In a world where global oil demand growth is experiencing downward revisions, India’s outlook remains robust, driven by a combination of economic expansion, industrial activity, and a burgeoning middle class. ES Ranganathan, a veteran of the Indian energy sector, and the Former Managing Director of Indraprastha Gas Limited (IGL), offers his insights into the factors fueling this projected 6.6% growth in India’s oil demand for 2024, positioning the country as a key player in the global energy landscape.
Economic Expansion and Industrial Activity
India’s economic growth, projected at 6.6% for 2024, is a fundamental driver of its rising oil demand. India’s Ministry of Commerce and Industry reported a remarkable 9% surge in Foreign Direct Investment (FDI) within the renewable energy sector during Q2 of FY 2023-24. FDI reached $505 million, reflecting confidence in India’s ambitious goal of adding 40 GW of renewable energy capacity by 2024-2025.
The country’s expanding industrial base, fueled by increasing Foreign Direct Investment (FDI) in the manufacturing sector, is set to significantly boost energy consumption. “As India’s industrial sector continues to grow, driven by both domestic demand and foreign investment, our energy needs are naturally expanding. This growth is a testament to the resilience and potential of our economy,” opines ES Ranganathan elaborating that surge in industrial activity is not just a marker of economic health but a clear indicator of the increasing energy demands that accompany such expansion.
Urbanization and Rising Middle-Class Consumption
Urbanization, coupled with rising income levels and the expansion of the middle class, is another crucial factor driving India’s oil demand. “The combination of urbanization and rising income levels of the middle class is transforming consumption patterns, particularly in the transportation sector, creating a perfect storm for oil demand growth in India,” remarks ES Ranganathan. The increasing need for transportation, both personal and commercial, is fueling this demand. This shift is not only increasing demand for oil but is also shaping the future of energy consumption in the country.
Implications for India’s Energy Strategy
The predicted growth in oil demand has significant implications for India’s energy strategy, concerning import reliance, refining capacity, and infrastructure investments. With crude oil imports in June 2024 averaging 4.5 million barrels per day, India remains heavily dependent on foreign oil. “India’s energy strategy must evolve to accommodate the growing demand while mitigating the risks associated with import reliance,” emphasizes ES Ranganathan, mentioning the need to invest in refining capacity and exploring alternative energy sources to reduce India’s dependence on foreign oil.
Electric Vehicles: A Game-Changer
ES Ranganathan highlights the significant rise in EV adoption, driven by government incentives, technological advancements, and growing environmental awareness among consumers. The Economic Survey of India 2023 projected a robust 49 percent compound annual growth rate (CAGR) in the domestic electric vehicle market between 2022 and 2030, with an estimated 10 million annual sales by 2030.
“The transition to electric vehicles represents a transformative force that will redefine the very foundations of energy consumption, compelling us to rethink our strategies in the oil sector,” asserts ES Ranganathan explaining that this shift will significantly alter demand dynamics in the oil sector, potentially leading to a gradual decline in traditional fossil fuel consumption, requiring innovation and adaptation in unprecedented ways.
Long-Term Sustainability: The Global Context
As the world moves towards cleaner energy sources, the sustainability of India’s oil demand growth comes into question. However, ES Ranganathan believes that India’s current growth trajectory is sustainable, provided it is accompanied by parallel investments in renewable energy. “While oil remains a critical component of our energy mix, it is essential that we also invest in renewable energy to ensure a balanced and sustainable energy future,” further adds ES Ranganathan. This dual approach will enable India to meet its growing energy demands while also aligning with global climate goals.
“The future of India’s energy sector lies in our ability to balance robust demand growth with sustainable practices, ensuring long-term prosperity,” concludes ES Ranganathan. To sum up, India’s projected oil demand growth for 2024, as analyzed by ES Ranganathan, reflects the country’s dynamic economic landscape and its critical role in the global energy market. By integrating modern technology, increasing investments in infrastructure, and promoting sustainable practices, India can continue to lead in the global energy market while ensuring a secure and prosperous future.
