Pacific Money | Economy | South Asia

The Security Imperative of India’s Clean Energy Transition

India’s energy security hinges on breaking its dependence on fossil fuels.

The 1973 oil crisis was a wake-up call for the U.S., triggering a fundamental rethink of its energy security strategy. In many ways, the present Gulf crisis has exposed the fragility of India’s dependence on fossil fuel imports. India’s energy security can no longer be achieved through diversification alone and must instead be built on a faster, more resilient clean energy transition.

Despite efforts to diversify its energy imports, India remains heavily dependent on the Middle East. The effective closure of the Strait of Hormuz has significantly disrupted India’s energy supplies, with nearly 50 percent of its crude oil and over 60 percent of its liquefied natural gas (LNG) and liquefied petroleum gas (LPG) imports transiting the waterway.

India has taken measures to mitigate the fallout from this crisis, but these have come at a cost. Reallocation of fuel for priority sectors such as household and transport at the start of the crisis has meant reduced supplies for India’s petrochemical industries and commercial users. India’s restaurant industry, for one, is estimated to incur monthly losses of around $8.5 billion due to the shortage of commercial LPG cylinders. The relaxation of regulations to permit the use of alternative fuels such as biomass, coal, and kerosene is likely to drive up carbon emissions, exacerbating hazardous air quality levels.

The energy shock has created tangible economic pressures as well. Russian crude cargoes already at sea are now being bought at a premium of $5-$15 a barrel. The rupee has hit all-time lows and India’s growth forecasts have suffered, with Goldman Sachs trimming its FY27 estimate for India’s GDP growth from 6.4 percent to 5.9 percent. Rising inflation may push an estimated 2.5 million Indians into poverty.

The crisis has also underscored a long-standing geopolitical reality for India. Despite its efforts to stay non-aligned, its fossil fuel dependence leaves it exposed to external pressure. After months of curbing Russian oil imports under U.S. pressure, India had to resume purchases, raising questions about the long-term impact on trade ties with Washington. Prime Minister Narendra Modi came under immense domestic pressure as fuel prices rose and the U.S. issued a temporary waiver to “allow” India to purchase Russian oil. After India managed to secure safe transit for some shipments from Iran, the U.S. blockade of Iranian ports further exposed the limits of India’s strategic autonomy.

As the world’s third-largest energy consumer, India remains deeply exposed to external shocks, with more than 70 percent of its energy supply still met by fossil fuels. While New Delhi’s case for greater leeway in emissions to meet its development needs was once defensible, the heightened vulnerability of fossil fuel supply chains today calls for an accelerated clean energy transition. 

Fortunately, India is already on the right track. The government has ramped up investments in rapid solar deployment and the adoption of electric vehicles (EVs) through targeted production-linked incentive schemes and tax cuts. In 2025-26 alone, India added a record 55 GW of non-fossil fuel power capacity, taking its total installed non-fossil fuel capacity to 283 GW. India’s EV market, valued at $2 billion, is poised for exponential growth, with a projected expansion to $164 billion by 2033.

Nevertheless, there is room for growth. Most of India’s installed non-fossil fuel capacity today comes from solar power alone (about 150 GW), with nuclear power comprising only about 3 percent of the mix. Efforts to liberalize the civil nuclear sector through the landmark SHANTI Act could enable much-needed private sector participation. However, sustained private investment will depend on clear, long-term, policy signals, financial incentives, and risk-sharing mechanisms to make nuclear energy commercially viable.

Financing remains a key constraint. Efforts to encourage domestic manufacturing of solar batteries, panels, and EVs are critical to avoid replacing one form of dependency with another. But accelerating the transition will also require attracting substantial foreign capital. India needs approximately $150-200 billion in investment annually until 2070 for its energy transition, yet current levels meet only about a quarter of that requirement. Broader ease-of-doing-business reforms and targeted policies can help attract greater FDI.

India also needs to deliver execution at scale. Even as India meets headline milestones with rapidity, achieving 50 percent of its 500 GW renewable energy target five years ahead of schedule, large segments of its population remain vulnerable. The government needs to reduce dependence on LPG for cooking for the roughly 330 million households that rely on it by promoting widespread electrification through targeted subsidies for electric appliances and affordable electricity access.

Finally, efforts to increase installed renewable energy capacity need to be complemented with improvements in power distribution. Non-fossil fuel sources comprise only a third of electricity generation in India, highlighting the gap between capacity addition and usable power. This is in part due to slower expansion of transmission infrastructure. Power distribution companies in the country continue to struggle with high technical and commercial losses, which are estimated at around 16 percent, more than double the global benchmark.

In a world defined by geopolitical volatility, India’s fossil fuel dependence is no longer a manageable risk but a structural liability. Unless it moves decisively to reduce that dependence, India will remain dangerously exposed to shocks it cannot control. 

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The 1973 oil crisis was a wake-up call for the U.S., triggering a fundamental rethink of its energy security strategy. In many ways, the present Gulf crisis has exposed the fragility of India’s dependence on fossil fuel imports. India’s energy security can no longer be achieved through diversification alone and must instead be built on a faster, more resilient clean energy transition.

Despite efforts to diversify its energy imports, India remains heavily dependent on the Middle East. The effective closure of the Strait of Hormuz has significantly disrupted India’s energy supplies, with nearly 50 percent of its crude oil and over 60 percent of its liquefied natural gas (LNG) and liquefied petroleum gas (LPG) imports transiting the waterway.

India has taken measures to mitigate the fallout from this crisis, but these have come at a cost. Reallocation of fuel for priority sectors such as household and transport at the start of the crisis has meant reduced supplies for India’s petrochemical industries and commercial users. India’s restaurant industry, for one, is estimated to incur monthly losses of around $8.5 billion due to the shortage of commercial LPG cylinders. The relaxation of regulations to permit the use of alternative fuels such as biomass, coal, and kerosene is likely to drive up carbon emissions, exacerbating hazardous air quality levels.

The energy shock has created tangible economic pressures as well. Russian crude cargoes already at sea are now being bought at a premium of $5-$15 a barrel. The rupee has hit all-time lows and India’s growth forecasts have suffered, with Goldman Sachs trimming its FY27 estimate for India’s GDP growth from 6.4 percent to 5.9 percent. Rising inflation may push an estimated 2.5 million Indians into poverty.

The crisis has also underscored a long-standing geopolitical reality for India. Despite its efforts to stay non-aligned, its fossil fuel dependence leaves it exposed to external pressure. After months of curbing Russian oil imports under U.S. pressure, India had to resume purchases, raising questions about the long-term impact on trade ties with Washington. Prime Minister Narendra Modi came under immense domestic pressure as fuel prices rose and the U.S. issued a temporary waiver to “allow” India to purchase Russian oil. After India managed to secure safe transit for some shipments from Iran, the U.S. blockade of Iranian ports further exposed the limits of India’s strategic autonomy.

As the world’s third-largest energy consumer, India remains deeply exposed to external shocks, with more than 70 percent of its energy supply still met by fossil fuels. While New Delhi’s case for greater leeway in emissions to meet its development needs was once defensible, the heightened vulnerability of fossil fuel supply chains today calls for an accelerated clean energy transition. 

Fortunately, India is already on the right track. The government has ramped up investments in rapid solar deployment and the adoption of electric vehicles (EVs) through targeted production-linked incentive schemes and tax cuts. In 2025-26 alone, India added a record 55 GW of non-fossil fuel power capacity, taking its total installed non-fossil fuel capacity to 283 GW. India’s EV market, valued at $2 billion, is poised for exponential growth, with a projected expansion to $164 billion by 2033.

Nevertheless, there is room for growth. Most of India’s installed non-fossil fuel capacity today comes from solar power alone (about 150 GW), with nuclear power comprising only about 3 percent of the mix. Efforts to liberalize the civil nuclear sector through the landmark SHANTI Act could enable much-needed private sector participation. However, sustained private investment will depend on clear, long-term, policy signals, financial incentives, and risk-sharing mechanisms to make nuclear energy commercially viable.

Financing remains a key constraint. Efforts to encourage domestic manufacturing of solar batteries, panels, and EVs are critical to avoid replacing one form of dependency with another. But accelerating the transition will also require attracting substantial foreign capital. India needs approximately $150-200 billion in investment annually until 2070 for its energy transition, yet current levels meet only about a quarter of that requirement. Broader ease-of-doing-business reforms and targeted policies can help attract greater FDI.

India also needs to deliver execution at scale. Even as India meets headline milestones with rapidity, achieving 50 percent of its 500 GW renewable energy target five years ahead of schedule, large segments of its population remain vulnerable. The government needs to reduce dependence on LPG for cooking for the roughly 330 million households that rely on it by promoting widespread electrification through targeted subsidies for electric appliances and affordable electricity access.

Finally, efforts to increase installed renewable energy capacity need to be complemented with improvements in power distribution. Non-fossil fuel sources comprise only a third of electricity generation in India, highlighting the gap between capacity addition and usable power. This is in part due to slower expansion of transmission infrastructure. Power distribution companies in the country continue to struggle with high technical and commercial losses, which are estimated at around 16 percent, more than double the global benchmark.

In a world defined by geopolitical volatility, India’s fossil fuel dependence is no longer a manageable risk but a structural liability. Unless it moves decisively to reduce that dependence, India will remain dangerously exposed to shocks it cannot control. 

Jahnavi Sodhi is an Associate at DGA-Albright Stonebridge Group. She previously interned at the Observer Research Foundation in India, where she published a paper on the international response to the 2019 amendments to Article 370 of the Indian Constitution concerning Jammu and Kashmir. She holds a B.A. in Government and Economics from Dartmouth College, where her senior honors thesis examined Iranian threats to oil flows through the Strait of Hormuz and the military capabilities of Gulf Cooperation Council states to respond.

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