Budgetary Expectations for Environmental Reforms in India

Published on July 17, 2024 by Dr Biswaraj Ghosh

Our budgetary expectations

In this blog, we delve into our expectations on India’s environmental reforms and budgetary support for the current financial year (2024-2025). We have focused on five key areas that may adversely impact India’s current growth trajectory and economic sustainability, as well as negatively affect life on land and life under water, thereby impacting several Sustainable Development Goals (SDGs) including SDGs 1, 2, 3, 6, 8, 11, 13, 14 and 15. The nature of the challenges calls for immediate attention, as well as long-term strategic commitment to mitigate negative environmental events and preserve life and economic growth.

The five key areas that need immediate consideration and reforms, supported by budgetary commitments, are:

Water stress management
Biodiversity preservation
Integration of ESG aspects into lending practices
Climate change management
Circularity of renewable energy sources

In the following sections, we identify the core challenges in each of the above areas, supported by quantitative data from recent years. We also discuss our budgetary expectations for possible solutions to each of the issues identified.

1. Managing acute water scarcity

Water stress management

Challenges

A 2020 survey by the World Wide Fund for Nature classified 30 Indian cities to be categorised as ‘high water risk’ and ‘very high water risk’ for the period leading up to the year 2050. These cities include Jaipur, Delhi, Amritsar, Pune, Kolkata, Mumbai and Vishakhapatnam, which are most susceptible to acute water crisis. A city categorised under the ‘extreme water stress’ segment uses at least 80% of its available supply, whereas those in the ‘high water stress’ bracket consume 40% of their total supply.[1]

Data in spotlight

Acute water crisis is a global phenomenon, affecting other countries as well, including Mexico, Egypt and Turkey. 31% of the global may experience high water stress by 2050 (as per Aqueduct). India possesses only 4% water resource (as per World Bank), making it one of the most water-stressed countries globally. Hence, it is imperative that India assumes proactive measure to preserve its limited water resources, invests in efficiency-based technologies and recharges ground water considering the needs of the future generations.

Our budgetary expectations

Further budgetary boost to Atal Bhujal Yojana and associated schemes to replenish ground water, especially in 30 cities facing acute water crisis
Budgetary support for reclaiming treated wastewater as additional water source
Incentives to farming community for adoption of more efficient water measures for irrigation
Inducements to companies to establish science-based water targets to enhance water-efficiency measures
Budgetary support for adoption of nature-based solutions such as restoring degraded watersheds, urban watersheds and wetlands, as well as reconnecting rivers to their floodplains, as suggested by WWF
Incentives for rainwater harvest at residential and commercial properties for the water stressed cities

2. Preserving biodiversity

Biodiversity management in India

Challenges

India is currently facing numerous roadblocks in managing its biodiversity optimally. First, urbanisation continues to expand at a rapid rate, and second, unsustainable agricultural practices and cattle rearing continue to expose many unique ecosystems to significant damage. Furthermore, deforestation is leading to habitat loss. In the same vein, excessive industrial processes continue to contaminate and pollute India’s water bodies, thereby affecting life under water. Similarly, overfishing, overutilisation of natural resources and logging are affecting its unique biodiversity species. In recent years, the country has experienced extreme climate events, which have taken a toll on its biodiversity. For instance, increasing forest fires, due to rapidly changing weather patterns (e.g., recent events in northern India), are destroying the habitat of native species.

Data in spotlight

India has already lost 90% of its area under the four biodiversity hotspots – Indo-Burma Region, The Himalayas, Sundaland and The Western Ghats, with 25 species becoming extinct in these regions, posing a grave biodiversity threat, as per Financial Express
The International Union for Conservation of Nature (IUCN) has included 1,212 animal species on its Red List. Above 12% – 69 mammals, 56 amphibians and 23 reptiles – of these species are deemed endangered, as per Financial Express
According to The Hindu, India has already lost forest area of 668,400 hectares over the past, which has been recorded as the second highest globally

Biodiversity preservation

Our budgetary expectations

Increase in budgetary support for promoting sustainable fishing, sustainable agricultural practices, cattle rearing and forestry and raising awareness on biodiversity preservation
Earmarking budgetary support for reforestation projects and development of new protected sites, especially in climate-critical zones
Targeted budgetary support for accredited forestry management courses
Regulated use of forest resources and financial support for Forest Stewardship Council certification
Budgetary support for municipal corporations to preserve urban biodiversity hotspots, as well as development and maintenance of local lakes and parks with native species (e.g., Rabindra Sarovar, Kolkata, hosts a number of native species)
Dedicated budgetary allowance for protecting endangered species as per IUCN survey
Enhanced budgetary support for critical areas of National Biodiversity Action Plan

3. Regulating the banking sector for ESG

Banking system

Challenges

Banks are poised to play a pivotal role in transition financing leading up to India’s 2070 Net Zero target, as well as in its Nationally Determined Contribution 2030 commitments, while adapting to the fast-changing macroeconomic landscape, based on environmental and social reforms. In India, the Reserve Bank of India (RBI) has a significant role in ensuring sustainable financing and responsible investment practices, as well as the adoption of reforms by the major banking ecosystem. It also needs to enact policy changes to support the Indian banking ecosystem enhance and incorporate ESG issues within its lending practices to minimise the risks associated with unsustainable business practices. Additionally, a centralised policy should stipulate that banks set aside funds for investment in sustainable social and environmental projects that not only provide returns on investment but also create and preserve social and environmental values.

Data in spotlight

Approximately 29 scheduled commercial banks in India agreed to modify their investing and lending practices to shore up green financing, according to The RBI’s Report of the Survey on Climate Risk and Sustainable Finance, July 2022 (source: PwC)

Our budgetary expectations

Development of blueprint on issuance of green bonds and loans, enhanced coverage of microfinancing schemes for credit access for micropreneurs, and dedicated focus on transition financing
Dedicated budgetary allocation for micro financial subsidies to economically weaker sections of society to ensure they can access credit to grow their business
Dedicated budgetary allocation for subsidies on transition finance to companies investing in sustainable solutions and eco-efficiencies

4. Climate research and budgeting

Climate change management

Challenges

Climate change and its implications are clearly visible. Erratic weather patterns and physical climate events (such as rain-induced floods, drought, water stress, heatwave, coastal damage and forest fires) are affecting the economy through asset damages, lower agricultural outputs, logistical problems and deteriorating health of low-income groups, among others, necessitating the greater role of national governments to build climate resilience and mitigate climate related risks.

Data in spotlight

According to UNDRR, Rajasthan, Assam, Uttar Pradesh, Bihar, Tamil Nadu, Gujarat, Punjab, Kerala and Maharashtra are some the 50 most sensitive states, as per the climate vulnerability of their built-up area
India’s Global Climate Risk Index score is 16.67 (as per German Watch)
Approximately 5tn is required by 2030 to meet India’s nationally determined contributions and USD10.1tn to achieve its net-zero targets by 2070, according to Climate Policy Initiative
India’s annual infrastructural loss due to climate change is estimated at around USD850bn, according to Coalition of Disaster Resilience Infrastructure

Our budgetary expectations

Manifold increase in budgetary support for dedicated research on climate change, forecasting technologies and integration of Artificial Intelligence to study weather patterns under the Ministry of Earth Sciences
Support for safe shelters at most hazardous prone zones
Continued budgetary support for India’s nationally determined goals as well as net-zero goals, which should offer research allowance for innovation in climate technologies
Budgetary support for research on alternative fuels (biofuel and green hydrogen), energy storage (mechanical, thermal, electrochemical, electrical and chemical storage systems), off-grid energy supply to further stimulate climate action and benefit from reduced Green House Gas emissions and and reduced operational expenses
Budgetary provision for battery storage systems in multiple zones to support India’s ambitious plans to expand its renewable energy capacity to 500GW by 2030 (source: Economic Times)
Dedicated financial support for developing asset and structural resilience to climate risks and adverse weather events
Budgetary support for municipalities in hazard-prone areas for flood banks, heat action plans, river linking for drought zones, flood-resilient infrastructure for safeguarding assets in low-lying areas against sea-level-rise-induced floods

Recommendation for establishing dedicated budget for adaptation and mitigation of core climate hazards on pan-India basis categorised into the following:

Heat-related events (to minimise/prevent lost man-days, due to excessive heat) – a RBI study indicates that loss in man-days from extreme heat and humidity could negatively impact India’s GDP by 4.5% by the year 2030
River- and sea-induced floods (to minimise damage to assets and loss of lives)

Rain-induced floods (to minimise asset damage, logistics constraints and loss of lives) – a State Bank of India’s study finds floods affect the economy to the tune of INR 150 billion
Drought- and water-related events (to minimise agricultural losses and human lives) – Ministry of Water Resources projections indicate a decrease in average annual per capita water availability by 2031

5. Circular solar power generation

Circularity concerns for RE sector

Challenges

A solar photovoltaic (PV) module lasts for 25–30 years (source: Forbes), while a wind turbine lives for approximately 20 years (source: TWI-Global). Over the next decade, high volumes of PV modules and wind turbines will likely reach their end of life and may end up in landfill, posing a considerable threat to India’s biodiversity, causing environmental degradation, using up land space and posing a significant solid waste management problem. While the use of PV modules and wind turbines is essential for India’s ambitious renewable energy plans, the circularity potential of these power generators needs to be researched for innovation to happen.

Data in spotlight

The installed PVs have generated an estimated 100 kilo tonnes (kt) of waste as of FY2023. This is projected to increase six times over to approximately 600 KT by 2030. Andhra Pradesh, Gujarat, Karnataka, Rajasthan and Tamil Nadu will account for nearly 67% of the total waste generated from PV modules, per Deccan

Our budgetary expectations

Budgetary support for research in sustainable materials for renewable power generators
Budget allocation for research in the extraction of useful materials from existing PV modules/wind turbines to prevent them from entering

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About the Author

Dr Biswaraj Ghosh

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Dr Biswaraj Ghosh is a key member of Acuity’s Corporate and Consulting vertical and oversees project execution and delivery for clients across multiple sectors covering Climate Change, and a range of ESG services. He possesses several functional expertise including solving sustainability-related issues, developing decarbonization strategies, stakeholder engagement, ESG risk assessment, materiality assessment, climate management, sustainability management, target setting, KPI design, etc. through qualitative & quantitative research. He is a Copyright holder (UK and India) for the indigenously developed Sustainability Management Model as part of his PhD thesis. He is also a published author, an international ESG talk show expert and an ESG career mentor. Biswaraj has a PhD in..Show More