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International Energy Outlook 2018

Release date: July 24, 2018   |  Next release date: July 2019  |   Executive Summary

Energy implications of faster growth in India with different economic compositions

Key takeaways

  • Regardless of economic development path, India is projected to have the world’s largest population and the fastest-growing economy. Yet, under three high economic growth cases with an assumed GDP growth rate of 7.1% per year, Indian energy use does not reach that of China or the United States in the next two decades.
  • The India Export-led case—where economic growth relies heavily on the expansion of exports—results in the largest increase in Indian energy use, with 33% more energy consumed in 2040 than in the IEO2018 Reference case. This side case also leads to nominal gross output from the energy-intensive manufacturing sector that is about 50% larger in 2040 than in the IEO2018 Reference case.
  • The industrial sector remains the largest energy-consuming end-use sector through 2040 across all India side cases considered in IEO2018.
  • The IEO2018 India side cases highlight the need to further explore the relationship between changes in economic growth and the relative sizes of the services and manufacturing sectors.

In 2015, India had the third-largest economy, the second-largest population, and the fourth-largest level of energy consumption

GDP, population, and energy consumption

  • Only China and the United States had larger economies than India in 2015.
  • India had the world’s second-largest population in 2015 and is projected to have the largest of any single country by 2040.
  • China, the United States, and Russia were the only countries to consume more energy than India in 2015.

India’s income and energy use per capita are lower than in other major economies in both 2015 and 2040 in the IEO2018 Reference case

Energy consumption per capita

  • India’s low energy use per capita is partly attributable to infrastructure constraints, a lack of investment in the energy sector, and use of traditional, non-marketed fuels such as charcoal.
  • India’s GDP per capita was $7,400 lower than China’s in 2015.
  • Neither India’s GDP nor its energy use per capita are projected to catch up to China’s by 2040 in the IEO2018 Reference case.

High economic growth cases for India include increases in different components of GDP either consumption, investment, or export shares

Components of GDP

  • EIA performed three IEO2018 high economic growth sensitivity cases, where India’s economy grows about 7.1% per year on average through 2040 instead of the IEO2018 Reference case average of 6.0%.
  • Gross Domestic Product (GDP) can be divided into four different components: personal consumption, investment, government consumption, and net exports (exports minus imports). Each case increases a different component’s share higher than the IEO2018 Reference case.
  • Consumption-led case—the consumption share of GDP rises from 61% to 67% in 2040.
  • Investment-led case—the investment share of GDP rises from 29% to 38% in 2040.
  • Export-led case—the export share of GDP rises from 23% to 55% in 2040.

Compared with IEO2018 Reference case energy use, IEO2018 high economic growth cases project increased energy consumption between 26% to 33% higher in 2040

Figure 4. 2040 Indian energy consumption

  • In each case, energy use is higher than in the IEO2018 Reference case in 2040.
  • In the Consumption-led case, energy use is 26% higher, and increases in industrial sector energy use are more than double all other end uses
  • In the Investment-led case, energy use is 29% higher, and increases in industrial sector energy use are only slightly higher than in the Consumption-led case.
  • In the Export-led case, energy use is 33% higher, and increases in industrial sector energy use are triple all other end uses.

In the Export-led case, which has the highest manufacturing output growth rate, Indian energy-intensive manufacturing output grows, but only reaches historical Chinese levels after 2035

Energy-intensive manufacturing gross output

  • India’s primarily service-oriented economy is less energy intensive than a large, goods-oriented economy such as China’s.
  • Services account for more than 50% of Indian output in all high economic growth cases by 2040.
  • Much higher levels of energy use could occur in India with major changes to the country’s industrial structure.

Historical levels of energy use per capita in other large economies are higher than projected for India in the IEO2018 Reference case and India still does not reach these levels in the IEO2018 high economic growth cases by 2040

Energy consumption per capita

  • Projected Indian energy use per person in 2040 remains low compared with other large economies in 2015, even under the high economic growth cases.
  • India remains mostly a service-based economy, benefits from technological progress other countries have experienced, and adopts energy-efficient practices and equipment.

Background

EIA’s International Energy Outlook 2018 (IEO2018) is a supplement to the IEO2017. The IEO2018 Reference case updates the IEO2017 Reference case with macroeconomic information, but there are no modeling changes to other end-use sectors. IEO2018 focuses on macroeconomic uncertainty by conducting sensitivity analyses in three IEO regions: China, India, and Africa. These are projected to be three of the fastest growing and most populous regions in the IEO2018 Reference case, and there is significant uncertainty regarding their future economic growth.


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