- On February 1, India’s Finance Minister Nirmala Sitharaman presented the annual budget of the federal government making all the right noises using terms such as climate change, net-zero, energy transition, green bonds, and circular economy, which must have been music to the ears of the environmentalists.
- The intent towards energy transition, as promised by Prime Minister Narendra Modi during the 2021 Glasgow climate summit, was visible in the financial support for encouraging the production of high-efficiency solar PV modules and push for electric vehicles.
- The Union Budget’s focus on pursuing infrastructure projects and efforts to make it easier for business may result in environmental consequences.
- The views in this commentary are that of the author.
On the face of it, the Union Budget for 2022-23 presented by India’s Finance Minister Nirmala Sitharaman on February 1, may seem an environment-friendly one. For the first time in any Union Budget, is there so many mentions of terms used in environmental discussions – climate change, net-zero, energy transition, carbon intensity, green bonds, circular economy, battery swapping and infrastructure status to energy storage systems.
The Economic Survey, which is considered a twin document to the Budget has an entire chapter detailing the status of India’s SDG (Sustainable Development Goals) implementation, forest cover, plastic waste management, groundwater resources, river systems, air pollution management and dealing with climate change. In his preface to the Economic Survey, the government’s principal economic adviser Sanjeev Sanyal, lists climate change as one of the important risks to the country’s economy. The survey further talks of the need for funding for climate change mitigation and adaptation, the 2021 order of the Securities and Exchange Board of India (SEBI) fixing standards for corporate environmental governance, and India’s green initiatives at the global stage.
This was a Budget meant to show the national government’s intent. On February 1, a finance minister from the National Democratic Alliance (NDA) government rose for the ninth time to present an annual budget. With Sitharaman referring to Amrit Kaal, the political message of this Budget is that this government is going to stay for the next 25 years, till India reaches its 100th year of Independence.
The Budget also comes at a time when the country is expected to be on a growth track after the adverse impact of the COVID-19 pandemic. Important state elections are around the corner, while the 2024 national elections are visible on the horizon. Within this context, the 2022-23 Budget has been designed to show the government’s growth intent, especially since it has been criticised for its earlier poor handling of the demonetisation, GST rollout and pandemic management.
The intent is clear
The economic intent, as stated by the finance minister, is to provide “futuristic and inclusive” growth, and “big public investment for modern infrastructure, readying for India at 100.” The four pillars for this are: PM GatiShakti (a package of policies and measures to support the growth of India’s logistics backbone); inclusive development; productivity enhancement and investment, sunrise opportunities, energy transition, and climate change; and financing of investments.
The logistics package consists of developing roads, railways, airports, ports, mass transport, waterways and infrastructure. The specifics include the expansion of the national highways network by 25,000 kilometers in the next year; four multimodal logistics parks; safety and capacity augmentation of 2,000 km of railway tracks and the establishment of 100 cargo terminals; and urban metro systems with multimodal connectivity.
Supporting connectivity is also through the transfer of river water across river basins. The Ken-Betwa river interlinking will be taken up. Further, there is mention of five more river interlinking projects – Damanganga-Pinjal, Par-Tapi-Narmada, Godavari-Krishna, Krishna-Pennar and Pennar-Kaveri.
Push for energy transition
Keeping in mind the additional commitments made by Prime Minister Narendra Modi at the Glasgow climate summit to reach the target of 500 gigawatts of power from non-fossil fuel sources, there is also a focus on strengthening the energy transition process. This is articulated in the form of additional financial support for production-linked incentives (PLI) for the manufacture of high-efficiency solar PV modules.
Grid-scale battery systems are being classified as infrastructure, thereby opening avenues for credit. A battery swapping policy with inter-operability standards is expected to make the move to electric vehicles easier.
The thumb rule stated in the Budget for generating financial resources for infrastructure development, including green infrastructure, is by using public investment to crowd in private investment. The government would raise market borrowing for sovereign green bonds to fund green infrastructure. The funds will be used for funding public-sector projects that will help in reducing the carbon intensity of the economy.
Using wasted outputs as inputs, such as electronic wastes, end of life vehicles, etc., for other industries as part of circular economy finds mention in the Budget, which it states will create “large opportunities for new businesses and jobs.” For transiting to carbon neutrality, green buildings, the use of biomass pellets in thermal power plants, coal gasification and agroforestry will be promoted.
Infrastructure pulling the economy
Smarting from criticism over a national economy that has gone through multiple shocks and in which jobs have been difficult to find, the NDA government’s efforts with this Budget is to support public infrastructure growth through government and borrowed funds, which in turn is expected to pull private investments and crank-start economic growth. This model was tried earlier with another NDA government in the past.
When Atal Bihari Vajpayee was the prime minister between 1999 and 2004, the then NDA Government initiated the development of the Golden Quadrilateral highway network connecting the four metropolitan cities – Delhi, Kolkata, Chennai and Mumbai. Superimposed on that were the North-South and the East-West axis.
These four-lane highways (now six-lane in most stretches) were the forerunners to all the toll highways and expressways that we see in the country today. In fact, these roads became so popular for use that the present-day Economic Survey uses the toll collected from these roads as one of the high-frequency indicators (HFIs) to continuously monitor the health of the economy.
“In a developing nation like India, demand is not generated automatically,” wrote Yashwant Sinha, the then finance minister, in his book titled India unmade: How the Modi government broke the economy (2018). “If you want your economy to grow at a higher rate, you have to create demand. That becomes an important goal of economic policy, but how do you do it? One way is to undertake big projects that will create demand for investment goods, and the other way is to create demand by putting money in people’s pockets which will create demands for consumption goods.”
“In the Vajpayee government what we did was deliberately follow a policy of sequencing the demand for investment goods first and for consumption goods later. So first we had all these projects for roads, telecom, housing, etc., which created a demand for investment goods, which gave a fillip to industries producing investment goods like cement, steel, building material, etc. Their boost led to employment generation, which brought additional money into people’s pockets, which led to an increased demand for consumption goods.”
In this year’s Budget, the government has clubbed green and regular infrastructure together. It serves two purposes – let infrastructure pull economic growth and help meet energy transition targets.
Is the Union Budget net green?
Infrastructure projects can have environmental consequences. So can utility-scale renewable energy infrastructure. From the proposed Bullet train in Gujarat and the proposed Silver Line in Kerala to the proposed expansion of highways in Goa affecting the Mollem National Park and in Karnataka affecting the Bandipur Tiger Reserve, many linear infrastructure projects continue to have popular protests because of their environmental and social consequences.
It is in this context that the Budget should not be seen in isolation of the government’s priorities and actions in the past years. In the process of increasing the ease of doing business, the NDA government has been diluting environmental regulations. The process for assessing the environmental impact of a project in itself stands diluted.
The Budget mentions it: “In recent years, over 25,000 compliances were reduced and 1,486 Union laws were repealed. This is the result of our government’s strong commitment for ‘minimum government & maximum governance’, our trust in the public, and ease of doing business (EODB).” The document also talks about Parivesh, the single-window portal, which has been “instrumental in reducing the time required for approvals significantly.” The promise is to make it even easier to do business in the Amrit Kaal.
Forests are usually collateral damage in many infrastructure projects. The Economic Survey, which quotes the India State of Forest Report 2021(ISFR) in detail, states: “much of India’s increase in forest cover during 2011-21 is attributed to enhancement in very dense forest cover, which rose by approximately 20 per cent during the period. Open forest cover also improved by seven per cent during the period. Going forward, there is a need to further improve forest and tree cover. Social forestry could also play a significant role in this regard.”
Thus, while the national government may follow through on its energy transition agenda as part of the infrastructure push, the green language of the Budget is more likely to result in a net loss for the environment.
Banner image: Plantations, which usually consist of a single crop, do not harbour high biodiversity and often cause fragmentation of old growth forests. But the latest Indian State Forest Report has still categorised them as forests, consequently reporting an apparent boost in forest cover in India. Photo by Harikrishnan S/ Wikimedia Commons.