The government has set an ambitious target of reaching 100 GW of solar power generation capacity and 227 GW of renewable energy capacity by 2022 (Mint file)
The government has set an ambitious target of reaching 100 GW of solar power generation capacity and 227 GW of renewable energy capacity by 2022 (Mint file)

Economic Survey sees big gains from higher energy consumption

  • A two-and-a-half times increase in India’s per capita energy consumption will help it grow the real per capita GDP by $5000 (in 2010 prices)
  • India uses only around 6% of the world’s primary energy despite it having 18% of the world’s population

New Delhi: The Economic Survey 2018-19 presented on Thursday said that a two-and-a-half times increase in India’s per capita energy consumption will help it grow the real per capita gross domestic product (GDP) by $5000 (in 2010 prices). Also, if India has to achieve the Human Development Index (HDI) level of 0.8, the per capita energy consumption has to quadruple.

This comes against the backdrop of India using only around 6% of the world’s primary energy despite it having 18% of the world’s population even as the National Democratic Alliance (NDA) government has set an ambitious task of becoming a $5 trillion economy by 2025. The Survey said that the ‘problem of energy poverty has been more pervasive than income poverty".

“India’s per capita energy consumption equals 0.6 tonnes of oil equivalent (toe) as compared to the global per capita average of 1.8 toe. India’s per capita primary energy consumption lags that of the upper-middle income countries by a considerable margin," the Survey added.

This comes at a time when India has emerged as the voice of consuming nations amid global uncertainties in the energy markets with supplies from Iran and Venezuela drying up and tension escalating in the Persian Gulf. India, the world’s third largest oil importer, has called for a global consensus on “responsible pricing", which balances the interests of producers and consumers. India’s worry over crude oil prices stems from its energy needs being primarily met through imports. India has also sought a review of payment terms with major oil producers.

“In the medium term, for India to achieve per capita GDP comparable to that of the upper-middle income countries, we require greater energy resources and that too at a rapidly increasing rate," the Survey said.

Since India imports more than 80% of its oil requirements and around 18% of natural gas, higher energy prices stoke inflation and hurt the country’s economic growth. Indian energy firms have invested around $38 billion to buy equity energy stakes in 28 countries, including Australia, Azerbaijan, Bangladesh, Brazil, Canada, Indonesia, Iran, Iraq, Libya, Nigeria and Russia.

“Energy intensity of India’s GDP has been declining in the recent past, which is reflective of increases in the efficiency of energy use. However, India cannot become an upper-middle-income country without (i) rapidly raising its share of the global energy consumption commensurate with its share of the global population, and (ii) ensuring universal access to adequate modern commercial energy at affordable prices," the Survey added.

This also comes against the backdrop of the Organization of the Petroleum Exporting Countries (Opec). plus arrangement extending its compact for production cuts. This production cut extension will have a wide-ranging impact on energy markets, given that Opec accounts for around 40% of global output. It is expected to have a particular fallout on India due to the Opec accounting for around 83% of the country’s total crude oil imports.

“It is also important to note that India’s energy intensity of GDP started declining at a much lower level of per capita GDP as compared to the developed world. India’s primary energy intensity of GDP started declining since 1991 at per capita GDP of around US$ 578 whereas US primary energy intensity of GDP started declining since 1970 at per capita GDP of around US$ 23,309 (at constant 2010 US$)," the Survey said.

India has also been calling for a global consensus on “responsible pricing," with China and India moving ahead to set up a joint working group (JWG) on energy to form a buyers’ bloc to bargain collectively for oil supplies.

Catch the Economic Survey live updates here

Close