3 min readMay 25, 2026 06:00 AM IST First published on: May 25, 2026 at 06:00 AM ISTThe US war on Iran has prompted a rethink on the challenges facing the Indian economy. While most of the focus at present has been on the sharp fall in the exchange rate of the rupee, the rupee’s fall isn’t, by itself, the problem. It is, rather, a reflection of the more substantive weaknesses in the economy. The biggest one is India’s high and rising dependence on energy imports. The initial response of austerity — urging people to work from home and other ways to conserve energy — could at best be a short-term fix. It is not a surprise that on his return from the five-nation tour last week, Prime Minister Narendra Modi held a meeting with his council of ministers to review the state of the economy and asked them to urgently explore alternative energy sources.An economy such as India’s that hopes to quadruple average incomes over the next 20 years will need all the energy it can get. For instance, according to the government’s own data, between 2013-14 and 2023-24, per capita electricity consumption rose by 46 per cent. But while demand is growing fast, and is expected to grow faster, the supply of energy is a different story. Take coal, for example. India has one of the largest reserves of coal in the world and coal has remained the backbone of its energy supply, accounting for nearly 79 per cent of the total energy supplied domestically in 2024-25. Yet, the government admits in 2026 that the country has “experienced a steady dependency on imported coal over the last decade”. The net energy import dependency — an indicator that measures the extent to which a country relies on imports to meet its energy requirements — for coal is more than 23 per cent. This dependence on imports is alarmingly high and rising when it comes to crude oil (almost 90 per cent, up from 85 per cent a decade ago) and natural gas (50 per cent, up from 40 per cent a decade ago).AdvertisementWhen it comes to a shift to renewables, India is fourth globally in renewable energy installed capacity, fourth in wind power, and third in solar power capacity. But more needs to be done, and soon. Finally, beyond finding new ways to produce and source energy with a view to reducing import dependence, India must also relook at how it uses its energy. Can it shift to electricity (produced from domestic sources) for cooking food instead of using imported gas? Or so radically improve public transport that it reduces the need for cars? Those are the questions.