- The first budget of the National Democratic Alliance (NDA)-3 aims for sustainable development while balancing coalition dynamics and economic challenges such as rising unemployment.
- Finance Minister Nirmala Sitharaman outlined nine priorities, including enhancing agricultural productivity and resilience, ensuring energy security, advancing urban development, and boosting manufacturing and services, having significant environmental co-benefits.
- Experts have raised concerns over the repetition of past initiatives and uncertainty of the execution of promises made in the union budget.
After recent parliamentary election setbacks for the Bharatiya Janata Party, where it lost key seats, its Union Finance Minister Nirmala Sitharaman faced a dual challenge as she presented her seventh consecutive budget on July 23, the first for the current administration: managing coalition demands and addressing rising unemployment. Despite these constraints, she introduced several initiatives aimed at a greener future, though many were reiterations of previous announcements.
Sitharaman outlined nine key priorities, including boosting productivity and resilience in agriculture, advancing urban development, securing energy, and enhancing manufacturing and services, focusing on Medium, Small, and Micro Enterprises (MSMEs).
Chandra Bhushan, CEO of iForest, a New Delhi-based non-profit, noted that while the number of announcements mirrored those in interim budgets, the four priorities — energy security, resilient agriculture, focus on MSMEs, and urban development — are crucial for the future due to their significant environmental co-benefits.
Within these objectives, the finance minister announced several initiatives which are already in progress. These included the Taxonomy for Climate Finance, a classification of climate investments that has been in progress for at least three years; the free solar electricity scheme PM Surya Ghar Muft Bijli Yojana which was first introduced in February; the carbon market, an ongoing process since 2022; the Advanced Ultra Super Critical Thermal Power Plants, with pilot studies that was initiated in 2016; and a plan to encourage 10 million farmers to adopt natural farming practices, continuing an effort from the previous year’s budget. Along with mitigation and adaptation efforts, the budget also includes provisions for flood management and reconstruction in states affected by floods, such as Bihar, Assam, Himachal Pradesh, Uttarakhand, and Sikkim, aiming to mitigate the impact of natural disasters and support the rebuilding of these areas.
A push for energy transition
The Economic Survey, which reviews the country’s economic progress and challenges over the past year, was tabled on July 22 in Parliament. It highlighted the challenge of energy transition in India and the associated trade-offs, while sharing the example of several other countries where this had led to delay timelines. It underscored India’s situation, where the government has to balance access to stable energy at a reasonable cost with its ambitions of becoming an industrialised nation, while also pursuing a low-carbon pathway. The survey emphasised the importance of storage capacity, critical minerals, nuclear energy, a sequenced transition towards cleaner coal, and more efficient technologies.
To support the transition, the finance minister announced a policy document on energy transition pathways that balance employment, growth, and environmental sustainability.
On the policy, Chandra Bhushan, CEO of iForest, said, “I hope this policy will be widely discussed and consulted in the country, given that the challenge of energy security and transition varies across states.”
The union minister Sitharaman, while delivering the budget, announced schemes to promote rooftop solar, pump storage, and nuclear energy. The government will partner with the private sector to enhance energy security by developing compact nuclear reactors as part of the Bharat Small Reactors initiative and advancing research and development of small and modular reactors under the Bharat Small Modular Reactors programme as well as new nuclear energy technologies.
She announced the establishment of a Critical Mineral Mission, which will take care of domestic production, recycling of critical minerals, and overseas acquisition of critical mineral assets. The government will launch the auction of the first tranche of offshore blocks for mining. Recognising the importance of critical minerals such as lithium, copper, cobalt, and rare earth elements for nuclear and renewable energy sectors, the minister proposed fully exempting customs duties on 25 critical minerals.
The minister also announced the development of a roadmap to transition ‘hard-to-abate’ industries from ‘energy efficiency’ targets that aim to reduce the energy needed to produce an output to ‘emission targets’ which aim to reduce the total amount of greenhouse gases or pollutants released in the atmosphere.
She recognised the importance of micro and small industries and mentioned that an energy audit would be conducted for 60 traditional industry clusters, including brass and ceramics. Financial support will be provided to help these industries transition to cleaner energy sources and implement energy efficiency measures. In the next phase, she said, the scheme will be expanded to an additional 100 clusters.
Mobilising climate finance
The Economic Survey has highlighted the importance of climate finance, saying, “.. availability and access to affordable finance are arguably the most significant challenges to India’s development of a low-carbon path.”
The finance minister said that the government would develop a taxonomy for climate finance, which defines what qualifies for climate finance or sustainable finance, in an effort to mobilise climate finance for adaptation and mitigation. However, this taxonomy has been under development for at least three years, though the draft has never been made public.
Responding to this, Neha Kumar, Head, South Asia, Climate Bonds Initiative, said the budget’s mention that India will embark on developing a climate finance taxonomy, is a welcome step. However, it’s important to recognise the significant work already done by the Ministry of Finance’s (MoF) taxonomy development group under the Sustainable Finance Task Force. “I hope we won’t reinvent the wheel and will instead build on the existing framework, which incorporates best practices and aligns with India’s priorities,” said Kumar who has served on the MoF taxonomy development group as a core member.
She highlights her expectation from the taxonomy by saying that it’s clear that right now the focus is on climate mitigation and adaptation but it will make sense to cover other environmental objectives like biodiversity and water which need as much attention. “While this is a good starting point, we eventually need to cover all environmental objectives to achieve overall environmental sustainability. Our climate finance taxonomy should include a transition lens and adopt an economy-wide approach. The previous draft taxonomy, which was not publicly released, focused on energy and transport for mitigation and agriculture for adaptation, with other priority sectors to be addressed in subsequent stages.”
Financial incentives for urban reforms
The Economic Survey recommended transforming cities into economic hubs by developing future-ready urban infrastructure, a point echoed by the finance minister in her budget speech. She outlined that this transformation will be driven by economic and transit planning and the orderly development of peri-urban areas through town planning schemes.
The minister highlighted urban reforms starting with a reduction in stamp duty, which will become an essential element of urban development schemes. The central government will initiate and incentivise reforms in states related to land administration, planning, management, and building bylaws. A significant portion of the 50-year interest-free loan to states will be allocated for these reforms.
Additionally, she talked about the promotion of water supply, sewage treatment, and solid waste management projects for 100 large cities through bankable projects. These initiatives will also include using treated water for irrigation and replenishing local tanks.
Hitesh Vaidya, former Director of the National Institute of Urban Affairs, praised the budget for its practicality. Unlike previous initiatives that focused on classifying cities as ‘smart’ or ‘non-smart,’ this budget adopts a hierarchical approach, addressing large, medium, and small cities, which he views as a positive shift.
Vaidya noted that the government is now emphasising that reforms should come before project development, highlighting the need to update building bylaws and planning frameworks. He also pointed out the budget’s recognition of peri-urban areas and their unique challenges. Another key change is the adoption of a regional approach to urban planning. This shift addresses climate and multi-jurisdictional issues by moving beyond city-specific planning to a broader regional development perspective, he said.
Highlighting the challenge in implementation, he says that there needs to be more urban planners in cities. He highlighted the importance of monitoring the impacts of the budget. “While we are moving in the right direction, somewhere monitoring the impact has to be brought back into the focus which is not there,” he said.
Scrutiny of farm-focused promises
In recent years, farmers have taken to the streets to demand better prices for their produce. With 65% of the population reliant on agriculture and allied activities, agriculture emerged as a top priority among the nine objectives outlined in the Finance Minister’s budget speech.
The finance minister announced that the government will focus on increasing productivity and developing climate-resilient crop varieties. “Our government will undertake a comprehensive review of the agricultural research setup to enhance productivity and develop climate-resilient varieties,” she stated.
The union minister revealed plans to release 109 new high-yielding and climate-resilient varieties of 32 field and horticulture crops for farmer cultivation. Additionally, the government aims to promote natural farming by initiating 10 million farmers across the country into this practice over the next two years, supported by certification and branding. Further, 10,000 bio-input resource centres will be established to support this initiative.
Kavitha Kuruganti, a Bengaluru-based social activist focused on sustainable farming, criticised the budget announcements for agriculture as inconsistent and underfunded. She argued that while the government makes grand promises, actual implementation is poorly documented and agricultural spending is declining.
Kuruganti expressed concern over the emphasis on new crop varieties, noting that traditional varieties resilient to biotic and abiotic stresses are being neglected. She highlighted that addressing climate change requires more than drought or flood-resistant crops, as regions may face delayed rainfall and heavy flooding. It appears that the government will focus on transgenic and genome-edited crops, which she believes benefit large corporations under the guise of research. Kuruganti described the natural farming initiative as a recycled idea, pointing out that a similar announcement was made in the 2023-24 budget. The progress regarding previous promises is yet not clear, she added.
Banner image: A Briefing Session for Members of Parliament on “Union Budget 2024-25: Key Features” was held on July 24, 2024. Image via Press and public relations wing of Lok Sabha Secretariat.
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