1) LITERALLY a harness is the set of leather straps for attaching a horse to a cart, so the horse can pull the cart.
Thus, a harness is "equipment for making a horse do work."
To "harness" hydroelectric power means to built dams and generators to force the river to do useful work.
2) "Potential" can mean "possible." Right now, there is no hydroelectric power being generated. It is possible that you COULD harness it to provide power. There is "hydroelectric potential."
3) "what is energy hungry economy? I feel it means . india's economy is in desperate need of power in order to bloom." Yes, that is EXACTLY right.