Column: India's economy - and emissions - primed for big jumps in 2023

India's economy - and emissions - primed for big jumps in 2023: Maguire
Labourers fill sand in a trolley next to electricity pylons carrying high tension wires on the outskirts of Ahmedabad, India October 13, 2021. REUTERS/Amit Dave/File Photo

LITTLETON, Colo., Feb 7 (Reuters) - India is set to become the world's fastest-growing major economy in 2023, with an investment boom likely to spark sharp increases in factory output, bank lending and consumer purchases, according to a recent survey by the Indian central bank.

Climate trackers will be alarmed by such a robust outlook, as India's power sector already spewed out near record emissions in 2022 when its economy was stuck in a lower gear, and will likely elevate pollution totals further as momentum builds.

Overall economic and industrial activity was curtailed in 2022 by a mix of parts shortages for producers, rising interest rates that slowed consumer demand, and a record weak rupee against the dollar, which made imports more expensive.

But following rapid corporate deleveraging that helped improve bank balance sheets in 2022, "the private sector is poised to increase spending, which can boost capex as and when the investment cycle picks up," according to consultancy Deloitte in its 2023 India economic outlook.

If overall industrial activity does increase as expected in 2023, then energy use and pollution from production lines and smokestack plants across the country can also be expected to climb, undermining global efforts to reign in fossil fuel pollution.


India's power sector emissions of carbon dioxide (CO2) and equivalent gases are on track for a record in 2022, according to data from think tank Ember.

The emissions tally for January through November - the latest monthly data available - is 7.5% above the same period in 2021, which registered a record annual power sector emissions total of 1.091 billion tonnes.

Strong, sustained electricity demand from households, retail outlets and offices - mainly for air conditioners - helped push India's overall electricity demand higher in 2022, despite the soft showing from manufacturers.

The primary source of pollution in 2022 was record-high use of coal, and a sharp drop in natural gas use because of high global gas prices.

India's electricity generation and emissions scale record highs in 2022

Total electricity generation through November increased by 8.3% from the year before, indicating that India's power producers successfully deployed larger amounts of new clean power in 2022 (up 13.3%) than new fossil-fuel power (up 6.7%).

However, electricity generation remained overwhelmingly reliant on coal, with an average of 72.7% of electricity coming from coal in 2022, Ember data shows.

With natural gas markets still disrupted by the fallout from Russia's invasion of Ukraine, Indian power producers are expected to continue relying on coal for a majority of baseload power generation in 2023, even as they roll out additional supplies of clean but intermittent renewable energy.


While electricity output trended higher in 2022, key measures of Indian manufacturing activity stalled below recent peaks, as a combination of supply chain stress, rising interest rates and a deteriorating rupee exchange rate slowed both production and consumption.

Indian rupee vs US dollar exchange rate

India's famed car market - the fourth largest by sales and production in 2021 - was particularly hamstrung, with average production in 2022 holding roughly 25% below the average from 2014 through 2018.

India car sales and production since 2010

Other measures of Indian manufacturing activity also revealed sustained sub-par output levels, with several indices published by the Ministry of Statistics and Programme Implementation (MOSPI) pointing to reduced production across the textiles, wood product and fabricated metals sectors.

India’s electricity output scaled record highs in 2022 even as manufacturing stalled

However, 63% of business leaders across India surveyed by investment bank JP Morgan are optimistic about the economy in 2023, with 94% of businesses expecting capital spending to grow or stay the same, and 84% expecting profit growth.

Some areas of concern remain, with 44% of those surveyed noting that supply chain pressures are worse than a year ago, while 61% said that a recession is likely in 2023 in line with expectations for the global economy.

But the overall upbeat tone of those surveyed - along with similarly positive expectations for India across the financial community - suggest that businesses across every sector of the economy are primed for growth this year.

That means more energy use across homes, offices, farms, factories, mines, refineries, cement plants and logistical channels - along with a commensurate rise in emissions.

With the country's power sector already on track to hit a new record through November last year, the cumulative emissions toll in 2023 could easily surpass a billion tonnes again, cementing India's status as the third largest power sector emitter after China and the United States.

Reporting by Gavin Maguire; Editing by Robert Birsel

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Gavin Maguire is the Global Energy Transition Columnist. He was previously Asia Commodities and Energy editor.