CHINA added 543 gigawatts of new power capacity across all technologies last year, according to Bloomberg News (January 28, 2026). The report says that this is 12% more than India’s entire power generation (as of end 2024). Of this addition, more than 80% was in renewables, shared between solar and wind energy. As per the US Energy Information Administration, China holds the world’s largest strategic oil reserves (about 1.4 billion barrels). Interestingly, it significantly expanded its reserves in 2025, taking advantage of discounted Russian, Iranian and Venezuelan barrels. India held only 21 million barrels.
Over the past few decades, China has given itself tremendous strategic depth in rare earth minerals, EV (electric vehicle) production, lithium-ion battery production and clean energy. The Chinese are now world leaders in this entire value chain. By doing this, they have not only managed to reduce their dependence on fossil fuels and reduce pollution but also established a very dominant position as the world transits out of fossil fuels. The troika of rare earths, battery manufacturing for EVs and clean energy is the “holy grail” for extracting an economy out of fossil fuel dependence.
This has been achieved by meticulous planning, highlighted in the Five-Year Plans (currently, the 15th Plan is being implemented), which are made by the central committee of the Chinese Communist Party along with the State Council (the Chinese cabinet). This strategic advantage will determine how the nation copes with the coming energy shock. It will be the difference between high and low inflation and a critical factor determining where the data centres for the AI age will move to, for there is a strategic confluence of clean energy generation, its storage, rare earth minerals and data centres. Just last year, China wielded its strategic tool and nearly brought India’s EV production to a halt by restricting rare earth export (it has a near monopoly).
People make plans regarding their lives, generally based on their experience and prospects. Similarly, nations — through their governments — plan for the future. Such planning involves in-depth analysis of past and present experience as well as projections about anticipated developments. Based on the above, the State enunciates policies to deal with the future. Looking at ourselves and the situation in which India finds itself today vis-a-vis the energy situation and its ramifications, we appear to not have done the required homework over the past few decades.
Since India is not a major oil-producing nation, it is incumbent upon the Union government to make sure that resources would be available in all contingencies and to build adequate reserves, and more importantly opt for green energy in a big way so as not to be totally dependent on imported crude. While it is heartening that half of our installed electricity capacity is now from renewables, coal still does the heavy lifting with a nearly 42% share. Critically, it continues to provide 70% of the electricity consumed, even as India has not developed adequate storage capacity. Needless to say, China has done a lot on this front.
This decade has been one of continuous disruption due to the Covid pandemic, the wars in Eastern Europe and West Asia and the emergence of AI. India missed the Industrial Revolution and paid a heavy price for it. The nation missed the first half of the computer-dominated era of the 1980s and 1990s and only when it was driven to near bankruptcy did the reforms of the 1990s come into play. Thankfully, the private sector stepped in along with the armies of techies who helped salvage the situation. Though India has not yet become a serious player in the software development business, it has created a space for itself in the IT services sector.
Given the late start, it is commendable that India achieved this much. Coming to the disruption being wrought by AI, we have once again missed the bus and can see it moving away fast over the horizon. India is nowhere in the semiconductor business, and our entire electronic industry is dependent on the Asian giants — Taiwan, South Korea and China. The data centres being envisaged will also remain dependent. The US and China have made giant leaps in AI and its related infrastructure. The infrastructure involves high-grade chip manufacturing, low-cost power and the government as a reformist and enabler. Companies such as Nvidia have become trillion-dollar firms and control the flow of AI technology. The US decides who can and cannot get these chips. Dutch companies such as ASML, which basically make the machines required for high-grade microchips and have a near monopoly in this arena, sell only where the US allows.
Where in all this does India stand? Are we again going to hope to be some sort of service and maintenance provider? The level of automation and robotics coming into play suggests that even this role will be a diminished one.
As the conflicting strategic interests of nations come into play while trying to assume dominance in the AI age, astute and visionary leadership is required. Foreign policy and diplomacy will play a critical role in developing strategic partnerships to enable the development of AI infrastructure and energy security. Today, even our battery manufacturing for EVs and grid storage is dependent on rare earth minerals from China (again a near monopoly). The need for strategic alliances can be seen in the shortage of gas and likely shortage of fertilisers and crude oil due to the closure of the Strait of Hormuz by the war in West Asia and the resultant disruption in supply lines. India has been forced to scrounge around and ask for help. We had a tie-up with Russia, as did China, but the sanctions have hurt us more.
Similarly, Iranian oil is no longer available to us. Our storage capacity is limited, and India has only now tied up with the UAE to build large reservoirs…this will take time. The failure of US-Iran talks will only damage us further and create panic, which India has so far avoided. Simultaneously, the US is championing Pakistan and its Field Marshal and trusts it as an important mediator vis-a-vis Iran. The US has helped it out with the World Bank, easing its financial problems.
Adding to India’s troubles is the close relationship between China and Pakistan. During his recent visit to China, Pakistan PM Shehbaz Sharif was received by President Xi Jinping and the “higher than the mountains” friendship was renewed. A joint statement called for solving the lingering “Jammu and Kashmir dispute”.
The Chinese keep developing infrastructure in the North-East (NE), especially in areas to which they claim ownership. Our own situation in the NE is not looking too good with the three-year-old problem in Manipur and the festering sores in Nagaland and Mizoram. The newly elected government in Bangladesh also needs monitoring as it is cosying up to Pakistan and China and is capable of creating more problems for us in the NE.
Taking all these factors together — the energy situation, which is likely to aggravate further; the China, Pakistan and Bangladesh positions with respect to us; and our own internal problems — the time calls for astute statesmanship and diplomacy of the highest order. The nation must unite to face this multi-pronged assault. This initiative must come from the leadership of the Indian government.
