Reform energy sector or pay a heavy price: Goldman Sachs tells India

energy-1A well-known international investment firm has cautioned India to revamp its energy sector, or pay a stiff price for dilly-dallying on the much-needed reforms. With India’s economy expected to grow in the months to come, the report by Goldman Sachs has projected that India’s expenditure on energy requirements could go up from current $120 billion to $230 million by 2023.

India accounts for 1/5th of the world’s population, but only “a 30th of its energy.” India’s expenditure on its energy bills could double within 10 years, warns the report. India’s net energy imports were estimated to be 6.3 percent of its GDP.

The report has suggested an increased emphasis on renewables and policy steps to create a green economy. The investment firm has advised India’s policy makers to switch from oil to natural gas and improve energy conservation to reduce the country’s energy export significantly. It added that reforms in the energy sector could reduce India’s annual energy import bill by $40 billion by fiscal year 2023 and also that in a reform scenario, it could come down to 4% of GDP from current 6.3%.  This would help India reduce its current account deficit on a structural basis which could be positive for the currency over the medium term.

Reducing transmission and distribution losses, stricter emission norms for vehicles and the use of more energy efficient appliances are some of the measures in improving energy conservation. The report added that if India could improve its energy efficiency by 15 percent over the next decade, it could save $32 billion per annum by financial year 2023.

India looks set to attract sizeable investments on account of pro-business reforms, which are expected to be undertaken by the new government.  In the light of this, India faces a major challenge to meet the growing demand for energy which is already in short supply. The July 30, 2012 incident of the northern electricity grid breaking down due to overdrawing of power by states underlined the need to shore up the country’s energy infrastructure.


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