The Changing Shape Of Energy Security India Lacks Good Poverty Statistics The Daily Brief 476

TITLE: The changing shape of energy security | India lacks good poverty statistics | The Daily Brief #476 CHANNEL: Markets by Zerodha DATE: 2026-06-01 ---TRANSCRIPT--- In today’s episode, we’ll break down two important stories. First, we’ll talk about energy security no longer being a fuel problem, and then we’ll talk about India’s missing poor. Welcome back to the Daily Brief by Zeroda, where we cut through the noise to help you understand what’s actually happening in the most important stories from business and markets. If you’re listening to this on your commute, on a walk, or at the gym, you can also find the daily brief as an audio podcast on Spotify, Apple Podcasts, or wherever you listen to your podcasts. I’m your host, Axara, and today is Monday, 1st June. Coming to the first story, so India is doing two seemingly contradictory things at once. On one side, we’re shifting to clean power as fast as any large economy on Earth. 5 years ago, for every rupee we put into fossil fueled electricity, we spent roughly a rupee and a half on renewables and nuclear power. But today, that has climbed to twice as much. Solar and wind now make up more than half of our installed power capacity with solar investment alone climbing about 25% a year. But at the same time, we’re building oil refineries at the fastest pace in years. Our refining investments have grown at around 23% a year over the past 5 years. And we are on track to add roughly 15% more by 2030. Almost all the crude we process is imported. And so the more we expand our refining capacity, the deeper our reliance on imported oil grows. So why are we simultaneously trying to insulate ourselves from fuel imports while also placing a bigger bet on the most import dependent part of its energy system? So, the energy world is in a weird inflection point and at the moment all we can do is hedge. But it isn’t just us. As a new report from the International Energy Agency or IIA notes, what the world considers energy security is changing rapidly. Now, for most of the last half century, energy security meant you needed to keep fuel flowing. 50 years ago, when the world had been hit by the oil shock of 1973, it responded by finding more oil in safer places like the North Sea. It also moved to use each drop of fuel it had more carefully with fuel economy rules and efficiency standards. We now find ourselves in such a moment again this year. So this time around, the IIA describes a very different instinct taking hold. The most reliable defense against being held hostage for oil countries are quickly discovering is not to need any. If you can get energy in the form that you don’t have to import or burn through, you are immune to being embargoed, blockaded, or priced out from another corner of the world. That logic is pointing the world to one direction, electricity. An electrified economy doesn’t perennially wait for its fuel to reach its borders. It’s already saving the world hundreds of billions in import costs, which is why close to 60% of all energy investment in the world now goes into electricity in some form, generating it, moving it, storing it, or running things on it. And the recent Hormones crisis has given this trend wings. As oil prices jumped this year, interest in electric vehicles climbed across the world, from the European Union to Vietnam. Countries like Japan and Korea, which import nearly all their fuel, are now putting public money into electrifying buildings and heating. They’re selling this to voters as national security, not climate policy. As the IIA warns, however, electrification doesn’t end a country’s dependence on the outside world. It only changes how that dependence looks. An economy that runs on oil has to keep buying oil, often from far away. An electrified one meanwhile has to get two different things right. It needs to spend a large amount of money up front and it needs to source a steady supply of manufactured hardware. Solar panels, batteries, transformers and other equipment that makes up a grid. If those are built and paid for, running costs drop and the fuel risk mostly goes away. But that comes with its own hurdles. The first is manufacturing. As we harp about endlessly on the daily brief, most of the world’s electrification hardware is overwhelmingly made in China. The country accounts for approximately 85% of the world’s solar manufacturing capacity, approximately 80% of its lithium-ion battery production, and approximately 95% of the capacity to make the wafers that go inside solar panels. It also controls more than 70% of the market for 19 out of the 20 minerals the IIA considers strategic. No single oil producer in the world enjoys anywhere near this level of dominance. Now the second hurdle is money. Clean power is capital heavy and frontloaded and almost all your investment is compressed at the very beginning while the savings only trickle in over decades. This makes electrification unusually sensitive to the cost of borrowing. So if money is hard to raise at the time infrastructure is being set up, the future earnings it could bring matter for little. As our technology improves, the burden drops. So over the past decade, the cost of solar panels, batteries, and electric vehicles fell by roughly 80%. Without these advancements, our current pace of electrification would cost twice as much. And yet, it is still not in everyone’s reach. Even if the equipment is cheap, if the loans needed to install it cost 12% a year, many are still unlikely to invest. That is the deep irony of our moment. Electrification was supposed to be a great leveler. The sun and the wind fall on everyone, unlike oil, which sits under a lucky few countries. But the things that turn sun and wind into electricity, capital and factories, are even more concentrated than oil ever was. And this has done something odd. There are few countries that can actually afford to make the switch, and there those that need it the least. A solar project in a rich country can be financed at a singledigit rate, often in the mids single digits. The same project in India, Brazil, Indonesia, or South Africa carries a cost of capital closer to 9 to 13%. In much of Africa, it runs above 20%. These higher interest rates add a recurring cost to the entire lifetime of a project, even though most investments are made up front. As a result, places that have the most to gain from cheap homegrown power are exactly the ones for whom it’s the most expensive to build. So that gap is getting harder to cross. For one, the world is becoming reluctant to give these projects patient capital instead tilting towards debt. While energy related borrowing rose about 10% last year, projects funded out of equity grants or subsidies edged down. The world is also doing away with the green premium it would once give electrification projects, shaving off some of their cost. And the market for sustainable label debt actually shrank about 14% last year as lenders went back to judging projects on their economics rather than branding. And the philanthropic money that once backs stopped risky projects in the poorest markets has thinned to a trickle. Instead, the capital for green infrastructure increasingly sits with a handful of very large institutions, pension funds, insurers, and asset managers. These now hold close to 30% of the biggest listed state energy companies and more than 85% of the largest private ones. These institutions chase lowrisk returns and are unlikely to fund moonshot projects somewhere in the developing world. And the result is stark. China, the United States, and the European Union account for about 2/3 of the world’s clean energy investment, and the rest of the world gets under 30% of its energy investment. Now, this has interesting knock-on effects. In a situation like the Hormos crisis, countries that could already raise the money for green projects were the most capable of displacing its effects. Meanwhile, those most exposed to swings in fuel prices have the least capital to climb out of that exposure. So, how does the developing world break out of this gridlock? IA points to one idea, capital recycling. If developers can sell or refinance their finished working projects, that could free up money for new ones. The same equity then can build several things over time instead of just one. This is already happening in the richer world. There the market for buying and selling operating projects grew from around $220 billion in 2013 to roughly $960 billion a decade later. But once again in the developing world which needs this kind of secondary market the most it barely exists. And without buyers for finished assets money stuck in one project never reaches the second. Now this might sound dry but consider this. If the cost of capital in developing economies comes down by a single percent, their yearly cost of financing their clean power and electrification falls by about $30 billion by 2035. Paradoxically, meanwhile, a moment like this pushes them further into coal and gas. So, take coal. As recently as the beginning of this year, it seemed like coal would soon cease to be the world’s energy backbone. But the world has suddenly learned just how unstable its oil supplies were. While green energy projects are unaffordable at the moment, therefore, coal is being recast across much of Asia as a security asset. It’s easy to find, plentiful, and relatively immune to the wrath of hormones like choke points. The world’s coal supply investment is now at its highest in more than a decade at around $180 billion. Meanwhile, investment in natural gas supply is at a 10-year high as well, but for very different reasons. This isn’t just an outcome of capital starvation. The United States, the world’s richest country, is ordering gas fired power plants at the fastest rate in 25 years. Now, much of it is meant to feed the surging electricity demands of AI data centers. And in just the last year, the country has placed approximately $24 billion worth of gas related orders for data center projects alone. If American data centers were a country, they would be the world’s second largest destination for gas turbines. The timeline for AI demand is simply too short for grids and clean plants to catch up. And so, in a moment that’s pushing the world towards electrification. Paradoxically, fossil fuels have suddenly had a second wind. Now, India sits in an awkward spot through all of this. We are too big and growing too fast to stay still. Our appetite for energy is growing faster than almost anywhere on Earth with our total energy spending rising about 11% a year. We’re too short of cheap capital to outspend the problem and we can’t lean fully into clean energy because that requires money we can’t afford and hardware imports from China who we don’t fully trust. And yet we can’t afford to stand still either. Structurally we need much more energy than we currently make. And so we do both. As we recently covered, we’ve built out so much green energy infrastructure recently that our raw capacity for generating energy isn’t our biggest problem anymore. Our biggest bottleneck now is finding a way to absorb all that energy. Some of our biggest investments are in things like the grid and batteries. Of late, even tenders for solar and wind energy are paired with storage so that our energy can be made reliable around the clock. But we’re hedging this with a massive buildout of refineries. We are increasingly a maker and exporter of finished fuels, capturing value and supply that would otherwise sit abroad. This naturally deepens our need for imported crude. But when the alternative is expensive finance and a dependence on China, all can actually become insurance. And so we have to fend off two risks at once. The risk of being shut out of the clean future and the risk of being caught short in the fossilbased present. If you prefer reading the daily brief instead of watching the video, check out the link to the newsletter in the description. Coming to the second story, between 2004 and 2011, India pulled off something rarely seen in the world. Our poverty rate fell from 37% to 22%. Every single year, we would drop more than 2 percentage points. That is every year 1 in 50 Indians, tens of millions of people would break out of poverty. And then for about a decade we struggled to even count how many poor people we had. Our economy kept growing through this period. Our GDP per capita rose by over 4% a year for the entire decade. And by any normal logic, poverty should have kept falling, maybe even at a faster rate. But did it? That’s a hard question to answer because we simply stopped counting. But there’s some indication to be found in a 2025 Tinbagen Institute discussion paper authored jointly by researchers at JNU and the Va Unipazite in Amsterdam. The three of them set out to reconstruct what happened to Indian poverty after 2011, a period when the data had a hole in the middle. Now, India counts its poor the simplest way imaginable. Surveyors knock on doors and ask what a household spent last month. They then add up the answers, draw a line, and count who falls below it. One of these surveys was due around 2017. Although the survey itself happened, the government refused to release the results, citing concerns about data quality. And so for roughly a decade, India had no official trustworthy consumption numbers at all. But there was some leaked tabulations. According to the economist S. Subramanyan, they pointed to something unfortunate. Poverty, it appeared, may have ticked up slightly between 2011 and 2017. A new survey finally arrived in 2022 and 2023. On the surface, it suggested a dream headline. India’s poverty had fallen 29.6% to 7.2%. That is, in a decade, poverty had fallen from nearly 1 in 3 Indians to barely 1 in4. But this didn’t settle things because the survey changed how it measured people’s consumption. So, the new survey used a different recall method from the one in 2011 with different time windows for different goods. Surveyors now visited each household several times instead of once. They bundled the items differently, added new ones, and began putting a value on goods people received for free. Now, this wasn’t a conspiracy. In fact, many of these were genuine upgrades. But when you overhaul a survey like this, ordinarily you run a small bridge survey alongside it, done the old way just once so the new numbers can be lined up against the past. But that step was skipped and with that we lost the ability to compare ourselves against older figures. Even though we had new numbers now, these changes made them incomparable with older surveys. You could tell how people responded to the new survey, but you couldn’t tell if there was real change in people’s lives or if the new method simply gave different answers. There was also a third problem. Nobody agrees on the poverty line. So you can think of a poverty line as a cutoff. Spend less than rupees x in a month and you’re counted as poor. Spend more and you’re not. India has two of them drawn by two different government committees. So the lower of these and therefore the one that’s harder to be considered poor under was the Tendulkar line. By that line 22% of Indians were poor in 2011 and the Rangar Rajan line sat higher considering more people as poor. Effectively even if we had spending data from every single person in India, we wouldn’t know exactly how poor people were. So with these problems in the data, all one could tell was that our level of poverty had moved. only it was much harder to estimate exactly how much it moved by. And for that we would need something more creative. So to get around our many data challenges, the researchers attempted something called surveyto survey imputation. A method that one of the same researchers had discovered previously. So instead of comparing spending, which the two surveys measured differently, they only looked for those things both surveys measured the same way. Both had household sizes, years of schooling, what kind of work people do, what they own, a fridge, a two-wheeler, a phone, and so on. And that gave you a pattern. A household that looked a certain way tended to spend a certain amount. If you applied the pattern to the new survey, you could make an educated guess on what those households would have spent, counted by the old method. So, the authors then ran the model a thousand times over, giving them a proper range instead of one fragile guess. Now, in a richer version of the same exercise, they also tracked patterns alongside results from labor force surveys we carry out every year, getting a richer year-by-year picture rather than one frozen frame. Now, this method isn’t magic, as the authors themselves admit. There’s no guarantee that a statistical relationship from 2011 has any meaning today. They did test it backwards between 2004 and 2011 for when we had good data. There it tracked reality quite closely but anything could have broken that correlation in the following years. This is a reconstruction. It is imperfect but it does offer some sort of bridge between two data series with a massive gap in between where none existed previously. And this exercise gave the researchers a range. The quick method that simply compared the two surveys showed a drop in poverty from 22% to around 11 to 14%. In the richer method which also used jobs data, the decline was less steep still dropping to approximately 18% by 2017 and then hovering at 17 to 18% through to 2022. This is all incidentally under the Tendulkar line. The stricter Rangar Rajan line gives a poverty rate somewhere in the low 20s. Now a common finding that runs across this is our rate of poverty decline has slowed against our old pace where poverty came down by 2% every year. the pace fell to less than 1% if not lower. In fact, chances are we saw a quick enough decline until around 2017, but it stalled there and some of our gains were wiped away in the co years of 2020 and 2021. But this is a national average. Underneath they found a wildly uneven map with different parts of India seeing completely different fates. So Uttar Pradesh, India’s largest state stands out with a clear and real fall in poverty across both villages and cities. In its immediate neighborhood though the picture was very different. Bihar barely budged. Jarkand and Madhya Pradesh weren’t much better off either. Whatever worked in UP wasn’t happening around it. And that gap wasn’t some quirk of measurement. It was clearly a matter of policy. Poverty reduction in Maharashtra and Aldra Pradesh to flatlined. In fact, in some states that already had low urban poverty, urban poverty actually crept up. Villages and cities too saw very different fates. Rural India saw the bigger drop from 2011. But at the same time, it also took the postcoavid hit. The bounce back in poverty rates after 2020 is mostly a village story. Meanwhile, cities improved less and more unevenly, but they also held on to their gains through the pandemic. One of the challenges with India’s poverty reduction is simply our size. Our population went from about 1.26 billion in 2011 to 1.43 billion in 2022 with hundreds of millions of new people. Even when the poverty rate fell, the number of poor Indians barely saw a dent, dropping from approximately 270 million to maybe 250 million. Now, the paper doesn’t attempt to tell us what happened. After all, it’s a measurement paper. It’s trying to get the number right, not to explain it. But here’s our speculation detached from the paper’s findings. So the last decade has showed up serious headwinds that were beyond anyone’s control. Co was a real external shock and in the years since the world has been through a wider slowdown that no single country fully controls. None of this is good for an economy. But there are clearly choices involved. Consider the state gap. Why does up pull ahead when Bihar, a culturally smaller state that sits just next to it, cannot? Things like this signal that governance and state level policy matter. And as we recently covered, some of this ties back to India’s broken labor markets where real wages for unskilled workers have gone nowhere for years while people are sliding back into low paid farm work because the factories never showed up. Many Indian economists like Modi or Gartaken Kumar have been making a similar point that our headline GDP growth may overstate how good things really are on the ground. This new paper certainly gives them some firepower. But there are other choices worth thinking about. Holding back the results of a survey is a choice, as was the lack of a bridge between our older consumption figures and the newest set. That more than any single figure is the real story. You might have whatever beliefs you do politically and you might completely disagree with their reading on India’s poverty rate. But it’s unfortunate that a country of India stature doesn’t have detailed statistics on its consumption or that researchers have to reverse engineer it with clever statistics out of a university in Amsterdam. That is a failure of our statistical plumbing. Good official statistics are infrastructure as basic as roads or electricity. When they break down, everyone argues past each other with their own favorite numbers while the truth dies a lonely death in between. Now coming to the tidbits. The government is finalizing a new policy to promote coal gasification based ura production aiming to reduce dependence on imported natural gas and improve fertilizer self-sufficiency. The move has gained urgency amid global energy supply concerns and growing industry interest in coal based ura projects. Coming to the next tidbit, creditors have realized more than rupees 4 lakh cr through resolutions under the insolveny and bankruptcy code or IBC. While over 30,000 cases involving rups 14 lakh cr was settled even before formal admission. The government says the IBC has significantly improved creditor data discipline and accelerated resolution of stressed assets. Coming to the final tidbit, SBI chairman CS Shetty warned that the ongoing West Asia conflict could weaken global growth, raise energy prices and push up inflation. While India remains relatively resilient due to strong domestic demand and public investment, prolonged disruptions could weigh on FY27 growth and inflation. That’s all the news I have for you. Thank you so much for watching and see you in the next one.

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