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India is gearing up for an energy investing boom as Narendra Modi’s government courts foreign and domestic investments. India’s economy has been growing rapidly, recently overtaking the United Kingdom to become the fifth biggest economy in the world. And it’s expected to keep rising through the ranks, surpassing both Germany and Japan to become the third largest economy in the world by 2030. As a result of these projections, Modi has been pushing hard to expand the Indian energy sector through increased investment. But will that money materialize?
Despite the runaway growth of India’s economy in recent years and the astronomical projections for its future trajectory, India’s economic growth unexpectedly stalled out this year, revealing major cracks in the foundation. After an 8.2 percent growth rate over the last fiscal year, India’s rate of economic growth fell to a shockingly low 5.4 percent last summer. The current fiscal year is now expected to see an economic growth rate of just 6.4 percent.
After years of soaring success, the Indian stock market just “erased the past six months of gains” as the rupee has plummeted in value against the dollar. “India’s new middle class, whose wealth surged like never before after the pandemic, is wondering where it went wrong,” The New York Times recently reported, before adding that “Mr. Modi will have to adjust his promises.”
Despite significant volatility, however, India may still be headed for an energy investment boom as Modi courts foreign investors to help build up domestic renewable energy production capacities as well as fossil increased fuel extraction to meet India’s energy needs.
India is already a global hub for petroleum refining with 23 domestic refineries, but nearly 90 percent of the country’s consumed oil – about 5.3 million bpd in 2023 – is imported from other nations. And its demand for oil and gas imports is set to skyrocket, with an estimated 25 percent of global oil and gas demand growth in 2025 coming from India alone.
Because of this, India has busily been inking deals with more and more suppliers to ensure ongoing energy security. Forbes reports that India currently has “multi-million dollar agreements with up to 40 crude oil and gas exporters.” There are also current reports that India will soon be buying a lot more oil and gas from the United States as the Trump administration gears up to drill, baby, drill to the dismay of climate activists.
Meeting this demand will also require major upstream and downstream investments for oil and gas production and refining. In response, India has raised caps for foreign investing in a litany of key market sectors. “To address trade deficit issues and encourage domestic production of hydrocarbons, it has also allowed 100 percent foreign investment in several segments of the traditional energy sector, including natural gas, petroleum products and refineries,” Forbes reports. Meanwhile, in the public sector, the foreign investment limit for refining projects has been increased to 49 percent.
India is particularly bullish about natural gas, which it plans to increasingly incorporate as a “bridge fuel” within its transforming energy mix. Modi’s government hopes to rake in $25 billion to $30 billion a year in investments towards exploration and production of natural gas resources across the subcontinent.
India is not only focused on increasing fossil fuel production and access, however. Modi’s administration is also hoping to put India on the global clean energy map. Despite its continued heavy reliance on coal, the dirtiest fossil fuel, India has set a target to achieve net zero emissions by 2070 and 500 GW of renewable energy capacity by 2030. This is a hugely ambitious target. Experts estimate that reaching the 2030 goal will require between $27 billion and $31 billion per year over the next five years, with an additional $21 billion to $24 billion per year for logistical and infrastructural supports such as electricity transmission, distribution, and energy storage.
While the scale of the challenge is enormous, Forbes reports that “investors appear to be up for it.” If true, this bodes well for the fate of the whole planet. As the International Energy Agency puts it, “India’s energy choices matter. They have direct and far-reaching effects on the lives of a growing population, and major indirect effects on the rest of the world through their impact on energy markets, emissions, and flows of technology and capital.”
