India is pursuing an unprecedented economic and environmental objective: expanding its gross domestic product nearly eightfold by 2047 while simultaneously transforming its energy and industrial sectors to achieve net-zero emissions within two generations. This dual challenge, highlighted by the government thinktank Niti Aayog, represents a historic first among major economies, which have typically industrialized before decarbonizing.

Unlike China, which industrialized at a large scale without a net-zero target, or developed nations that grew wealthy prior to transitioning to low-carbon systems, India faces the task of building infrastructure and meeting rising energy demands while reducing emissions. The country’s climate vulnerability is acute; in April, all of the world’s 50 hottest cities were located in India. Despite this urgency, coal remains a significant source of electricity, particularly during periods of peak demand, creating a feedback loop where rising heat increases cooling needs, which in turn drives coal consumption and higher temperatures.

India is shifting its energy mix, with non-fossil fuel sources currently making up more than half of installed electricity capacity. Niti Aayog projects that India’s economy will reach $30 trillion by 2047, driven by increased urbanization, industrialization, and improved living standards. Nonetheless, questions remain about how sustainable growth will be maintained politically and economically, especially regarding the distribution of costs and benefits during the transition.

Central to these concerns is the issue of demand generation. A growing economy requires sustained investment in energy and infrastructure, but it is unclear what will initially stimulate the necessary demand and ensure ongoing market stability. This involves understanding who initiates spending, how demand is guaranteed, and how firms are incentivized to continue investing when existing capacities are underutilized or when the share of consumption in national income declines.

India’s advances in solar power provide a partial answer. According to political economist Mathias Larsen, the country’s solar sector growth was driven by deliberate state action that created markets, leveraged public sector resources, and protected domestic producers. This model contrasts with the idea that private finance alone can efficiently allocate capital without coordinated state involvement.

However, solar power represents only one segment of the economy, and scaling a comprehensive low-carbon transition raises additional complications. In contrast to China, which relied heavily on export markets—facilitated by decades of favorable US trade policies—to absorb industrial capacity, India faces a more challenging global landscape marked by fragile supply chains, climate-related trade barriers, and Chinese export overcapacity.

These conditions make the question of domestic demand all the more critical for India. While many analysts assume that private investors will deploy capital efficiently once funds are available, this view overlooks the essential role of the state in jumpstarting demand, ensuring market guarantees, and coordinating investment across sectors. This suggests that India’s transition may depend heavily on sustained and strategic public-sector involvement to realize its ambitious economic and environmental goals.