ridden roads, garbage management issues, and power supply problems as factors that may deter investment. However, these infrastructure deficits pale in comparison to the fiscal burden of ₹22,000 crore in subsidies that offer uncertain returns.
Economic Impact: Promises vs. Reality#
Andhra Pradesh officials tout impressive economic projections for the Google data center. State-cited assessments project an average annual GSDP (Gross State Domestic Product) contribution of ₹10,518 crore between 2028-2032, with Google Cloud-enabled productivity spillovers worth ₹9,553 crore annually, totaling ₹47,720 crore over five years.
However, these projections should be viewed with skepticism for several reasons:
Indirect and Induced Effects: The 1,88,220 jobs claimed include direct, indirect, and induced employment across construction, data center operations, engineering, IT, and supply chain functions. This methodology inflates actual job creation by including jobs that may have existed regardless of the data center or would have been created by alternative investments of the same ₹87,520 crore.
Construction Phase Temporary Employment: A significant portion of claimed employment will be temporary construction jobs. While individual data centers can employ hundreds or even over a thousand workers during peak construction, these positions disappear once the facility becomes operational.
Economic Multiplier Assumptions: Projected economic contributions often rely on optimistic multiplier assumptions. While the industry claims each data center job supports six jobs elsewhere in the economy, this methodology can overstate actual economic benefits, especially when the facility receives massive subsidies that could have funded alternative job-creating investments.
Comparison with Other Industries: A ₹87,520 crore investment in manufacturing, education, or healthcare sectors would likely generate substantially more permanent employment and economic activity. The cheese-packaging plant comparison in Texas illustrates how other industries provide better job-creation-to-investment ratios than data centers.
Hidden Costs and Community Impacts#
Beyond the direct fiscal costs, the Google data center imposes several hidden costs on Andhra Pradesh communities:
Electricity Rate Impacts: Data centers’ massive power consumption can increase electricity rates for other consumers. In Georgia, ratepayers face rate hikes as Georgia Power builds capacity to serve hyperscale data center power needs. In Virginia, Dominion Energy forecasts that data center growth will trigger rate increases and delay coal plant retirements. Residential and low-income customers often bear a disproportionate share of infrastructure costs while data centers negotiate subsidized rates or fixed-price agreements.
Water Scarcity for Residents: The 5 TMC water allocation from Polavaram represents a significant portion of available water resources. Given that Visakhapatnam’s total water needs across agriculture, industry, and drinking water supply amount to 137 TMC, with only 44 TMC currently supplied through various sources, allocating 5 TMC to a single data center complex raises equity concerns.
Environmental Justice: The HRF describes the project as “corporate exploitation” that hands over Vizag’s resources without generating proportionate jobs, revenue, or public benefit. The organization warns of “irreversible ecological damage, massive public resource diversion and deepening corporate capture of resources under the guise of technological advancement”.
Infrastructure Strain: The data center’s location in Visakhapatnam, on a cyclone-prone coast, raises disaster resilience concerns. The facility’s integration into existing power grids, water systems, and transportation networks may strain infrastructure that already faces challenges.
Political Dimensions and Interstate Tensions#
The Google deal has heightened political tensions between southern Indian states, revealing the competitive—and potentially destructive—nature of investment attraction strategies.
Andhra-Karnataka Rivalry: The war of words between Andhra Pradesh IT Minister Nara Lokesh and Karnataka IT Minister Priyank Kharge illustrates how investment competition can poison interstate relations. Lokesh’s jibe that “Andhra food is spicy. Seems some of our investments are too. Some neighbours are already feeling the burn!” and his mocking of Bengaluru’s infrastructure problems represent a departure from cooperative federalism.
Kharge’s response emphasized Karnataka’s approach: “Bengaluru has built its IT strength without selling its future”. This exchange highlights fundamentally different development philosophies—one based on massive subsidies, the other on building enduring competitive advantages through talent and infrastructure.
Tamil Nadu’s Response: Tamil Nadu politicians also criticized the DMK government for failing to attract the investment despite Google CEO Sundar Pichai being Tamil. However, the state’s minister acknowledged complex political factors beyond simple incentive packages.
Federal Implications: The deal occurred amid tense India-U.S. diplomatic relations over tariffs, with Prime Minister Modi urging boycotts of foreign goods. Union Finance Minister Nirmala Sitharaman attended the signing ceremony, suggesting central government support. This raises questions about whether political considerations influenced the deal’s structure and location.
Comparison with Global Data Center Impacts#
International experience with data center incentives provides cautionary lessons for Andhra Pradesh:
U.S. Community Backlash: In September 2025, Google withdrew its $1 billion AI data center proposal in Franklin Township, Indianapolis, just minutes before a city-county council vote that was expected to reject it. Local residents organized under “Protect Franklin Township” raised strong objections over water and energy consumption, fearing the facility would overburden infrastructure and inflate utility bills. This demonstrates that even in the United States, communities increasingly resist data centers despite economic promises.
Ballooning Fiscal Costs: As noted earlier, states like Virginia, Texas, and Illinois have seen data center subsidy costs explode beyond initial estimates. Virginia’s $732 million in 2024 data center subsidies equals the entire operating budget of the state’s judicial department.
Limited Job Creation: U.S. Census Bureau data shows that while data center employment increased 60% nationally from 2016 to 2023 (from 306,000 to 501,000 workers), over 40% of employment was concentrated in just five states. Within states, employment was further concentrated in a few counties, demonstrating that job creation claims often exceed reality and benefits accrue unevenly.
Environmental Costs: Google’s 2024 environmental report shows the company consumed approximately 8.1 billion gallons of water across its data centers and offices globally. While Google commits to replenishing 120% of freshwater consumption by 2030, their 2024 replenishment was only 64%. This gap raises questions about whether sustainability promises will materialize in Visakhapatnam.
Alternative Perspectives and Counterarguments#
Supporters of the Google deal present several counterarguments that deserve consideration:
Technological Hub Status: Proponents argue the data center establishes Visakhapatnam as “AI City Vizag,” positioning Andhra Pradesh to drive India’s AI transformation. The facility will be integrated into Google’s global network via subsea cables, potentially attracting additional technology investments and creating a broader ecosystem.
Indirect Economic Benefits: Google’s theory of change emphasizes that data centers foster thriving communities beyond direct employment through economic development, STEM education support, and infrastructure improvements. In Virginia’s Loudoun County, Google data centers generated $330 million per year in direct, indirect, and induced impacts as measured by GDP, with operations supporting 3,500 jobs and creating broader community benefits.
Clean Energy Investment: The deal includes co-investment in transmission lines, renewable power generation, and energy storage systems in Andhra Pradesh. Google’s commitment to power the facility with clean energy could accelerate the state’s renewable energy transition and enhance grid resilience.
Digital Infrastructure Leadership: At a national level, the project contributes to India’s AI capabilities and digital infrastructure development. McKinsey projects India’s data center demand will surge from 1.2 GW in 2024 to 4.5 GW by 2030, creating a need for significant investment. Positioning India as a global AI hub could have strategic technological and economic benefits.
Competitive Necessity: Some argue that in a globalized economy, states must offer competitive incentives to attract major investments. If Andhra Pradesh hadn’t provided the incentive package, the investment might have gone to another country entirely, providing India with no benefit.
However, these counterarguments don’t fully address the core concerns about fiscal sustainability, limited job creation, environmental impacts, and opportunity costs.
Recommendations and Policy Implications#
The Google-Andhra Pradesh deal offers important lessons for Indian states considering similar agreements:
Transparency and Accountability: Governments should disclose full subsidy costs upfront and establish mechanisms to track actual versus promised job creation, economic impacts, and environmental compliance. Annual public reporting on data center performance against commitments would ensure accountability.
Performance-Based Incentives: Rather than providing upfront subsidies, states should structure incentives based on verified job creation, capital investment, and environmental performance. Clawback provisions should allow governments to recoup subsidies if companies fail to meet commitments.
Environmental Standards: Data center agreements should include binding commitments on water usage (with mandatory seawater cooling in coastal locations), renewable energy sourcing percentages, and participation in water replenishment programs. Independent environmental impact assessments should be required and made public.
Fiscal Sustainability Analysis: Before approving incentive packages, states should conduct rigorous cost-benefit analyses comparing data center investments with alternative uses of the same resources. Independent economic consultants should evaluate projected impacts against global evidence.
Regional Cooperation: Rather than engaging in destructive interstate competition, Indian states should coordinate to establish minimum standards for data center incentives, preventing a race to the bottom that benefits corporations at public expense.
Diversified Development Strategy: States should avoid over-reliance on capital-intensive, low-employment industries like data centers. Balanced development strategies that include manufacturing, services, education, and healthcare sectors will create more sustainable, equitable economic growth.
Conclusion#
The Google-Andhra Pradesh AI data center deal represents a high-stakes gamble with significant downsides that may outweigh the promised benefits. While the $15 billion investment sounds impressive, the ₹22,000 crore subsidy package, limited permanent employment, massive resource consumption, and uncertain economic returns raise serious concerns about fiscal sustainability and opportunity cost.
Other states like Karnataka rejected similar incentive structures not out of inability to compete, but from recognition that sustainable economic development requires building enduring competitive advantages—talent, infrastructure, innovation ecosystems—rather than temporary tax holidays that drain public treasuries. The interstate criticism reflects genuine concerns about the wisdom of such deals rather than mere jealousy.
Global evidence from the United States demonstrates that data center subsidies often balloon beyond initial estimates, create fewer jobs than promised, strain public resources through increased electricity and water demand, and impose hidden costs on communities through higher utility rates. The growing backlash against data centers in American communities, including Google’s withdrawal from Franklin Township, Indianapolis, signals that the negative impacts are becoming increasingly apparent.[^43][^42]
For Andhra Pradesh, the deal’s success will depend on whether Google honors its sustainability commitments, whether promised economic benefits materialize, and whether the state can manage the resource demands without compromising residents’ access to water and affordable electricity. The ₹22,000 crore in subsidies represents a massive opportunity cost—those resources could have funded education, healthcare, infrastructure, or industries with better job-creation potential.
Ultimately, the Google data center may prove less a “landmark development” for Andhra Pradesh’s future than a cautionary tale about the risks of competing for corporate investment through unsustainable subsidies. Other Indian states would be wise to learn from both the promises and the pitfalls of this deal before embarking on similar agreements.