Enhancing Economic Growth and Sustainable Development in India

Divya Bawa, June 12, 2024

India’s commitment to achieving net-zero emissions by 2070 is not just a climate goal but a cornerstone of its economic growth strategy. By targeting a 45 per cent decrease in the emission intensity of its GDP and aiming for 50 percent non-fossil fuel power generation by 2030 [1], India is aligning environmental sustainability with economic prosperity. Central to this transition are the comprehensive policy reforms to be undertaken across various cross-cutting aspects to ensure resource availability such as land, manpower, water etc. From ambitious renewable energy targets to innovative land use planning and the nascent but promising hydrogen economy, India’s policy landscape is evolving rapidly to address the challenges of climate change and energy security.

India has also implemented various financial mechanisms to foster its clean energy transition, including feed-in tariffs, tax incentives, subsidies, green bonds, and renewable energy certificates, incentivising investment and promoting the adoption of sustainable energy sources. India has made notable progress in green financing like the sovereign green bonds showcase India’s commitment to expanding renewable energy production and reducing its carbon intensity by supporting expenditures for renewable energy and electrification of transport systems. Indian green bond issuances have reached a total of $21 billion as of February 2023 [2]. Further, the Reserve Bank of India concluded four sovereign green bonds auctions of INR 20,000 crore (vs INR 16,000 crore in FY23), whose proceeds may be used to finance/refinance eligible green projects [3]. Alongside policy reforms, adopting an analytical economy-wide approach to understand the entire economic landscape of a country rather than focussing on specific sectors in isolation is crucial for India’s economic growth. Let’s discuss some of the key strategies that can be adopted for fostering enhanced economic growth and sustainable development in India.

Promoting Renewable Energy Capacity
India has made significant progress in renewable energy, with 71% of the 26 GW of new power generation capacity in FY 2023-2024 coming from renewable sources, bringing the total renewable energy capacity to 144 GW (33% of the total). Solar power dominated this growth, contributing 15 GW (81% of new renewable capacity), and wind energy additions nearly doubled to 3.3 GW. Additionally, RE auctions reached a record 41 GW, with a notable shift towards including energy storage components [4]. To further align with India’s climate objectives, a substantial expansion of renewable fuel capacity, alongside the promotion of technological solutions and fostering innovation, will be a positive step to expand   current installed base. This approach will help in  economic growth, diversification of the country’s energy mix, and increase the use of renewable fuel. Clear targets, streamlined processes for community engagement, infrastructure development, etc., investment in robust policies, and financial incentives can be crucial in further boosting  renewable energy capacity in India. Additionally, investments in research and development (R&D) and grid integration technologies can play a vital role in this transition

Diversifying Economic Opportunities
Exploring economic diversification is one of the  essential factors for growth. While renewable energy is crucial for sustainable development, relying solely on it may not be viable. States in India vary in resources, requiring alternative approaches. For instance in states, initiatives like the promotion of renewable energy, energy efficiency in industries, green manufacturing, crop diversification, the promotion of green fuels like green hydrogen, and the encouragement of electric vehicles can stimulate innovation and job growth. In addition, green jobs can certainly play a crucial role in diversifying economic opportunities in India and enhancing economic growth. With India emerging as one of the world leaders, it has the potential to create 35 million green jobs by 2047 [5]. There is a need to boost the prevalence of green skills across all sectors undergoing green transitions. This can be  essential to cultivate the workforce needed to meet the demand and achieve net-zero transitions effectively. From a sustainability perspective, fostering economic diversification should include initiatives promoting regenerative agriculture, eco-tourism, and sustainable practices across industries to ensure long-term resilience against environmental challenges.

Prioritising Complimentary Areas of Focus
Sectoral interventions, such as nature-based solutions that include afforestation, watershed management, and ecosystem restoration, alongside investments in agriculture, infrastructure, tourism, and manufacturing, can generate employment opportunities, foster green innovation, and contribute to Gross Domestic Product (GDP) growth. These interventions play a significant role in boosting economic growth and sustainable development. For example, advancements in agricultural technologies and infrastructure improvements can enhance productivity, ensure food security, attract investment, and bolster rural livelihoods. Similarly, prioritising manufacturing and industrial development can creates avenues for capital absorption, resulting in job creation and technological innovation.

Establishing a Robust Governance Mechanism for Sub-National Climate Actions
Given the critical role of sub-national actors in advancing India’s low-carbon development goals, a robust governance mechanism at this level can be  imperative for effective implementation of the clean energy transition. Strong local governance can ensure that regional efforts align with national objectives, facilitates efficient resource allocation, and enables timely policy execution. Incorporating diverse governance structures, including cities and panchayats, will help in driving India’s clean energy transition. This involves implementing localised solutions, setting policies, and fostering collaboration between stakeholders at various levels.

Strengthening the Financing Mechanism
A robust financing mechanism is vital for fostering India’s economic growth and sustainable development. It ensures adequate investment in renewable energy, infrastructure, and green technologies, while mobilising private sector participation and supporting innovation adoption. Such a mechanism can promote inclusive growth and resilience to climate change. Strong policy and regulatory frameworks can be considered  essential to create a favourable investment climate and direct funds towards economic development. Solutions like concessional loans, grants, subsidies, and carbon pricing can further help facilitate economic growth. This comprehensive approach can certainly  assist India in  its ambitious targets for prosperity and environmental sustainability.

Institutionalising Climate Change Capacities
Institutionalising capacities on climate change is another crucial factor for fostering economic growth and sustainable development through resilience, innovation, and informed decision-making. By building expertise within institutions, India can better understand and mitigate climate-related risks, attract investment in green technologies and infrastructure, and capitalise on emerging opportunities. Collaborating with relevant institutions and stakeholders (such as academic training institutes (ATIs), Bankers Institute of Rural Development who are providing periodic training to government officials to mainstream climate change into sectoral development plans) , government organisations, civil societies, and think tanks, to integrate climate considerations into policies and initiatives across sectors, can be  key to ensuring resilience to climate change impacts and contributing to holistic planning for sustainable development.

In conclusion, a multifaceted approach is incontrovertibly one of the crucial steps for achieving economic growth and sustainable development in India. Promoting renewable energy, diversifying economic opportunities through policy reforms across various aspects such as land, water, and labour, and expanding focus on complimentary areas (such as nature based solutions and ecosystem restoration) are the strategies that will go a long way towards this goal. While  establishing robust governance mechanisms, strengthening the financing mechanism, and institutionalising capacities on climate change, can play a pivotal role towards implementation. Through collaborative efforts to climate-proof sectoral actions, India can pursue holistic planning, propelling itself towards improved economic growth and sustainable development.