Budgeting for green growth
The Narendra Modi-led National Democratic Alliance (NDA) government has started the third term with an affirmation of continuity and retained the same team of Cabinet ministers in key portfolios. The finance minister will present the full Budget for 2024–2025 on July 23, and is expected to address the pressing issues of job creation and green growth. In her address to the joint session of Parliament, President Droupadi Murmu outlined the broad strategy of the forthcoming Budget, promising “historic steps” and major economic reforms.
The Interim Budget of 2024–2025 prioritised green growth, allocating funds for green credits, energy, mobility, and farming. Finance Minister Nirmala Sitharaman also introduced innovative schemes such as Amrit Dharohar for wetland conservation and the Mangrove Initiative for Shoreline Habitats and Tangible Incomes (MISHTI) for mangrove conservation. Renewable energy projects, such as solar and wind power, received a greater allocation.
However, the question remains whether the finance minister will allocate funds to address the issues of climate change, especially mitigating the impact, building resilience to reduce the impact, and rescuing vulnerable communities who suffer most from extreme weather, both heat waves and floods.
India aims to achieve net zero emissions by 2070, requiring an investment of over Rs 700 lakh crore, of which Rs 600 lakh crore is needed for transitioning to non-fossil energy. Currently, only a quarter of these needs are met by climate funding, posing a significant challenge in generating resources to mainstream the budget towards achieving this goal.
According to estimates, at least 4 per cent of the total Budget needs to be allocated to the environmental sector to help communities mitigate and adapt to climate change. Contrary to this requirement, in recent years, less than 1 per cent of the budgeted amount has been allocated to the Ministry of Forests, Environment, and Climate Change (MoEFCC).
Ignoring the transition towards green growth has negative economic consequences. The Reserve Bank of India’s May 2023 Report on Currency and Finance estimated that up to 4.5 per cent of India’s GDP is at risk by 2030 due to lost labour hours caused by extreme heat and humidity. The report also noted that India ranked seventh in the list of most affected countries in terms of climate vulnerability and climate disaster events, depressing the living standards of half of its population by 2050.
While the overall push in the new Budget will be towards achieving an annual growth rate of over 7 per cent GDP, it would be tragic if more than half of this growth is lost to the negative impacts of climate change, pushing more people into poverty.
The finance minister must recognise the perils of relying solely on a narrow focus on economic growth, which might accelerate the impact of climate change and act as an impediment to decarbonising the economy.
Conservation of natural forest ecosystems assists in combating climate change. In 2020, the Finance Commission gave a weightage of 10 per cent to sharing the central taxes by those states that took care of forests, which can be increased to 15 per cent to further motivate and incentivise states to protect forest resources and provide ecosystem services.
It is also essential to build synergy across the sectors of the economy to reallocate resources for climate budgeting. Allocating more funds under MNREGA towards water conservation and drought-proofing has the potential to reduce the vulnerability to climate hazards. It has the potential to rejuvenate the rural landscape, provide jobs, and help build smart villages.
The transition to green energy requires significant allocation towards clean energy systems in major sectors such as power generation, transport, and industries. About 20 per cent of the workforce is engaged in green business, and this can be increases to 60 per cent by introducing energy-saving technologies in industrial manufacturing. The Budget has to create opportunities for such green growth that can create green jobs to boast economic growth with a climate-positive strategy.
The RBI’s Report on Currency and Finance estimates that the cost of adapting to climate change requires allocating 2.5 per cent of the annual GDP for green finance. While this may be the goal, let us hope that in the Budget, the allocation for MoEFCC increases from an abysmal 0.07 per cent to a higher percentage in order to implement the mandate of environmental governance.
Ironically, over the years, the MOEFCC has not been able to spend the allocated amount due to administrative delays. A fresh strategy and a concentrated approach to utilising the funds are essential to addressing the issues arising from climate change.
(The writer is a farmer and Uttara Kannada-based environmentalist.)
Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.