Role of Energy and Economic Growth in India

Why is it that a few selected states in India are faring better in terms of economic growth compared to others? For example, states of Haryana and Punjab are agriculturally rich and the states of Gujarat and Maharashtra have multiple factories. On the contrary, Bihar, Jharkhand, Chhattisgarh have a long way to go in terms of economic development. The difference stems from differences in the infrastructural development. One of the most crucial aspects of infrastructure is energy. This means energy and economic growth go hand in hand. If one is good, then the other one would automatically be good too.

Energy and Economic growth

Today, we cannot imagine the world without power. From a simple electric bulb to large factories, everything relies on power to operate. This means that energy is a crucial input for economic and social growth. In very simple words, as the supply of energy is improved, more power reaches the people. This allows them to indulge into economically productive activities, which improves the overall economic condition of the people.

In fact, almost half of the industrial growth in today’s world is due to energy even though it takes up less than one-tenth share in the total cost of production. Growth in energy is believed to play a huge role in the increase in GDP too. In the 1970s in the USA, there was an acute energy crisis. At the same time, the economic growth slowed down, which is believed to have been a direct consequence of the energy crisis.

Hence, it is established that energy and economic growth are indeed interdependent on each other. Now, let’s study its implications with respect to India.

Energy and Economic Development in India

Since the 2000s, the energy consumption in India has more than doubled and the value keeps on increasing year after year. India ranks third globally when it comes to gross power generation. However, the per capita energy consumption has a very low value (even lower than Africa). Around 250 million people have no access to power. 

To achieve India’s vision of a $5 trillion economy, bridging this gap is one of the first steps that the government needs to undertake. This is why the government is focusing on several power projects (many of which are under the public-private partnership model). 

There are following sources of energy in India currently:

1. Coal: To this very day, our major share of energy comes from coal and other petroleum products, most of which are imported from other countries. It is a non-renewable source of energy and a source of pollution as well. The government is making efforts to decrease our dependence on the goal for power generation.
2. Water: There are various hydrothermal power plants in the country which supply power to numerous factories and households. The energy of high speed water is harnessed to spin the turbine that generates electricity.
3. Nuclear: Nuclear fission power plants are another major source of energy in the country. A nuclear power plant has a high potential to generate electricity. The energy generated from the process of nuclear fission (an atomic process in which one large nucleus is split into high-speed small nuclei) can be used to generate electricity.
4. Wind and solar: These are renewable sources of energy. Since, both wind and solar are present abundantly in nature, they can never get exhausted and hence, we can ensure a lifetime supply of energy through these.

Role of Energy in India

In the 1950s, the transportation sector utilised almost 44% of the country’s power. It was the sector with the highest energy demand. Closely following it was the industrial sector which required high energy too. Back then, the demand from households was limited. 

Jump to today, the percentage of the transportation sector has dropped to less than 5%. Industries utilise the highest percentage of power. The share of households has also increased significantly.

The role of energy in India’s agricultural sector is also undisputed. It is used for various farm activities including, but not limited to, irrigation, storage, and operating farm machinery. In the success of the Green revolution, energy is the unsung hero.

Renewable Energy – The way forward

Renewable energy and economic growth need to be focused on to maximise the economic and social development in the country. Government’s aim to reduce the carbon footprint in the country and make India carbon-neutral by 2070 can only be realised with the help of renewable energy. 

In the Budget 2022, the government announced that it plans to fulfil 50% of its energy requirements by renewable energy sources. If it comes true, it would significantly reduce our dependence on coal and petroleum products, which would also lessen our trade deficit. A reduction in the trade deficit is a positive sign of economic growth.

Conclusion

Energy makes people’s lives easier. Hence, their productivity also increases. Increase in energy generation and supply not only accelerates economic growth but also improves the living standards of people. The government envisions supplying energy to every district of India for the economic and social upliftment of the country. The relationship between energy and economic development in India is not one-sided. When economic growth happens, then more factories are set up, which need more energy to operate. Hence, as one increases, the other increases automatically.