India’s strong growth fundamentals may be intact, but the country’s ability to sustain that growth is increasingly tied to how it manages energy and water security. That was the central warning from Erik Berglof, Center Director at the House of Governance and Public Policy, Stockholm School of Economics, who said prolonged geopolitical and economic shocks could expose vulnerabilities that conventional macroeconomic indicators do not fully capture.
Speaking on the sidelines of the Kautilya Economic Conclave, Berglof said India had very strong growth prospects, but continuing uncertainty, particularly in the Gulf, was creating economic stress. His assessment places the resilience question beyond GDP, fiscal policy and external finance. It points to the infrastructure systems that keep households, businesses and cities functioning: energy supply, water availability and the institutions responsible for managing both.
The significance of the warning lies in the duration of the shock. A short disruption can often be absorbed through emergency measures, inventory adjustments or temporary fiscal support. A prolonged shock is different. It can raise costs, alter investment decisions and force governments to protect households and firms for longer periods. Berglof said the prolonged nature of the latest geopolitical shock could affect India even though the country’s economic fundamentals remained strong.
That distinction matters for urban India. Cities concentrate households, industry, services and infrastructure demand. They depend on reliable electricity for homes, transport systems, water pumping, construction, hospitals, communications and commercial activity. They also depend on water systems whose vulnerability may not be visible until shortages, pricing pressures or disruptions affect daily life. The supplied evidence does not establish the scale of any current urban supply gap, but it does identify energy and water security as domestic vulnerabilities that could shape the durability of future growth.
Berglof’s proposed response to the energy challenge was not simply to shield consumers from every external price shock. He cautioned that government measures designed to protect households could weaken incentives to reduce fossil-fuel dependence and accelerate the transition towards cleaner energy. In his view, the broader lesson from the shock was the need to build resilience through a more decentralised and renewable-based energy system.
This is an institutional question as much as a technology question. A decentralised energy system changes where capacity is produced, how it is connected and how risk is distributed. It can reduce dependence on a limited number of large supply points, but its effectiveness depends on planning, grid management, financing and the ability of public agencies to coordinate deployment. Berglof’s remarks do not provide a specific implementation plan for India, but they frame energy resilience as a system-design issue rather than only a fuel-supply problem.
The tension between affordability and transition is also important. Governments may need to protect households from sudden increases in energy costs during a geopolitical disruption. Yet if those interventions reduce the incentive to conserve energy or move away from fossil fuels, they may preserve short-term affordability while making long-term resilience harder to achieve. The source material does not quantify the effect of any such measures in India, but the policy trade-off is explicit in Berglof’s assessment.
External finance adds another layer of risk. Berglof said rising US bond yields could affect emerging and developing economies by increasing interest costs. He highlighted the danger posed by elevated debt levels and a large wall of repayments expected over the next five years. India, he said, was better placed than many other emerging economies because it had built significant buffers and had lower debt levels than some vulnerable countries.
That relative position provides protection, but it does not remove the infrastructure challenge. Higher borrowing costs can make long-gestation public projects more expensive to finance and can increase pressure on governments to prioritise immediate relief over system upgrades. The article does not identify specific Indian infrastructure projects or funding programmes affected by higher yields. It does, however, connect financial conditions to the wider question of whether countries have enough fiscal room to respond to repeated external shocks without compromising future resilience.
Berglof also referred to US tariffs and said India had been disproportionately affected. He stressed that the uncertainty and arbitrary nature of tariff measures were as concerning as the tariffs themselves. For urban economies, such uncertainty can matter through supply chains, industrial investment and the cost of imported inputs, although the supplied report does not provide sector-level figures or identify particular cities affected by the measures.
The water challenge is more directly a domestic governance issue. Berglof said India faced a significant water challenge and needed reforms around the pricing and management of water. That observation shifts attention from water availability alone to the way water is administered. Pricing, allocation, maintenance and demand management determine how a finite resource is distributed across households, agriculture, industry and public services.
For cities, water security is inseparable from the performance of municipal systems. Water must be sourced, treated, moved, stored and managed through networks that serve unevenly growing urban areas. The input does not provide data on leakage, coverage, reservoir levels, groundwater use or municipal finances, so no conclusion can be drawn here about the performance of any particular city. But the emphasis on pricing and management indicates that resilience cannot be secured only by adding physical supply. Governance arrangements also determine whether existing supplies are used efficiently and whether access remains reliable during stress.
This is where energy and water security intersect. Water systems require energy for extraction, treatment, pumping and distribution. Energy systems, in turn, can depend on water for generation and industrial processes. A disruption in one network can therefore raise pressure on the other. Berglof’s comments do not map this interdependence in detail, but his decision to identify both sectors as critical areas suggests that resilience must be considered across connected systems rather than through isolated projects.
Climate risk further complicates this picture. Berglof called for stronger resilience against climate shocks, geopolitical risks and other external disruptions. He also warned that measures taken during a shock could weaken the transition away from fossil fuels. The combined message is that resilience cannot mean returning permanently to older, more carbon-intensive systems whenever uncertainty rises. It must include the capacity to absorb disruption while continuing structural changes in the energy system.
The fiscal dimension remains central. Berglof said a deficit would not be a major concern if the conflict in the Middle East were resolved, but prolonged uncertainty requiring higher deficits over several years could become damaging. His assessment recognises India’s existing fiscal buffers while warning that the duration of a shock can change the calculation. Temporary support and long-term spending commitments have different consequences, particularly when borrowing costs are elevated and repayment obligations are approaching.
For urban governance, the implication is that resilience investments compete with immediate crisis management. Energy networks, water systems and climate protection require sustained planning, while external shocks create pressure for rapid relief. The source does not establish how Indian governments are currently balancing these priorities, nor does it identify specific reforms under consideration. It does establish that energy and water security are being treated as conditions for sustaining growth, not as secondary service-delivery concerns.
The larger urban question is whether India’s infrastructure institutions can become more resilient without making essential services less affordable. Berglof’s remarks bring together three pressures: external shocks that can raise costs, fiscal and financial conditions that can constrain responses, and domestic systems that require reform. India’s growth fundamentals may provide a strong base, but that base will remain exposed if energy and water systems cannot withstand prolonged disruption.
The evidence currently confirms the risk framework rather than a specific outcome. India is described as better placed than many emerging economies because of its buffers and fiscal policies, while its energy transition and water management remain areas requiring attention. The developments to monitor are the duration of geopolitical uncertainty, the effect of higher global borrowing costs, the design of household protection measures, and whether reforms in decentralised energy and water pricing move from broad policy concern to concrete implementation.