India’s Power Sector Could Grow 5–6% Annually, Says Citi

India’s power sector could be entering a fresh growth phase. According to a recent Citi report, electricity demand in the country may grow at a 5–6% CAGR over the medium term, supported by a broader investment cycle across the sector.

The report suggests this phase may look different from previous power upcycles, with spending expected across multiple areas instead of a single segment. As the sector moves back into focus, could this become one of India’s biggest long-term infrastructure stories?

Why Is India’s Power Demand Entering A Broader Growth Cycle?

India’s electricity demand is no longer being driven by just one factor. According to Citi, several trends are beginning to support consumption growth at the same time, creating what it describes as a “multi-vector” demand cycle.

One of the biggest contributors is electrification. As more sectors shift towards electricity-based systems, overall power usage is expected to rise steadily over the coming years. At the same time, India’s manufacturing push is adding fresh demand from industrial activity.

The report also highlights the growing role of data centres, which require a large and uninterrupted power supply to operate. Cooling demand is another key factor. With rising temperatures, urbanisation, and increasing appliance penetration, electricity consumption linked to air-conditioning and cooling infrastructure is expected to increase further.

Citi believes these combined trends could help India’s power demand grow at 5–6% annually in the medium term. Unlike earlier periods, where demand growth was concentrated in a few areas, the current cycle appears broader and more diversified.

What Makes This Power Capex Cycle Different From Earlier Ones?

This time, the focus is not only on adding more power capacity. The bigger challenge is ensuring the grid can remain reliable during periods of high demand and fluctuating renewable supply. Citi noted that the regulatory approach is also beginning to evolve in that direction. The Central Electricity Authority (CEA) is issuing guidelines around thermal capacity expansion and storage readiness.

The report estimates GENCO (Generation Companies) capacity additions between FY26 and FY32 could be 2.3x–2.5x higher than the levels seen in FY19–FY25. Heatwaves linked to El Niño have added another layer of pressure on India’s power system. Electricity demand tends to jump during such periods, particularly in the evenings when cooling needs remain high. Solar output, meanwhile, starts tapering off. That mismatch has exposed some weak spots in the grid.

As a result, the conversation is no longer only about building more power plants. Storage, transmission networks, and grid flexibility are now becoming equally important parts of the investment cycle.

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What Should Investors Watch In India’s Power Sector?

Brokerages believe the opportunity may extend across multiple segments of the power ecosystem if the current capex cycle sustains. Apart from conventional power producers, companies linked to transmission, renewable energy, and grid infrastructure could also remain in focus.

Among the widely tracked names in the sector are NTPC, Tata Power, Power Grid Corporation of India, and JSW Energy.

That said, the sector is unlikely to move in a straight line. Project execution, policy changes, fuel availability, and demand trends will matter. Besides, this is a sector where execution takes time. Large power and transmission projects are planned years in advance, and delays are not unusual. So while the investment cycle may be strengthening, the gains are unlikely to appear overnight.

Sources:

The Economic Times

Business Standard