It is well recognized that India’s growth over the next two decades or so will be largely driven by a variety of commodities including energy products (conventional and non-conventional), metals (industrial, base and precious), polymers and of course, agricultural goods.

Commodity intensity of India’s growth is inexorable. The country will continue to be a producer, processors, consumer, exporter or importer of a wide range of commodities; and the volumes will continue to expand. In some way, India is set to go the China way.

Indeed, five mega trends will potentially shape and accelerate the country’s commodity-driven growth. In this process, some commodities will gain prominence while some will lose consumption volumes. Here’s how.

Energy Transition: India is committed to decarbonize by moving away from polluting fossil fuels towards renewables so as to become net-zero by 2070. This would mean the country will gradually reduce its dependence on crude oil and coal.

It is already a large producer, importer and consumer of coal. It is a modest producer but large importer and consumer of crude oil. 

As the nation moves toward renewables, composition of the basket of energy products – the energy mix - will undergo changes. There will be a steady reduction in import and consumption of polluting fossil fuels. At the same time, renewables – solar energy, wind energy, nuclear energy, biofuels and so on – will gain importance.

Transition towards renewable energy will inevitably mean more investment in energy infrastructure for renewables that in turn would translate to higher consumption of key materials such as steel, copper and aluminium. Demand for these materials is sure to surge as we make progress in our energy transition endeavor over the next several years.

Electrification: Our country will inevitably move towards greater electrification than at present for a wide variety of economic activities including, in the main, electric mobility. The way forward is Electric Vehicles (EVs) including cars and trucks as well as electrified railways.

By nature, devices for electric mobility are commodity intensive, especially metals intensive. There will be greater demand for industrial metals including steel, copper,

aluminium, nickel, cobalt, lithium, palladium and so on.

Electrification will also mean solar panels, construction of power grids and charging infrastructure for EVs, for instance. These also will involve use of metals.

Rapid Urbanization: This mega trend is something none can stop. Migration of people from rural to urban areas mainly in search of livelihood is a global phenomenon. India is no exception

Development of urban areas would necessarily mean consumption of a range of commodities for building urban infrastructure including residential and commercial properties, roads, bridges, water supply, drainage and other civic amenities.

All these call for utilization of vast quantities of commodities such as steel, zinc, aluminium, copper, cement and many more. As a thumb rule, commodities account for as much as 70 percent of any infrastructure project cost.

Climate Change: None can wish away the effect of global warming and climate change. The world continues to witness weather aberrations like frequent droughts, floods, hurricane, heat wave and so on. These evolving weather events not only adversely impact human life but also hurt economic activity, damage agricultural crops, disrupt mining and similar operations.

Adverse weather events resulting from climate change can potentially damage agricultural crop prospects in many countries and compromise food security. So, the world needs adaptation and mitigation measures including resilience through climate-smart agriculture. Large amounts of research dollars are required to mitigate the risks of climate change. The world food systems need to remain vigilant.

In our country, the challenge of land constraints and water shortage is exacerbated by climate change. Some of our key crops like wheat and maize are at the limit of heat tolerance. Farm sector stakeholders cannot afford to ignore the looming risk.

Resource Nationalism: Given the emerging global scenario where resource rich nations are sure to benefit from resource crunch elsewhere, one can safely expect resource nationalism to take hold. Countries are going to exercise increased levels of caution in releasing scarce resources such as rare earths and minerals for the world market.

In metals and minerals, in particular, one country China dominates the existing supply chains. Disruptions to established supply chains can throw economic activity and investment decisions out of gear. Geopolitics often leads to supply shocks.

Dependency can quickly turn into vulnerability.

Geographic persification is the key. Exporting countries are keen to explore new destination markets while importing countries look for multiple sources of supply.

These five are key emerging global mega trends that stakeholders in the commodity value chain must keep an eye on. Policymakers too have to take on board these mega trends as plans and investments can get stymied if the emerging mega trends are not factored in.

India cannot live in isolation. Our economy is integrating with the global economy through the trade route and the investment route. Similarly, our domestic market is integrating with the global market. Any development in the world can willy-nilly impact our economy.

The point that India’s growth in the next 2-3 decades will be significantly commodity intensive should alert policymakers to pay great attention to the sector and encourage them to design growth-oriented and sustainable policies from a long-term perspective.