India’s energy intensity: India’s economy uses far less energy for each unit of output than it did during the 1991 balance of payments crisis. Our World in Data puts energy use at 1.37 kilowatt-hours per international dollar of GDP in 1991, against 0.96 kWh in 2022, a decline of about 30 per cent. Government data show a further fall of 1.26 per cent between 2022-23 and 2024-25.
Energy intensity measures the energy required to produce one unit of GDP. India’s total energy consumption has increased with the size of the economy. But output has grown faster than energy use.
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India energy intensity and crude dependence
The Gulf crisis aggravated India’s external payments problem in 1990-91. The petroleum import bill rose by $2 billion to $5.7 billion as crude prices and import volumes increased. Weak exports, falling remittances, large fiscal deficits and a loss of creditor confidence added to the pressure. By June 1991, foreign currency assets had fallen to $1.1 billion, barely enough for two weeks of imports. The government pledged gold to raise emergency funds.
The crisis forced an import squeeze and helped trigger the liberalisation programme. It also established the link between India’s dependence on imported oil and its external financial stability.
That dependence has since increased. The Petroleum Planning and Analysis Cell put crude oil import dependence at 88.7 per cent in 2025-26, up from 84.4 per cent five years earlier. India is more exposed to an oil supply interruption than the draft’s estimate of 85 per cent suggests.
The disruptions in West Asia during 2026 showed how quickly shipping routes, insurance costs and fuel availability can become economic concerns. India has diversified its suppliers and routes, but an interruption in a major producing region still raises the import bill and puts pressure on inflation and the rupee.
Lower energy intensity moderates this exposure. Each rupee of output requires less imported fuel than before. It cannot protect the economy from a sudden price rise or a prolonged supply disruption.
Why India’s energy intensity has fallen
Technology and the composition of GDP have driven the decline. Newer industrial equipment uses less energy per unit of production. Steel, cement and other large consumers have upgraded some processes, while power generation has benefited from improvements in plant operations and coal use.
The shift towards services has had a larger economy-wide effect. Software, finance, telecommunications and professional services consume less energy per rupee of output than steel or cement. Their growing share of GDP has therefore reduced aggregate energy intensity.
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The product mix within manufacturing has also changed. Steel and cement remain large energy consumers, but pharmaceuticals, electronics and engineering goods account for a greater share of industrial output. Process improvements within energy-intensive industries have added to the decline.
The improvement became more consistent after 2000. Energy intensity declined for 22 consecutive years in the Our World in Data series. In 2019, its rolling decadal rate of decline reached 2.13 per cent a year, the fastest since the 1970s.
India’s record is stronger than that of China and Brazil over comparable periods, though weaker than Russia’s. The United States, Germany and Japan have recorded steeper long-term reductions. Economic structure, technology and the energy mix account for much of the difference.
Energy efficiency policy has contributed
The Energy Conservation Act, 2001 gave the Bureau of Energy Efficiency responsibility for reducing the energy intensity of the economy. The Perform, Achieve and Trade scheme set energy-use targets for designated industrial consumers and allowed the trading of energy-saving certificates.
By the end of PAT Cycle VI, the programme had delivered estimated energy savings of 27.07 million tonnes of oil equivalent and avoided 115.21 million tonnes of carbon dioxide emissions, according to the Power Ministry.
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The standards and labelling programme has pushed manufacturers towards more efficient air-conditioners, refrigerators, fans and other appliances. Fuel-economy norms have imposed similar requirements on passenger vehicles. Building codes have introduced energy standards for large commercial and residential properties.
UJALA helped replace incandescent bulbs with LEDs. Energy Efficiency Services Ltd had distributed 36.87 crore LED bulbs by January 2025, apart from the much larger private market that followed the programme.
These schemes explain only part of the fall in energy intensity. The expansion of services and changes in the industrial product mix would have reduced the ratio even without them. Government programmes have, however, imposed measurable efficiency targets on industries and appliances that might otherwise have delayed investment.
Lower energy intensity is not energy independence
India’s next efficiency gains will be harder. Part of the decline came from a change in the structure of GDP. The government now wants manufacturing to grow faster. Unless steel, cement, transport, buildings and cooling systems become more efficient, a larger industrial base could slow the fall in energy intensity.
Renewable and nuclear power can reduce dependence on imported fossil fuels. They do not automatically reduce the quantity of energy used per unit of GDP. That requires better industrial processes, stricter appliance and building standards, lower grid losses and more efficient transport.
Energy transition and energy efficiency address different parts of India’s vulnerability. Domestic clean energy can replace some imported fuel. Efficiency reduces the amount of energy needed to sustain growth. An economy importing close to nine-tenths of its crude requires both.