India Rising - What President Obama Will See When He Visits India in 7 Days

President Obama is going to India next week and high on his agenda should be the strengthening of the Green Partnership formed a year ago with Prime Minister Singh on his state visit to Washington. The leaders’ agreement set off a year of expanding and intensifying engagement between dozens of energy and environmental and other agencies, bureaus and offices in the two governments. In a remarkably short time, they have built a very promising framework for research and deployment of clean energy technologies.  In a week, the leaders are expected to sign and launch a number of the key elements of the Partnership, which could rapidly grow to $100 million a year. One important area the leaders should increase focus on is the development of lower-carbon economic development strategies.

When President Obama arrives in Delhi, he will see a rising India. The India he will encounter is one that is growing rapidly, is consuming resources at an unprecedented rate, and whose greenhouse gas emissions are on the rise. At the same time, it will be an India where energy supply is lagging behind, and where most of its people remain very poor and vulnerable. America understands that the path India adopts on its rise up the ladder of prosperity will impact America’s own future, and that of the world.  Here are some indications of the potential challenges ahead for both India and the U.S.; the statistics and projections are stunning:

By 2050, India’s economy will grow to almost 90% the size of the then U.S. economy, and be the third largest in the world, after the U.S. and China. The Indian economy is likely to grow at the rate of at least 6% annually until 2050, perhaps closer to 7.5%. This is a higher rate than any of the BRICS economies (Brazil, Russia, India and China), and is the highest annual average GDP growth rate amongst the G20 countries. India is also likely to be the fastest growing economy in the world (a higher growth rate than China). India will have the highest average investment rate, at 33-34% a year, signifying a robust economy. Even more optimistic estimates based on an 8% GDP growth rate model suggest that India will overtake the U.S. economy by 2043 to become the world’s second largest economy.  

              World’s Largest Economies in 2050 – India Will be Third Largest

(Source: Goldman Sachs, Dreaming With the BRICS: The Path to 2050, Global Economics Paper 99)

India’s middle class will grow from roughly 50 million people today, to over 500 million by 2025, a ten-fold increase in just the next fifteen years. India will be the fifth largest consumer market in the world by 2025. With at least a steady 4% rise in per capita income over the next four decades, India’s consumer spending will grow four-fold from 17 trillion Indian Rupees today to nearly 70 trillion by 2025. By 2050, India will have the largest aggregate number of cars on the road, compared to any country in the world. India’s urban population will expand by nearly 40% by 2030. A doubling of coal-fired power generating capacity from 78 GW to 142 GW is expected by 2030. Demand for oil is also expected to quadruple in India by 2030, and India could become the world’s fourth largest importer of oil as early as 2025. By 2050, India could account for as much as 11% of the world’s carbon emissions. Climate models commissioned by India’s Ministry of Environment and Forests indicate that India’s aggregate greenhouse gas emissions could grow to between 4 and 7.3 billion tons of CO2 equivalent by 2030 (per capita emissions in 2030 will accordingly range between 2.7 to 5 tons of CO2e).

India’s Total Greenhouse Gas Emissions – Projected Increase According to Five Models

  (Source: Ministry of Environment and Forests, India, India’s Greenhouse Gas Emissions Profile: Results of Five Climate Modeling Studies, 2009)

While these trends will further deplete the planet’s natural capital, the implications are grave and even more immediate for India’s environment, and its own aspirations of sustained economic growth and development. Studies indicate that India is the second most vulnerable country to climate change. By 2030 India will have only half the water it needs to meet total demand. India already leads the BRICS countries in the number of mammals under threat, and its ecological footprint is twice as high as its biocapacity. Climate change is likely to cause temperature rise and variation in rainfall patterns, posing a particular threat to agriculture in India, a sector that accounts for 14% of the nation’s GDP, 10% of exports, and employs nearly 60% of the workforce. Additional threats to the economy will emerge from floods, droughts, an increased disease burden, and rising sea levels, which could disrupt economic activity in hubs like Mumbai.

In order to achieve its true growth potential, it is imperative for India to improve environmental quality, including improving energy efficiencies, and making energy and water usage cleaner. This requires creating greater public awareness of the importance of environmental sustainability and adopting new and cleaner technology, especially in energy. It also requires equipping regulatory agencies with more teeth and building their capacity. India could achieve abatement of nearly 30-50% of its emissions through a suite of measures in the power, transportation, agro-forestry, manufacturing and buildings sectors. The good news is that India is already starting to take action on a number of fronts. Another positive trend is that India’s carbon intensity is expected to halve by 2030. According to some projections, in a “Green Growth” scenario until 2050, India’s emissions could rise by only 115% instead of by 400% in a “Business-as-Usual” case. Of course, to maximize the gains of sustainable development and prevent higher abatement costs resulting from inaction, India should accelerate its efforts right away, since waiting even five more years could add more cost and difficulty to the task of curtailing emissions.

Effect of Postponing Action Against Climate Change in India – A Lost Opportunity

(Source: McKinsey and Company, Environment and Energy Sustainability: An Approach for India, 2009)

President Obama is going to India at a pivotal moment. India is embarking on an adventure, one where it is faced with some very important choices. The Indian government has declared where it wants to go – to a secure, sustainable future of real prosperity and economic health. And thus the path it must take is clear too – a cleaner, greener, responsible growth trajectory that will safeguard the lives of its billions, and of the rest of the world. This is a vision that the United States also shares. We hope that Prime Minister Singh and President Obama can continue down this common path together and enable a lower-carbon, green trajectory for India’s rise.