The government has clarified that AI data centers do not require a standalone environmental clearance process, as they are treated like other commercial or industrial buildings under the Environmental Impact Assessment (EIA) Notification of 2006. Environmental clearance is only mandatory if the project’s physical size exceeds defined thresholds, such as a built-up area of 20,000 square meters or more. The government is focusing on the 'construction footprint' rather than computing capacity or AI-specific operational model. Developers must still adhere to the Water (Prevention and Control of Pollution) Act, 1974, and the Air (Prevention and Control of Pollution) Act, 1981. While this regulatory clarity may expedite project timelines, it does not remove operational risks associated with high electricity and water use, particularly for cooling. In water-stressed regions, local authorities and communities are increasingly scrutinizing projects that compete with municipal water supplies. A major proposed AI data center in Visakhapatnam has faced public opposition and legal hurdles due to concerns over local water availability, highlighting that 'social license' is becoming a critical factor for long-term viability. Investors should monitor how individual states handle integration of these centers, with the Ministry of Jal Shakti’s 2023 guidelines on groundwater extraction and the Bureau of Energy Efficiency’s guidelines on cooling systems increasingly relevant.