India has boarded the train towards greener glory but is likely to face hiccups owing to its stringent policies.
What could make India weak at its knees?
American rating company, Moody’s has said that India’s economic development needs will constrain the government’s ability to extend sufficient financial support to fund its carbon transition.
What’s more? The carbon-intensive industries make up for over one-fourth of the loans from banks. This will be a stumbling block for the Indian financial system. Why?
Due to the rigid green-energy commitments of the country, banks will have to lend to the green sector too in order to keep up with its targets.
Carving the Way for Private Comrades
Moody’s report found that many private companies in sectors like auto, chemicals, steel, and utilities, have already announced their own net-zero targets and are well ahead of the Indian government’s goal. However, their government counterparts are lagging. This puts the onus on private players to drive the carbon transition in India.
Whisking the Green Grails
To keep up with India’s green commitments, additional policy signals will be required to attract higher private investment. Also, the reduced storage costs and the scalability of renewable projects with storage would support the metamorphosis.
Moody’s believes that green financing is a substantial lending opportunity for the banks and would help reduce transition risk.
India is chasing trillions of dollars in climate finance from external donors amidst the reviving economy. This could label India as “an unlikely prospect” which makes the private sector even more pivotal in driving emissions reduction.
Too long? Here’s a one-liner: Moody’s report reveals the state of carbon transition in India; says India’s policies may challenge its net-zero progress putting the onus on the private sector.