India's green day rising

India's Energy Problem

India is now the world’s third‑largest energy consumer, yet it produces only a small share of the fuel it needs. 

The country imports around 89% of its crude oil, nearly half of its natural gas, and hundreds of millions of tonnes of coal every year. In FY22–23, India’s net oil and gas import bill reached US$144 billion, accounting for roughly one‑quarter of all merchandise imports.

This dependence means that every spike in global energy prices, whether triggered by geopolitical conflict, OPEC supply decisions, or disruptions through chokepoints such as the Strait of Hormuz, feeds directly into the Indian economy. The effects are immediate: wider trade deficits, higher inflation, pressure on household budgets, and reduced fiscal space for public investment.

Energy import dependence is not a peripheral macro issue for India. It is one of the country’s most significant structural vulnerabilities, shaping everything from inflation dynamics to external stability and long‑term growth capacity.

However, a shift is underway.... 

Despite its heavy dependence on fossil fuels, India is now undertaking one of the most ambitious energy transitions anywhere in the world. The shift is no longer theoretical thought. It is showing up in hard numbers. In FY25–26, India added a record 55.3 GW of non‑fossil capacity, almost double the previous year, driven overwhelmingly by solar and wind. 

The country is now the third‑largest renewable energy market globally, with total renewable capacity expanding 3.6x since 2014.

A symbolic milestone arrived in June 2025, when non‑fossil sources crossed 50% of India’s total installed electricity capacity, hitting a Paris‑aligned target five years ahead of schedule. Fossil fuels still dominate actual energy consumption, but the shift in installed capacity makes the direction unmistakable: India is laying the groundwork for a cleaner, more secure and less import‑dependent energy system.

And this isn’t just a capacity story. It is also a generation story. Non‑fossil sources supplied 29.2% of India’s electricity in FY25–26, up from around 18% a decade ago. Solar output has more than doubled in just three years, while wind generation recorded its strongest annual increase in 2025. 

In July 2025, renewables met 51.5% of India’s electricity demand on a single day, a moment that would have seemed improbable even a few years ago.

The grid is getting cleaner, but transport remains the sector where fossil fuels still have an overwhelming grip. Almost every car, truck, motorcycle and auto‑rickshaw on Indian roads still runs on petroleum. That’s why the government’s push into electric mobility is becoming central to the broader energy transition. Without it, India’s dependence on imported oil will remain one of its most stubborn structural vulnerabilities.

India’s shift away from fossil fuels isn’t being left to market forces. It is being engineered through policy. 

At the national level, the government has set a target of 500 GW of non‑fossil electricity capacity by 2030, backed by subsidies, tax incentives, manufacturing support and regulatory reform. 

On the demand side, the PM E‑DRIVE scheme is pushing electric mobility into the mass market by offering purchase subsidies for electric two‑wheelers, three‑wheelers and commercial vehicles. Lower GST rates, along with state‑level road‑tax and registration waivers, have further narrowed the cost gap between electric and petrol vehicles.

On the supply side, India is building the domestic ecosystem needed to support this transition. Reduced GST on renewable‑energy equipment and customs‑duty exemptions for lithium‑ion cell manufacturing equipment are designed to strengthen local supply chains across solar modules, batteries and EV components. State policy is also becoming more assertive. Delhi’s draft EV policy is a clear example: from 2027, only electric three‑wheelers will be eligible for new registration, followed by a phase‑out of new petrol two‑wheelers from 2028.

By combining financial incentives with firm timelines, these policies give manufacturers, fleet operators and consumers greater certainty. They also help India reduce oil dependence, improve urban air quality and turn electrification from a long‑term ambition into a mass‑market reality.

India’s electrification opportunity is unfolding largely outside the major index heavyweights. The companies driving this shift include EV manufacturers, battery innovators, charging infrastructure providers and component specialists and currently sit mostly in the mid and small‑cap universe, meaning they are often under‑represented or entirely absent from the MSCI India Index. Passive exposure captures India’s past; it risks missing one of the country’s most important structural growth themes.

Across the ecosystem, companies such as Amara Raja Energy & Mobility (pivoting from lead acid batteries into lithium‑ion and energy storage), Indian Energy Exchange (benefiting from rising use of electricity contracts to manage a more flexible, renewable‑ heavy grid), and Mahindra & Mahindra (scaling electric SUVs and mobility solutions) are already positioned to benefit from this transition. 

Capturing these opportunities requires active management, local insight and the flexibility to invest across the full market‑cap range.