Slowing Demand Growth Raises Risk Of Power Oversupply In India: Fitch Ratings

New Delhi, May 14 (KNN) India's power sector is confronting a potential oversupply risk due to persistently sluggish electricity demand growth combined with rapid capacity additions, according to a recent report by Fitch Ratings.

The global rating agency highlights that India has experienced relatively modest electricity demand growth of approximately 4 percent over the past two years, while power generation capacity continues to expand significantly. 

Fitch projects that this moderate growth trend will continue, with power demand expected to increase by 4-5 percent over the medium term, similar to the 4 percent growth observed in the fiscal year ended March 2025.

This represents a marked deceleration from the previous growth trajectory, with demand growth in FY25 declining to approximately half the 8 percent rate recorded during FY22-FY24. 

The slowdown is partially attributed to weaker-than-anticipated GDP growth, according to Fitch.

Energy shortages at the national level have diminished significantly to 0.1 percent in FY 2024-25, compared to 4.2 percent in FY 2013-14, reflecting considerable improvements in generation and transmission capacities.

The reliability of electricity supply has also improved markedly, with average availability in rural areas increasing from 12.5 hours in 2014 to 21.9 hours, while urban areas now receive up to 23.4 hours of power supply.

Total installed power generation capacity has expanded by 83.8 percent, rising from 249 GW as of March 31, 2014, to 457 GW as of November 30, 2024. 

Looking ahead, Fitch forecasts economic growth of 6.4 percent in FY26 and 6.3 percent in FY27, which should support steady increases in power demand. 

However, the agency cautions that significant risks to the economic outlook remain, including uncertainties surrounding India-Pakistan relations, global trade dynamics, and potential U.S. tariffs.

(KNN Bureau)