Growth demands energy. It is no wonder that India—with an economy expected to grow at over 5 percent a year for the next twenty-five years—has developed a ravenous appetite for energy. India is the world’s fifth largest consumer of energy, and by 2030 it is expected to become the third largest, overtaking Japan and Russia.
The country’s demand for oil alone is expected to increase at an average rate of 2.9 percent annually over the next quarter century. Yet India has only 0.4 percent of the world’s proven oil reserves, and domestic production is expected to remain constant, if not decline. Absent the discovery of major reserves—which most analysts view as unrealistic— it is clear that India will remain a net importer of oil. If consumption follows the current trajectory, India is also projected to run out of coal, its primary source of energy, in forty years. Its domestic natural gas reserves are limited as well.
India’s import dependence has intensified concerns that without reliable, affordable energy it will be unable to sustain high economic growth. India imports (to varying degrees) its three major sources of energy, and its dependence on imported oil is expected to increase even further. The situation is complicated by a number of factors: 1) major oil suppliers are in unstable regions in the Middle East and Africa; 2) oil prices are high, spurring higher gas prices; 3) geopolitical uncertainty stokes fears of a possible supply disruption and volatility in oil prices; 4) slow market reform has limited investment; and 5) few or no viable energy alternatives currently exist: India’s civilian nuclear program has regularly fallen behind schedule and large-scale development of hydroelectricity generation facilities has been stymied. Development of nonconventional energy sources has progressed, but their use is currently limited.
This report, a study of India’s energy demands and policymaking, was written by Tanvi Madan, formerly a senior research analyst at the Brookings Institution and currently a Harrington Doctoral Fellow at the University of Texas at Austin. Brookings Senior Fellow Stephen P. Cohen also contributed to this monograph, as did Sidney Kwiram, Johns Hopkins University School of Advanced International Studies, Washington, DC, and Arti Trehan of the University of Michigan, Ann Arbor.