Union Budget 2024 | India needs $1.4 trillion to turn net-zero economy by 2070

Bengaluru: India requires an investment support of $1.4 trillion -- an average of $28 billion per year -- to become a net-zero economy by 2070. Raising financial resources for adaptation and mitigation action of this scale is an "unprecedented challenge", according to the Economic Survey 2023-24 tabled in Parliament on Monday.

This is due to limited flow of international finance and large reliance on domestic resources to fund the transition to a green economy.

It also said that mobilisation of finance as well as investment on competitive terms and resolution of land acquisition issues are necessary for realising the Rs 30.5 lakh crore investment required for meeting the target of having 500GW renewable energy in India by 2030.

As per the Reserve Bank of India, bridging the substantial funding gap necessitates allocating 2.5% of India's annual GDP to green finance. A  report by the Climate Policy Initiative released in 2022 found that domestic sources accounted for the majority of green finance in India, at 87%  and 83% in FY19 and FY20, respectively. While international finance was seen increasing (from 13% in FY19 to 17%  in FY20), they were and are still insufficient to meet India's net-zero target.

"Mobilising substantial capital from traditional sources presents multifaceted challenges in emerging economies like India. The perceived sovereign risks associated with emerging markets and developing economies (EMDEs) and the capital-intensive nature of such projects, coupled with lengthy gestation periods and evolving regulatory frameworks, can create misalignment between investor expectations and project timelines",the Survey observed.

It is also pertinent to note that the flows of global capital to developing countries have been impeded by high costs of capital. Despite securing a good rating on its green bond framework, Indian sovereign green bonds have hardly received any ‘greenium’ from private investors.

It is more a ‘wall of capital’ than a ‘flood of capital’ that is waiting to fund energy transition in EMDEs. It just isn’t mobile. All of these together have severely hampered the flow of finance for green transition projects, the Survey added.

Union Budget 2024 | Making a record for any Finance Minister, Nirmala Sitharaman will be presenting her 7th Union Budget on July 23, 2024 under the Modi 3.0 government. While inflation has burnt a hole in the pockets of 'aam janata', will this Budget spell relief for Indians? Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.