India’s economic growth rate is finally outstripping China’s and now the nation is looking to invest in new oil production to meet its future energy needs. Asia’s third-largest economy is expected to surpass Japan as the world’s third-largest oil user this year and continue to have the fastest-growing crude consuption in the world through 2040, according to the IEA.
Long considered a laggard among the emerging markets, India appears to be seeing a new trend of growth driven by rising incomes and increased manufacturing as Indian Prime Minister Narendra Modihas has pushed for the creation of tens of millions of new factory jobs as a means of economic development, something which would naturally increase the amount of oil consumed in the nation.
“In addition to the boost from low oil prices, structural and policy-driven changes are under way which could result in India’s oil demand taking off in a similar way to China’s during the late 1990s, when Chinese oil demand was at levels roughly equivalent to current Indian oil demand,” said Amrita Sen, chief oil analyst for Energy Aspects Ltd. in London.
Rising incomes in the country would also mean increased vehicle usage when Indian households are able to afford more cars and more gasoline. As India develops a more robust, car-friendly infrastructure, increased demand by its citizens is expected to serve a counter-weight to declines in oil demand from China and more developed nations where shifts towards service-based economies and increased fuel efficiency cut into demand
“Economic expansion is priority for the Modi government, and energy is a key part of that story,” said Virendra Chauhan, a Singapore-based oil analyst for Energy Aspects Ltd, referring to the Indian government’s energy security goals.