Could India become a petro-rupee state? The Indian oil minister said last week that the country has almost as much oil as Saudi Arabia, just when conventional wisdom says it’s running out. Energy independence would be excellent; relying on oil without building a real economy, disastrous.

Petrominister

[Mani] Shankar Aiyar, minister of petroleum for India… believes that India could become a petrodollar state in the 21st century… The optimism is grounded in massive oil deposits, close to 30 billion tons, in Central India. That’s twice the size of the deposits in Iraq (13 billion tons, according to the Institute of Petroleum) and just shy of Saudi deposits. With this, India, which imports 70 percent of its oil, could become an exporter… [Link]

India may exhaust its existing oil fields soon, and as its economy grows, so does its thirst:

India has oil reserves to last only till 2016, if no new discovery is made, the Petroleum Minister, Mr Mani Shankar Aiyar, said today. [Link]

ONGC’s oil output has stalled at about 520,000 barrels a day in the past couple of years and is expected to decline as older fields near the end of their productive lifespan. Mr Aiyar voiced concerns about a fall in domestic output at a time when India’s rapidly expanding economy is fuelling huge demand for energy. [Link]

Central India has oil deposits twice the size of those in Iraq and just shy of Saudi deposits. But they’re not easy to extract

India ranks sixth in the world in terms of energy demand… While India has significant reserves of coal, it is relatively poor in oil and gas resources… The majority of India’s oil reserves are located in fields offshore Bombay and onshore in Assam. Due to stagnating domestic crude production, India imports approximately 70% of its oil, much of it from the Middle East… The World Energy Outlook… projects that India’s dependence on oil imports will grow to 91.6% by the year 2020. [Link]

Nearly half [India’s] electricity, according to various estimates, gets stolen by individuals placing illegal feed wires onto power lines… [Link]

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The WaPo reports that software and services are great bootstrap industries because, unlike heavy manufacturing and chip fabs, they don’t have a lot of dependencies on infrastructure (via Globalisation Institute):

Chennai also shows why India succeeds in software and services. To do software, you only need one functional buildingTo do software, you don’t need a broad infrastructure base; you need one functional building. I visited Tidel Park, a gleaming office block here that houses 31 software firms, two-thirds of which are foreign. There aren’t any power cuts here because the building has its own backup generators. There are no connectivity worries because it is served by six competing broadband providers. And it certainly is safe. Tidel Park boasts 150 guards and a security control room that would not look out of place on Darth Vader’s Death Star. [Link]

However, eventually you need a manufacturing base and the ability to generate economies of scale. The khadi cloth era of protecting domestic industries only made them sluggish and unresponsive and postponed global competitiveness. Relative to centralized planning, few of India’s early leaders understood adaptive systems or emergent effects:

… the opening of India’s economy has forced its manufacturers to reinvent themselves. Chennai’s auto-components firms have done this almost manically. Ten years ago, their brakes and valves were crummy enough to scare away the international car majors that considered manufacturing in India. Today, you can’t spend an hour with any of the components Actually, getting rid of the tariff barriers is where you startfirms without hearing about the international quality certifications they’ve amassed; the Deming Prize, awarded for manufacturing excellence by a Japanese committee, has acquired talismanic status… the city’s business leaders pepper their conversation with Japanese management lingo.

The results are dramatic. The TVS Group, the largest of India’s auto-components firms, now exports around a third of its output — proof that it meets international standards. The rival Rane Group reports that it has reduced defects from 10,000 parts per million to 250 and that 28 percent of its engine valves are now exported. One of the TVS companies, Sundram Fasteners, has won a General Motors “Supplier of the Year” award five times, and it supplies 100 percent of GM’s radiator caps.