India is poised to emerge as a key player in global energy markets, following a distinct growth trajectory characterized by lower energy intensity, a diverse energy portfolio, and rising commodity imports, according to Wood Mackenzie’s latest Horizons report.
The report, ‘Eye on the tiger: How higher Indian economic growth could impact global energy markets’, highlights that, unlike China’s energy-intensive boom in the early 2000s, India’s growth is expected to be more balanced, with a focus on high-value manufacturing and renewable energy.
Yanting Zhou, principal economist at Wood Mackenzie, stated that while India’s growth resembles China’s rapid expansion, key differences distinguish it. She noted that although India’s energy demand will rise, its industrial sector is less energy-intensive. Additionally, India is better positioned to adopt efficient, low-carbon technologies compared to China in the 2000s, supporting a more sustainable growth path.
This unique trajectory could accelerate India’s transition to a low-carbon economy, potentially enabling the nation to achieve its net-zero emissions goal ahead of the 2070 target.
According to Wood Mackenzie’s high-growth scenario for India, by 2033:
- the economy to reach just under US$9 trillion, nearly triple from US$3.2 trillion
- coal demand to grow nearly doubles to 2.2 billion tonnes
- oil demand to reach 8.2 million barrels per day, up from 5.6 million barrels per day
- power demand surges to almost 4,000 TWh, with significant increases in both coal and renewable generation
- steel demand to rise 9% annually, reaching 317 million tonnes
Source: Wood Mackenzie
Different industrial structure: India’s growth focuses on high-value-added manufacturing, including renewables and advanced batteries, which is supported by government subsidies and technological advancements.
Lower energy intensity: India’s industrial sector currently consumes less energy per unit of GDP than China did in the early 2000s. By 2033, crude steel and cement production in India is projected to be only about one-third of China’s output in 2011, according to Wood Mackenzie’s high-growth scenario. Additionally, an increasing share of renewable energy and the adoption of electric vehicles will further lower India’s energy intensity.
Modest impact on global energy prices: In a high-growth scenario, while competition for commodities is expected to rise, India’s growing demand is not likely to trigger the significant price surges that occurred during China’s boom in the 2000s. The spare capacity of OPEC+ is generally sufficient to accommodate the increasing oil demand from India. As a result, India’s oil demand is projected to increase Brent prices by a relatively modest US$1 to US$3 per barrel.
The additional demand for 10 million tons per annum (Mtpa) of LNG from India will arise during a period when global gas prices are expected to decline. The market is preparing to absorb more than 200 Mtpa of LNG supply growth, which accounts for about 50% of current supply, limiting potential price increases for LNG.
India’s thermal coal production could reach 1,800 metric tons (Mt) by 2033 in the high-growth scenario, driven by the need to ensure energy security. But the country will still need to import around 200 Mt from the seaborne markets. Therefore, the current seaborne thermal coal cost, approximately US$107 per tonne, could rise to US$110 per tonne by 2033.
Emissions trajectory: While CO2 emissions initially rise due to the rapid expansion of coal, India’s high-growth scenario could accelerate low-carbon supply chain development, potentially enabling faster decarbonization post-2030s.
Roshna Nazar, research analyst, energy transition at Wood Mackenzie, said, “If India can repeat China’s post-2010 strategy of investing in low-carbon supply chains for solar, wind, electric vehicles, and critical minerals, the higher emissions anticipated in the early 2030s will be temporary. This stronger growth could lay the groundwork for faster and more durable decarbonization to follow.”
Energy and natural resources producers are likely to benefit from increased demand, particularly those located in Russia, the Middle East, Australia, Indonesia, and South Africa. However, investors will need to prioritize securing a first-mover advantage before domestic companies scale up, as noted by Wood Mackenzie.
Opportunities for global producers, challenges for domestic policy
Wood Mackenzie estimates that India will need to invest US$600 billion in its power sector over the next decade. This investment presents significant investment opportunities for power generation capacity additions, grid improvements, and supply chains.
The Indian government is well-positioned to implement innovative strategies that balance energy security, emissions reduction, and economic growth, all while ensuring affordable energy access. By implementing supportive policies—such as streamlined approval processes, attractive incentives for renewable energy projects, and the promotion of public-private partnerships—India can significantly decrease its reliance on commodity imports after 2035. This shift could improve the balance of payments, reduce public debt, and boost foreign reserves.
Zhou concluded that alongside increasing imports, achieving higher growth will demand substantial investment in domestic energy production, oil refining, steelmaking, and low-carbon supply chains. She noted that similar to China in the 2000s, India has numerous expansion opportunities.
