INSUBCONTINENT EXCLUSIVE:
India's Union Budget, presented earlier this week, is both a presentation of the national accounts and the only statement of government
policy that we get all year
This year, the accounts made for worrying reading
The government is short of money and the economy is short of momentum
As a statement of policy, however, the budget is far more promising.The government borrowing program, at over $200 billion in the coming
financial year (which starts on April 1 in India), is likely to strain financial markets
Meanwhile, debt has soared since the pandemic began and now hovers at around 90% of GDP
Next year's fiscal deficit is going to be 6.4% of GDP, much higher than expected
The interest burden has grown almost 40% in just two years; about half of India's taxes now go to paying off interest on the government's
debt.The government's response? Squeeze spending on everything except infrastructure
There's a clear and coherent principle behind this strategy, one that India's Finance Minister Nirmala Sitharaman spelled out in her speech
The only problem is that the government has been trying this very trick for over five years and it still hasn't worked.Big public works
won't revive private-sector enthusiasm
That's where the budget offered more heartening news.A large proportion of Sitharaman's speech was dedicated to climate action and the
She quoted Prime Minister Narendra Modi just once, to make the point that he had committed India at the COP26 conference in Glasgow last
year to a low-carbon development path
To start down that road, the budget announced a slew of green incentives, policies and instruments.More money was thrown at solar panel
A policy was announced to set standards for EV battery-swapping
Fuel used in older (and more polluting cars) was made more expensive
Grid-linked battery farms will receive preferential debt finance
Finally, to help pay for all this, the government announced it would be issuing sovereign green bonds some time during the coming
year.India's leaders have been flailing about for awhile, searching for a new narrative that might enthuse the private sector and help
They tried promoting export-oriented manufacturing but undercut their pitch by issuing protectionist policies and dragging their feet on
projects and guaranteed demand that private capital so craves
When you combine the global ESG boom with India's efforts to create specialized funds and a new development finance institution to channel
finance to sustainable projects, it's easy to see how India's green turn might also ease its capital crunch a bit.Most importantly, the
In a country where the biggest concern for private investors is that a sudden shift in state policy will cause you to lose everything,
policy commitment is the only signal that works.Of course, policy direction and policy action aren't the same thing
If sovereign green bonds are to help fill India's fiscal gap, then the government will have to be absolutely clear about where the money is
going and what the impact of each dollar raised will be on mitigating emissions
Incentives for battery farms are all very well but protectionist policies have swelled tariffs on battery storage systems to about 40%,
according to the Financial Times
India's powerful legacy automakers have undercut every attempt so far to mandate more zero-emissions transport and they might do so
again.Still, when the possibility of a new, low-carbon growth path is discussed here in Delhi, it is now possible to detect a note of
India's government may be short of money
At least it's not yet short of ideas.(Except for the headline, this story has not been edited by TheIndianSubcontinent staff and is
published from a syndicated feed.)
