The 100 billion bonanza

India’s increasing energy efficiency has freed up around 3 per cent of GDP. This can help spur economic growth.

- SAURABH MUKHERJEA

The general perception in the media is that India is at the mercy of Oil Producing and Exporting Countries (OPEC) and therefore, a rally in fuel prices often triggers all sorts of manic responses in India. For example, when crude-oil prices rose by 47 per cent in the first half of this calendar year (courtesy Russia's attack on Ukraine), the Nifty corrected by 10 per cent.

The real story of India's energy consumption is actually very different from the popular picture. Firstly, whilst India's energy intensity, i.e., total power consumption in India divided by GDP, is significantly higher than that of the USA, China, and Japan, it has improved significantly over the past decade. Specifically, India's energy intensity has fallen at 1.3 per cent per annum over the past decade. Even more encouragingly, as is evident from the chart Energy intensity of the Big 4 economies, there is enormous room for the country to raise its game on this front Japan and the USA use one-third as much energy as India for every of $1 of GDP generated and both of these countries and China have improved their energy intensity far more rapidly than India over the past decade. (Japan is the most efficient user of energy amongst the Big 4 economies. To understand how Japan got there, see our blog dated May 28 2022, https://bit.ly/3ETOrqU.)

Economic implications of improved efficiency in energy usage