Now that geopolitical wrangling increasingly shapes international trade dynamics, India must reduce its dependence on imported energy to maximize its strategic autonomy. While it could invest more in hydrocarbons, the far better option is to become a renewables-powered electro-state.
NEW DELHI – No sooner had the recent draft India-US trade agreement been made public than it was met with outcries from the Indian commentariat. The biggest bone of contention was the US requirement that India phase out its oil imports from Russia. These had risen from 2% of total oil imports in 2021 to 36% by 2024, reflecting the massive discount on Russian oil – about $35 per barrel below Brent – following Russia’s full-scale invasion of Ukraine.
In fact, with the discount declining to about $2 recently, oil imports from Russia have fallen accordingly. But controversies over the provenance of oil imports (be they from Russia, Iran, or Venezuela) are likely to continue, calling attention to the deeper, underlying problem afflicting India’s economy: energy dependence.
Consider energy imports as a share of total energy consumption for India and China over the course of their recent economic history (Chart 1). Not only is India heavily dependent on imported energy, but its dependency has risen from 10% of energy consumption in 1990 to over 35% in 2023. By contrast, while China has also been quite energy dependent, it has been much less dependent than India at comparable points in its development.
