INDIA’S ENERGY ECONOMY FACES A LONG-TERM SHIFT AS ELECTRIFICATION ACCELERATES

India’s energy economy is moving toward greater electrification, with transport expected to be one of the major drivers of electricity demand over the next decade. The International Energy Agency’s latest assessment indicates that India’s electrification rate could rise significantly by 2035, reducing the role of direct fossil-fuel consumption in selected sectors. The change will have consequences across the economy because replacing petrol and diesel consumption with electricity requires investment in generation, transmission, distribution, batteries and charging infrastructure. Automobile manufacturers are already responding through electric cars, scooters, motorcycles and commercial vehicles, while energy companies are investing in renewable generation and storage. The shift could also create opportunities for engineering companies and component manufacturers involved in motors, power electronics, batteries and grid equipment. For India, electrification has an additional strategic dimension because the country imports large quantities of crude oil. Greater use of domestically generated electricity could eventually reduce some exposure to international oil-price movements. However, the transition will require substantial infrastructure investment and careful management of peak electricity demand. Businesses will need to adapt to an energy system where electricity becomes increasingly important not only for households but also for transportation and industrial activity. The long-term result could be a closer integration of India’s automotive, power, technology and infrastructure industries.