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Solar panels and coal plants in Dadri, India

India’s opportunity for sustainable growth

Blog Sustainable Growth and Energy

India needs to choose a growth trajectory that prioritises raising living standards while minimising environmental decline. Innovations in at least two areas – energy and conservation – can help India realise this opportunity.

In the Mahabharata, the fire god Agni, suffering from a bout of indigestion from eating too much ghee, consumes the Khandava Forest. With the help of Krishna and Arjuna, Agni overcomes Indra, god of weather and war, laying waste to all creatures within. From the ashes rose Indraprastha, the magnificent capital of the Pandavas’ kingdom. Civilisation flourished while nature was destroyed in the name of progress. Was it worth it? The story of the burning of the Khandava Forest offers no answer. The reader is left to themselves to ponder the moral dilemma of destroying a forest for human gain.

Once a tale of economic malaise, India’s growth engine has taken off. GDP has nearly quadrupled in the past two decades. Rapid development has transformed countless lives across the subcontinent. In 2000, agriculture employed 60% of the Indian workforce and with vibrant new jobs in services within cities today, its share has fallen to 40%.

Much like the countries before it, India’s economic ascent came with an environmental cost. Human prosperity has for long had an antagonistic relationship with the environment. While India is now the fifth-largest economy in the world, its capital, Delhi, was the most polluted in 2023. Nine of the top 10 most polluted cities were in India in 2023.

The need and possibility of sustainable growth in India

Growth remains India’s imperative. No government will, or should, promote an anti-growth agenda. However, the externalities associated with growth – both locally and globally in the form of climate change – are manifesting in hotter temperatures, depleted groundwater, poisonous air, stronger floods, and more severe droughts. Left unchecked, these externalities threaten prospects for development. India, therefore, needs to pursue sustainable growth: a trajectory that prioritises raising living standards while minimising environmental decline. Given its size, how India chooses to grow will not only affect its own local environment, but the world’s.

Fortunately, owing to dramatic recent innovations – both technological and institutional – the strength of this ‘growth versus environment’ trade-off is weaker than ever before. Instead of the challenge of sustainable growth, there is an opportunity for sustainable growth; Indraprastha within the Khandava Forest, not instead of. In this article, we highlight how innovations in at least two areas – energy and conservation – are helping India realise this opportunity. In many aspects, India is already leading the way.

Harnessing clean energy

Energy is the basis of all economic activity. Where and at what cost India sources its energy will determine whether it can sustain its growth.

Figure 1 - Share of India’s energy sources in 2022

Figure 1 - Share of India's energy sources in 2022
Notes: Despite growth in solar, fossil fuels continue to be dominant sources of India’s energy needs. Source: NITI Aayog.

Fossil fuels dominate the primary energy supply (Figure 1). In 2022, 59% of India’s energy came from coal, 30% from oil, and a mere 2% from renewables. Lowering these shares requires two transitions: the deployment of renewables in the electricity sector, and the electrification of transportation. A mixture of political, economic, legal, and energy security concerns have meant that fossil fuels, and coal in particular, have thus far remained ‘king’ in India.

A new coronation might be around the corner. The winds of innovation now mean that solar and wind are the cheapest sources of electricity ever known. The price of electricity from solar has fallen by 89% between 2009 and 2019 alone.  In 1991, the price of lithium-ion battery cells per kWh was US$ 7,523; today, it is US$ 139, a 98% collapse in cost. The dramatic fall in the cost of renewables offsets the additional costs imposed on the power system through their intermittency. Furthermore, advances in battery storage systems and improvements in demand-side management are reducing the impact that these variable sources have on system stability. Renewables and storage are likely to hit cost parity with local coal in India sooner than we may think, offering a cheap, secure, and non-polluting form of electricity to power growth. If we factor in the social and economic costs of air pollution from fossil fuel combustion, the calculus is even clearer.

India has not been asleep at the wheel. The installation costs of solar in India have declined steeply over 2010-2022. Bhadla Solar Park in Rajasthan is one of the largest solar parks in the world. India, host of the headquarters of the International Solar Alliance, emerges as not just one of the leaders in South Asia but also among other large economies (Figure 2).  Across the country, its residential rooftops boast a solar potential of 637 GW - a mere third of which can meet the current electricity needs of India’s residents. The government has set ambitious targets of building out 500 GW of solar in the coming years. Sustaining its ambition in this area is paramount.

Figure 2: Share of electricity production from solar Duration Data visualisation

Notes: India is among the leaders in production of electricity through solar. Graph generated by the authors using ‘Our World in Data’.

Transport is the other side of the energy coin. India is among the leaders in the uptake of electric vehicles (EVs). The sale of EVs doubled in 2023 and is expected to rise by 66%. By 2030, a third of the vehicles in India are predicted to be electric. These are largely two- and three-wheelers that address the last-mile mobility issues (common in other developing countries too) and hence, complement the public transport systems in Indian cities. Electrifying two- and three-wheelers represent a low-hanging fruit. As India grows, demand for larger, four-wheeled vehicles will inevitably expand. Innovation has brought down costs and extended battery range, but consumers remain anxious about high sticker prices and range constraints. To facilitate this transition, the government could focus on supporting the associated charging infrastructure that addresses these constraints. Importantly, there is an opportunity to build out such infrastructure in anticipation of, instead of in response to, a growing trend of electrification.

Conserving the natural environment

Our natural environment is on the receiving end of our energy use. From the air we breathe, to the water we drink, to the soil we till, India’s natural environment is under attack. The air is now polluted beyond hazardous levels. Life in Delhi is being cut short by 11.9 years because of air pollution. Groundwater, which sustains 70% of India’s agriculture, is rapidly heading towards extreme scarcity; a tipping point beyond which it would be impossible to access it may soon be reached. Even large climatic regularities, such as the arrival of the annual monsoon, is becoming increasingly irregular. Stronger deluges have raised the risk of floods as the absence of adequate tree cover erodes the top layer of the soil, worsening the soil quality, and in extreme cases, wiping away entire buildings.

The erosion of natural capital affects human lives both immediately (such as by forcing displacement because of floods or schools being closed because of poor air quality) and over time (by way of health complications owing to prolonged exposure to pollutants). Children of mothers who faced rainfall shocks while pregnant grew up with verbal and mathematical ability setbacks. Highlighting the delicate ties that bind us in ecosystems, the collapse of India’s vulture population following the proliferation of diclofenac variants, a painkiller, significantly raised the incidence of waterborne diseases and human mortality. All these factors affect long-term growth.

Recent innovations in the design of regulations and markets are helping restore the balance in our relationship with nature. Crop burning in India generates substantial externalities which are felt beyond the immediate environment. Innovative new payment for ecosystem services (PES) schemes that give upfront conditional cash to farmers in Punjab are showing promise in reducing burning. The introduction of a market for industrial particulate matter emissions in Gujarat reduced emissions between 20-30% while reducing abatement costs by 11-14%.

Data are the backbone of these interventions; to conserve our natural assets, we need to first measure and understand them better. A swathe of technological advances, such as in satellite imagery, have given us granular knowledge of how nature is being affected by economic expansion. By learning the causes of environmental decline, we can better prescribe the cure.

Uncharted waters

Sustainable growth is possible but not guaranteed. Vested parties often succeed in delaying the adoption of new innovations. The diverse challenges facing India – a country with subsistence farmers and aerospace engineers; deserts and lakes – constrain the set of policies that can be written and investments that can be made. For a country on its ascent, recent technological and institutional innovations offer a path that no country has trod before – a clean, sustainable form of growth.

This article was published in collaboration with the Ideas for India and The Wire as a part of the upcoming India Sustainable Growth Conference at the London School of Economics and Political Science.