INDIA

Economic policies push India’s emissions higher by fuelling energy-intensive growth and constraining the pace and depth of mitigation through high GDP targets.

India’s pursuit of rapid economic development, driven by a young population and ambitious growth targets, inherently clashes with the imperatives of climate mitigation, which demand substantial upfront investments and structural shifts away from carbon-intensive pathways. These conflicts manifest in policy tensions and cost trade-offs:

• Policy Tensions: Economic policies prioritise energy security and industrialisation, often relying on coal for baseload power to support manufacturing and infrastructure booms. In contrast, climate policies aim to accelerate the deployment of renewables and reduce emissions intensity under the Paris Agreement. 

For instance, coal-dependent growth ensures affordable energy for factories and households but undermines Nationally Determined Contribution (NDC) goals by locking in fossil fuel infrastructure. Mining reforms for critical minerals (e.g., lithium for batteries) boost EV and renewable supply chains but risk environmental degradation and community displacement in biodiversity hotspots like the Eastern Ghats. Additionally, export-led growth under “Make in India” favors rapid industrial expansion, potentially sidelining stringent emissions standards to remain competitive globally.

• Cost Trade-offs: Economic development requires massive capital for infrastructure (e.g., ₹11.21 lakh crore in the 2025-26 Budget for the National Infrastructure Pipeline), diverting funds from climate adaptation, such as resilient agriculture or urban green corridors. Transitioning to low-carbon tech incurs high short-term costs, estimated at $170 billion annually for renewables through 2030, potentially straining fiscal resources amid subsidies for fossil fuels (₹2.7 lakh crore in 2024-25). Job displacement in the coal sector (affecting 10-15 million workers) versus green job creation adds social costs, exacerbating rural-urban divides and inequality, as economic liberalization shifts the emissions burden to less developed states.

These frictions highlight India’s “common but differentiated responsibilities” stance: as a developing nation with low per capita emissions (2 tons CO2e vs. global 4.7), it argues for a phase-out period before deep decarbonization, but this delays global climate goals.

India’s Economic Development Priorities and Policies

India’s core economic priority is achieving “Viksit Bharat” (Developed India) by 2047, a $30 trillion economy with 8-10% annual GDP growth, lifting 1.46 billion people out of poverty through inclusive, resilient progress. Key focuses include job creation (targeting 90 million by 2030), infrastructure modernisation, manufacturing revival, rural empowerment, and digital/export-led innovation, amid a 2025 GDP growth of ~7-8% despite global headwinds.

To address these, India employs or plans multifaceted policies:

• Growth Engines: “Make in India” incentivises foreign direct investment (FDI) via production-linked incentives (PLIs), aiming for 25% manufacturing GDP share by 2030; agriculture and MSMEs get boosted via the G RAM G Bill 2025 for asset creation and rural incomes.
• Infrastructure and Connectivity: The $1.4 trillion National Infrastructure Pipeline (NIP) advances 9,000 projects (highways, ports, airports) with ₹11.21 lakh crore allocated in Budget 2025-26, emphasizing efficient logistics to cut costs by 14%.
• Sectoral Reforms: Mining reforms unlock critical minerals for batteries/EVs; AI hubs in Kerala/Uttar Pradesh target $500 billion in tech exports under US-India pacts; power sector blends coal/renewables for 24/7 supply via amendments to the Electricity Act.
• Fiscal and Social Measures: Union Budget 2025-26 simplifies taxes to boost consumption, allocates for public health (to counter inequality), and integrates empowerment via sovereign tech frameworks. Big reforms in 2025 include labour codes and foreign policy aid to neighbours for stable trade.

These policies emphasize “thinking bigger” for equitable growth, with exports, investment, and domestic resilience as pillars.

Impacts of Economic Development Policies on Climate Mitigation

Economic policies propel India’s emissions upward by fueling energy-intensive growth, constraining the pace and depth of mitigation. High GDP targets necessitate a 7% annual increase in energy demand, met partly by coal (still ~70% of generation), delaying the shift to renewables despite reaching 50% non-fossil capacity early. Infrastructure expansions (e.g., highways) enable industrial sprawl but increase transport emissions, while mining booms risk 10-20% habitat loss in sensitive areas, complicating biodiversity credits under NDCs.

A stark example: Will development limit emissions rise to IPCC’s 1.5°C pathway? 

Yes, significantly. The IPCC’s SR1.5 (updated pathways) requires global emissions to peak before 2025 and to drop 43% from 2019 levels by 2030, with developing nations like India needing near-zero absolute emissions growth post-2025 through rapid electrification and efficiency. However, under current policies, India’s emissions are projected at 4.4-4.6 GtCO2e by 2030 – an 8-11% rise from prior estimates and continuing upward beyond, per Climate Action Tracker’s 2025 update. This trajectory aligns with NDC compliance (45% intensity reduction) but exceeds 1.5°C-compatible pathways, potentially contributing to 2.4-2.7°C of global warming if unadjusted. Economic priorities like coal additions for energy security (e.g., 2025 capacity growth) and $21 trillion in planned climate spending (spread to 2070) prioritise affordability over ambition, limiting India’s peak before 2030 and co-benefits like air quality gains.

Does Tension Explain Climate Mitigation’s Changing Status?

Absolutely. Initially viewed skeptically as a “Western luxury” in conflict with poverty alleviation (e.g., pre-2015 NDCs focused on adaptation over mitigation), climate action has evolved into a “core enabler” by 2025, as evidenced by Budget integrations and high Climate Performance Index rankings. The tension balancing “roti, kapda, makaan” (basics) with planetary health drove this shift: early coal reliance exposed vulnerabilities (e.g., 2024’s record emissions spike amid heatwaves costing 1.5-2% GDP), while synergies like green jobs (6 million added in renewables) proved mitigation boosts growth. COP advocacy for finance (critiquing COP29’s “grossly inadequate” NCQG) secured $100 billion+ pledges, reframing climate as an opportunity. By 2025, renewables prioritization in budgets and a 1% dip in power sector CO2 emissions reflect this: tension forced pragmatic integration, elevating it from a “side note” to a strategic pillar for Viksit Bharat.

Bridging Barriers: Ways for Climate Mitigation to Support Economic Development

Barriers like fiscal silos, tech gaps, and social resistance can be bridged through “green growth” collaboration that leverages mitigation to create jobs, build resilience, and enhance competitiveness. 

Concrete examples:

1. PM-KUSUM Solarization Scheme: Solarizes 10,000+ MW for farmers by 2025, cutting diesel costs 90% and CO2 by 1.5 Mt/year while doubling rural incomes via higher yields. This bridges by turning mitigation into agricultural productivity, targeting 34 GW by 2026 and creating 200,000 jobs, directly supporting rural development without mandates.
2. National Green Hydrogen Mission ($2.4 billion): Scales production for steel/fertilizers, unlocking 600,000 jobs by 2030 and swapping fossil inputs in exports (e.g., Jamnagar pilots). It mitigates emissions (10% industrial cut) while enhancing global competitiveness, funded via green bonds to ease fiscal strain.
3. Sovereign Green Bonds and ESG Alignment: Issued ₹16,000 crore in 2025 for renewables, bridging finance gaps by attracting $10 billion private investment. This supports infrastructure (e.g., EV fleets in metros) while yielding health savings (₹2-3 lakh crore annually from cleaner air), demonstrating that low-carbon tech is an economic multiplier.

Best Policies for the Rest of the World to Achieve 2030 Goals

India’s model offers replicable “win-win” policies for Global South nations targeting IPCC’s 43% global cut by 2030:

• Accelerated Renewables with Job Mandates: Exceeding 50% non-fossil capacity early via PLIs creates 6-10 million green jobs; adopt globally to decouple growth from emissions, as in IRENA’s $170 billion investment blueprint.
• Integrated Climate Finance in Budgets: Allocating 2-3% of GDP to green spending (e.g., ₹26,500 crore for renewables in 2025-26) via bonds scales up transitions; world leaders should mandate 5% of national budgets for adaptation/mitigation, unlocking trillions in blended finance.
• Lifestyle and Community-Led Initiatives (LiFE Movement): Bottom-up sustainability (e.g., Kerala’s mangroves boosting fish yields 2x) fosters behavioral shifts without top-down costs; scale via UN frameworks for 1 GtCO2e savings by 2030, emphasizing equity for buy-in. These policies demonstrate development as a “force for good,” aligning with IPCC pathways for equitable 1.5°C limits.

This Post was submitted by Climate Scorecard India Country Manager, Ankita Padelkar