Montek Singh Ahluwalia Warns Of Worst Energy Crisis In 30 Years At ABP's India@2047 Conclave

Ahluwalia noted that India cannot completely insulate itself from global energy shocks because the country remains heavily dependent on imported fuel.

The former Planning Commission Deputy Chairman also called for a more transparent fuel pricing mechanism, suggesting consumers should have a clearer understanding of how global energy prices influence what they pay at the pump.

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Key points generated by AI, verified by newsroom

• India faces severe energy crisis, impacting current account deficit.
• Petrol subsidies unjustified; fuel prices need transparency.
• Government absorbs some energy shock via tax cuts.

As India works towards its ambition of becoming a developed nation by 2047, the country is facing what could be its most significant energy challenge in decades, former Planning Commission Deputy Chairman Montek Singh Ahluwalia warned at the ABP Network India@2047 Conclave in New Delhi on Tuesday.

Speaking during the session titled 'Reviving PPP: Reimagining Infrastructure Financing', Ahluwalia described the ongoing fuel shock triggered by the conflict in West Asia as the worst energy crisis in nearly three decades, cautioning that higher oil and fertiliser prices could create fresh pressure on India's economy.

"This crisis will almost certainly raise the CAD (Current Account Deficit) because of the additional price we pay for imported oil, fertiliser. On the other hand, the capital account surplus is going down due to foreign outflows. There is still uncertainty," he said.

His remarks come at a time when elevated crude oil prices, geopolitical tensions and foreign capital outflows are creating new challenges for policymakers seeking to maintain growth momentum while preserving macroeconomic stability.

Energy Shock A Short-Term Challenge, Not A Permanent Setback

Despite the near-term concerns, Ahluwalia stressed that the current crisis should be viewed as temporary rather than structural.

Speaking about India's long-term development journey, he said the country remains capable of achieving its ambitions, provided policymakers stay focused on growth-enhancing reforms.

"We should recognise this is a short-term crisis and this will take about 2-3 years to come back on track, maybe 2 years," he said.

According to Ahluwalia, the real challenge lies in ensuring that India does not lose sight of its long-term growth objectives while navigating the immediate impact of the energy shock.

India Needs Faster Growth To Reach Developed-Nation Status

Ahluwalia argued that India's current growth trajectory may not be sufficient to achieve the country's 2047 aspirations.

"If you want to grow at 8 per cent on average for 20 years, you're not going to do that in a steady 8 per cent. What's going to happen is you're going to grow faster earlier and as the country becomes richer and more complicated, the growth rate will slow down," he said.

He suggested that India should target significantly higher growth over the next decade before settling into a more mature growth phase later.

"An 8 per cent average for India means that maybe in the next 10 years, we should be aiming at 9 per cent, and then go down to about 7 per cent, so you average 8 per cent."

Comparing current performance with the growth required to meet the 2047 goal, Ahluwalia said India still has work to do.

"I think we probably need to increase our growth rate by 3 percentage points. From about 6 now to something like 9."

Infrastructure, Logistics And Policy Reforms Hold The Key

According to Ahluwalia, achieving higher growth will require addressing several structural bottlenecks.

"The real question is, how are we doing now compared to a reference growth rate that's relevant to 2047?" he said.

He identified infrastructure development, logistics efficiency and administrative reforms as critical areas requiring urgent attention.

"There are certain areas where we are lagging behind, where we have to move more to better. Infrastructure is really one of them, procedures and logistics is another. All of these require innovative change in policy."

The comments tied directly into the central theme of the session, how India should finance the next phase of infrastructure creation.

Government Alone Cannot Fund India's Infrastructure Needs

Ahluwalia argued that public finances alone will not be sufficient to support the scale of infrastructure investment required over the coming decades.

"So does the government have enough money to spend? One hundred per cent it doesn't have," he said.

He noted that institutions such as the World Bank had long advocated the use of public-private partnerships as a way to bridge infrastructure financing gaps.

"Actually, I think the World Bank, for many years, even in the UPA period, approved of the push to bringing in PPPs. And now, this government has continued that, done it in a slightly different way."

While acknowledging recent efforts, he suggested that India could make far greater use of PPP models.

"I think that we could do much, much more directly through PPP."

Asset Monetisation Is Different From PPP

Ahluwalia also drew a distinction between traditional PPP projects and the government's current asset monetisation strategy.

"What is currently being done is not actually just PPP. What is being done is what they call monetisation of the infrastructure pipeline."

Under the monetisation framework, the government develops infrastructure assets and subsequently sells or leases operating rights, using the proceeds to fund additional projects.

"That means the government will build the asset in the first place, then sell it off or sell off the right to use, and use that money to build other assets."

While the model has advantages, Ahluwalia suggested that excessive reliance on monetisation may reduce opportunities for private-sector expertise during the construction and development stages.

"When you do that, you lose all the project expertise of construction. If you ask me, the private sector is much better."

Transparent Contracts Attract Better Investors

The former Planning Commission Deputy Chairman also addressed concerns around private-sector participation in public infrastructure projects.

"If the concern is oligopoly, that can be very easily tackled by setting the appropriate rules," he said. According to him, the real challenge lies in designing robust concession agreements and ensuring transparency throughout the bidding process.

"In order to do proper PPP, you have to devise really good concession agreements and then invite bids." He argued that transparent frameworks encourage stronger competition and attract higher-quality investors.

"People say that you provided a concession agreement, combined with non-transparent bidding, and handed it over to your buddies. As long as the concession agreement is transparent, I think you actually attract better bidders."

Ahluwalia added that serious investors often avoid opaque bidding systems because they fear connected players may enjoy an unfair advantage.

"Bidders don't like coming in to concession agreements that are non-transparent because they feel that connected people can always handle that problem, whereas they can't."

Fuel Prices Should Reflect Market Reality

Turning to the energy sector, Ahluwalia argued that India cannot completely shield itself from global fuel price movements given its dependence on imported crude oil.

"When you are importing something, you need to pay the price," he said.

He questioned the logic of broad-based fuel subsidies, arguing that petroleum products should not be treated in the same way as essential welfare goods.

"Petroleum in itself is not a product that deserves subsidy. It is not like medicines. Someone driving a Mercedes doesn't deserve a subsidy on petrol prices."

Calling for greater transparency in fuel pricing, he said consumers should have a better understanding of how global energy markets influence domestic prices.

"Most of the stuff is controlled by marketing companies which are owned by the government."

"We need much greater transparency in how the petrol prices are determined. Consumers should recognise that since we are 80 per cent dependent on petrol imports, this is a product whose price will rise and fall. We should let the prices rise and fall according to the market so people understand this."

At the same time, Ahluwalia acknowledged that the Centre has attempted to soften the impact of rising global energy prices on consumers.

"The government has taken a bit of a hit by reducing excise duty," he said.

Protectionism Cannot Deliver Make In India

Ahluwalia also cautioned against relying on protectionist policies as a pathway to manufacturing growth.

"The notion that Make in India can be achieved simply by protectionism is an unmitigated disaster," he said.

According to him, the original objective of the programme was to create globally competitive industries rather than shield domestic producers from competition.

"The logic of it is in an open environment, we make in India and for the world." He argued that policymakers should focus on improving competitiveness and productivity rather than relying excessively on tariff barriers.

Looking ahead, Ahluwalia stressed that foreign capital would continue to play a crucial role in supporting India's growth ambitions.

"We need to relook our policies towards FDI because we need them," he said.

Combined with his call for a fresh look at foreign direct investment policies, the remarks underscore a broader argument: that India's path to becoming a developed economy by 2047 will depend not only on infrastructure creation and capital investment, but also on maintaining openness, competitiveness and investor confidence.