Luminous Indian rupee sign with an energy investment backdrop (Photo illustration: Getty Creatives)
India’s economy is currently the fifth-largest in the world. By 2030, it is expected to be the world’s third-largest behind only the U.S. and China. To maintain its spectacular growth trajectory, the government is courting investment in India’s energy sector exponentially and sparking what may turn out to be nothing short of a boom.
Many forecasters expect India’s GDP growth rate for 2025 to be in the region of 6.5% to 6.8% (e.g. Deloitte). The lower end of the forecast range remains broadly similar to growth levels recorded in 2024, as India sets its sights on being at the heart of global value chains and diversifying its exports.
To achieve this, Prime Minister Narendra Modi’s government has a tricky balancing act of juggling traditional and renewable energy sources to meet India’s burgeoning needs. It is courting foreign direct investment in both segments to varying degrees driven by the country’s evolving and ever growing energy needs.
Near-Term Considerations
Currently oil and natural gas account for nearly 30% of India’s total energy supply, according to the International Energy Agency. For context, the country’s total consumption in barrels of oil equivalent terms was 5.3 million bpd in 2023, nearly 90% of which was imported.
It is also expected that 25% of global oil and gas demand growth in 2025 will come from India. To ensure the security of supply, India has increased its pool of suppliers by signing multi-million dollar agreements with up to 40 crude oil and gas exporters.
To address trade deficit issues and encourage domestic production of hydrocarbons, it has also allowed 100% foreign investment in several segments of the traditional energy sector, including natural gas, petroleum products and refineries. The foreign investment limit for public sector refining projects has been raised to 49%.
Downstream moves are particularly interesting, given India is already a refining hub with 23 refineries, and plans to tap investment dollars for export-oriented infrastructure such as petroleum product pipelines and export terminals.
India also remains a “big believer” in the gas economy, according its Minister of Petroleum and Natural Gas Hardeep Singh Puri. The country is hoping to up its usage of natural gas from 6% to 15% of its energy mix, and continues to seek investment partners in order to achieve that objective.
The idea is to bag to at least $25 billion to $30 billion a year in investments towards exploration and production, and downstream ventures, sources suggest. Further clarity on the direction of travel, emerging policies and the flow of investment dollars will likely occupy centerstage at the upcoming India Energy Week 2025, due to be held in Delhi from February 11-14.
But the event is also expected showcase the mammoth investment that India is feverishly courting, and has already received, for its renewable energy and clean technology or “cleantech” industries.
Creating Green Pathways
India is already home to some of the world’s largest solar and wind power generation facilities, and hopes to wean itself off a historic reliance on coal. A target has been set to achieve net zero emissions by 2070. The first phase of this includes reaching 500 gigawatts of renewable energy capacity by 2030 versus 135 GW at the end of 2023.
Investors appear to be up for it. That’s if India’s debut in the sovereign green bond market in Q1 2023 is any indicator. The country issued two tranches of bonds valued at $1 billion marketed primarily to local investors in January that year. The issuance — proceeds of which were to support renewable energy, urban mass transit rail projects and low-carbon hydrogen production — was more than four times oversubscribed.
View from space of India’s night lights (Photo illustration: Getty Creatives)
And just as the international energy markets craved a clear statement of intent, the Modi government duly obliged in July 2024. Finance Minister Nirmala Sitharaman proposed wide-ranging measures to support India’s energy transition plans in her budget that month.
These included inviting the private sector to set up small-sized nuclear reactors, encouraging battery storage solutions for renewables, announcing a clear policy framework for pumped hydro storage, plans for developing a climate finance taxonomy and exempting critical minerals — including copper, lithium and cobalt — from customs duties.
The latter move forms part of a wider plan to expand a customs-free list of capital goods and commodities to be used in the production of solar cells and panels in India. Additionally, Sitharaman said the government would conduct an auction for offshore mining of critical minerals and rare earths, essential for manufacturing components such as batteries and electrolyzers.
An Investment Boom
The question is how big is the green opportunity? Many forecasters, including Morgan Stanley and Moody’s believe India will require an investment range of $27 billion to $31 billion per year over the next five years to achieve the government’s target of 500 GW of renewable energy capacity by 2030.
Another $21 billion to $24 billion per year may be needed for electricity transmission, distribution, and energy storage. Even a total of the lower range comes to $50 billion a year, more than twice the amount being courted by India for traditional energy investments.
Should the upper end of both traditional and renewable energy annual investment forecasts be added, the total comes to $85 billion a year. And that doesn’t even include cleantech. So the answer on the potential size of the market is clear — if the projected need is met by actual investment dollars, India’s energy sector is in boom-town territory.
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