An urbanizing Indian population poses a threat to the international agenda to reduce carbon emissions in the coming years, according to most models of development that are based on the economic trajectory of the United Kingdom, the United States and most other “first world” nations.
“Like China since the start of this century, India is in the midst of a huge wave of urbanization, the scale of which has few parallels in history,” the Indian Department of Industry, Innovation and Science said report last week. The report said it expected the nation’s total urban population to jump from 439 million last year to 642 million by 2035.
That’s an increase of 10 million people per year.Commodities traders are expected to benefit the most from the burgeoning Indian middle class, which consists of people including medical professionals, engineers, software developers and technical workers that make the world go round. Consider the analysis provided in the best-selling book “The World is Flat,” by Thomas Friedman, which follows the trend of hiring Indian radiologists and medical technicians to analyze X-rays and other critical medical documents before the sun rises in the west.
An increased amount of disposable income in the middle class will translate into higher energy demand, and more money also equates to more consumption on all fronts: food, transportation and lifestyle add-ons combined.
OPEC figures say India should expect a 150 percent rise in oil demand by the year 2040.
“As a highly populous and rapidly developing middle-income country, India’s consumption of metals is likely to increase considerably,” BHP Billiton says regarding its analysis of South Asian economic growth. Relative to China, New Delhi has dedicated only a limited amount of resources to manufacturing growth. Factories and related industrial development would only cause fossil fuel demand to jump with increased ferocity.
In anticipation of this new demand, government funds are pouring into Indian hydrocarbon projects over the next decade. Oil Minister Dharmendra Pradhan said $300 billion in new investments were imminent as a specialized group of experts combs through proposed projects.
“Should India industrialize in a similar way to China and other East Asian countries, it has the potential to be larger consumer of minerals in 20 years’ time than China is now,” a recent Australian report said. “However, should India move more directly toward a services-based economy, its consumption by 2035 may be less than a third of China’s current resource usage.”
Exact figures are difficult to calculate in light of the volatility in the Asian energy industry’s direction toward developing a stable oil and gas demand projection. The middle class grows predictably upward, but without precision.
In rural areas, Modi plans to use cheap coal to bring electricity to the millions of Indians living in disconnected villages. But after enjoying years of ample coal supply, India’s power sector has seen coal inventories slip drastically into the red in recent months. This potentially has long-term implications for global natural gas because of a peculiar feature of India’s energy landscape: a fleet of unused gas-fired plants.
There are several ways forward for the Indian government to manage national energy policy in the coming decades. Modi’s decisions will guide the nation through periods of unbridled economic growth as India ventures to become a developed country.
“Unless we see the kind of reforms that were expected from the Modi government in terms of land and labor—factors of production which are essential for private investment to pick up to levels that have been witnessed in China historically—and manufacturing to become a very significant part of India’s growth outlook, it’s unlikely,” Oxford economic analyst Priyanka Kishore told Bloomberg TV.