India’s manufacturing activity, which consumes about half of the country’s power supply, surged in August to the highest level in 17 years, driving the fastest growth in electricity generation in five months.
India saw a 4% rise in power generation in August, according to a Reuters analysis of data from Grid India, the federal grid operator.
Industrial activity, which began to recover in July and soared in August to a 2008 high, was the key driver of higher electricity generation in one of the fastest-growing developing economies.
India’s manufacturing activity, as measured by the HSBC India Manufacturing Purchasing Managers’ Index (PMI) compiled by S&P Global, signaled the fastest improvement in operating conditions for 17 and a half years.
Strong demand continues to underpin robust increases in factory orders and production, S&P Global noted.
As the manufacturing sector accounts for half of India’s power demand, electricity generation jumped in August by the most since March this year. Further improvements are likely in the coming two quarters as the June-September monsoon season with heavy rains is coming to a close.
Doubts remain about how India’s massive manufacturing industry would cope with the now-hiked 50% tariffs on Indian goods imported into the U.S., with 25% of the tariff due to India’s continued purchases of Russian oil.
Still, India’s power demand from the business is rising and generation responds.
The higher power output helped generation from coal—which remains India’s top electricity source—post an annual increase in August for the first month in five months.
Despite the lowest coal prices in Asia in four years, India’s coal power generation dipped in May to the lowest since the Covid lockdowns of 2020, as a lack of heatwaves and soaring renewable energy installations and generation pushed down coal demand in the electricity sector.
In July, India boasted achieving five years ahead of schedule its target to have 50% of its installed electricity capacity coming from non-fossil fuel sources.
This installed capacity, however, does not mean renewable power generation will soon replace coal in India, especially if grid constraints and battery and transmission delays persist.
By Michael Kern for Oilprice.com
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