CNBC’s Inside India newsletter: India’s deepening ties with natural gas

CNBC’s Inside India newsletter: India’s deepening ties with natural gas

This report is from this week’s CNBC’s “Inside India” newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe here.

The big story

Oil accounted for more than 70% of imports in Russia, Iraq and Saudi Arabia — three countries that don’t have strong democratic credentials.

On the demand side, the Indian government has aggressively pushed policies that favor vehicles powered by compressed natural gas (CNG), a derivative of liquified natural gas (LNG).

These vehicles have taken off faster than electric vehicles as a good distribution network for the fuel has lowered range anxiety. They’re also typically cheaper to run on a per-mile basis. That’s allowed sales to rise 33% this year to more than half a million vehicles, with Maruti Suzuki taking the lion’s share of the market.

Earlier this year, the government also unveiled plans to have a third of heavy-duty trucks in the country run on LNG instead of diesel, which currently makes up the bulk of refined fuel, over the next five to seven years.

Aside from transport, LNG use has grown thanks to government policy encouraging natural gas for domestic cooking. Piped connections have grown 250% to 11.9 million over the seven years ending November 2023, according to the Institute for Energy Economics and Financial Analysis. Meanwhile, the number of households that could receive piped natural gas is more than 300 million.

India also appears to be happy to import LNG, even from unsavory partners, if it helps balance risks in other parts of its economy. For instance, natural gas is a crucial ingredient for making fertilizers, and manufacturing it domestically helps increase food security.

Rystad Energy, a consultancy, has forecasted that the demand for natural gas will likely double by 2040. The research firm also expects India to be unable to meet its demand entirely through domestic sources and will have to rely “heavily” on imports to meet its needs.

Need to know

Canada alleges Indian involvement in Sikh separatists plot. The Canadian government alleged this week that Indian Minister of Home Affairs Amit Shah is behind plots targeting Sikh separatists in Canada. The allegation was revealed by Canadian Deputy Foreign Affairs Minister David Morrison, who told a parliamentary panel he had confirmed to a U.S.-based newspaper that it was Shah who is the accused behind the plots. India has previously dismissed the claims as baseless.

India is confident it can hit its 7% growth target for its 2025 financial year. The country’s Secretary of the Department of Economic Affairs Ajay Seth said on Tuesday the goal is “very much doable.” Seth is also optimistic about India’s growth rate for its third and fourth quarters despite slower capital expenditure in some states. India’s fiscal year runs from April 1 to March 31 the following year.

The Reserve Bank of India lowered its forecast for India’s second-quarter growth. Previous estimates by the RBI put GDP growth during India’s fiscal second-quarter — which is from July to September — at 7.2%. However, the RBI reduced its forecast to 6.8%, attributing it to weakness in areas like Nifty earnings forecasts and goods and service tax collections.

What happened in the markets?

Indian stocks are struggling to maintain momentum. The Nifty 50 index has essentially traded flat this week. The index has risen 11.4% this year.

Similarly, the benchmark 10-year Indian government bond yield has been muted this week trading 3 or 4 basis points around 6.83%.

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On CNBC TV this week, Aravind Maiya, CEO of Embassy REITs, observed that there are more companies setting up their global capabilities centers in India. Of the Fortune 500 companies, 23% have a GCC in India, said Maiya, and that proportion is expected to go up to 43% in the next five-to-six years. Crucially, those centers are now so-called “transformation hubs” engaging in cutting-edge work, rather than the support centers they were in the past.

Meanwhile, Landsberg Bennett Private Wealth Management’s Chief Investment Officer Michael Landsberg said investors should diversify their portfolios outside the U.S. for growth. Specifically, Landsberg likes India, because the country’s growth is two-to-three times higher than that of the U.S.

What’s happening next week?

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