Environment and Economic Development: An Analysis of Electricity Demand Projections for India

Increase in electricity use widens economic opportunity to the population, improves social infrastructure, and increases productivity. In this study, we examine the relationship between economic growth and electricity consumption, and make projections of electricity demand based on evidence from international experience. Electricity consumption for high-income countries is 8834.3 Kwh per capita in 2014, while low- and middle-income countries on an average consume 1922.1 Kwh per capita electricity. India’s total (and per capita) electricity consumption is very low as compared to many high-income and transition economies. The study estimates the year in which India is expected to shift from lower middle-income economy category to upper middle-income economy category, and subsequently to high-income economy category, under three scenarios: pessimistic, BAU, and optimistic scenario. Results show that even under an optimistic scenario, India’s per capita electricity consumption is likely to be lower than the current average electricity consumption of high-income countries (7980 Kwh) when it crosses its high-income level, i.e., in 2038 under optimistic scenario. The study further discusses the policy reforms that have been initiated to enable a significant shift in the overall operations of the electricity sector and promoted energy efficiency, leading to an expansion in the infrastructure sector at a relatively lower environmental cost in the recent past and the way forward.