'Article Pick' - What India Missed In Its INR 20 Lakh Crore Package

Having dived into a conversation around green stimulus at OnePointFive, and how countries (Europe, United States and China) are responding to it, it is only fair that we discussed the state of affairs in India, as well. 

This week, we have picked up a piece by Aesha Datta (Assistant Editor — Environment), published in ET Prime.

The piece not only investigates the extent of green measures in India’s ₹20 Lakh Crore stimulus package (announced in the 3rd week of May, 2020); but also explores evidence if at all a green stimulus can bring real economic benefits.

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3 OnePointFive SideNotes to help you understand the context:

1. India CO2 emission has been increasing year on year

2. India is the world’s third largest CO2 emitter, after China and USA

3. Here is why India’s stimulus package is so important to the climate conversation

At current global emission levels, the world needs to decline emission by 7.5% annually until year 2030 to keep its temperature rise below 1.5°C — to avoid catastrophic climate shocks 

And India — which not only has an increasing CO2 emission trend year on year but is also the world’s third largest emitter of CO2 — plays a very important role in the on-going global efforts to ensure such a decrease in emission is achieved.

As the Indian government provides financial assistance to various sectors in an attempt to reopen its economy after the extended COVID-19 lockdown, it is imperative that the government wisely chooses the kind of transport, industries, energy, construction systems, and businesses that it will protect and promote in the post COVID era.

The trillions of dollars of infrastructure built in the coming years will last for decades, shaping the future carbon emissions in India, that will be all-but-impossible to deviate from years, down the road.

It is in this moment of massive government stimulus for economic recovery, that governments around the world have attempted to re-orient their economies into low carbon paths through a mix of “green stimulus”.

India, likewise, will also have to consider and invest for a low carbon economic growth model, so that the global efforts to decrease emission is achieved.

OnePointFive encourages its members to read the article to develop a sense of the economic means and arguments available to national governments in order to keep their greenhouse gas emissions low, without sacrificing their economic growth ambitions.

This is popularly known as “decoupling of growth from emission” and is a crucial policy strategy to avoid irreversible climate change, as countries forge their path of economic development.

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In the face of the India’s increasing emission pathway, Aesha makes an argument that the Government of India may have missed a massive opportunity to stimulate its economy through green investment, during the ₹20 Lakh Crore stimulus announced recently in its attempt to reopen the Indian economy from the COVID lockdown.

She draws our attention to the facts that,

“the relief to the construction sector, did not come with the caveats of building energy-efficient infrastructure”

“the massive ₹ 90,000 crore booster to the struggling power distribution companies didn’t address the concerns of unsustainably expensive power-purchase agreements (PPAs) with old coal-based power plants, often the mega polluters.”

“the revival package for Micro, Small & Medium Enterprises (MSMEs), some of which are highly polluting, did not look at investments in efficient technologies that can have incremental impact on healthcare expenses.”

The author’s inference is based on the now-available-evidence (more than 10 years later) on the performance of countries that had announced “green stimulus” to re-orient and re-open their economies, after the Global Financial Crisis (GFC) of 2007–2008. The piece also, looks at arguments from eminent thinkers in the field.

The author points us at the “faster and stronger bounce-back” track record of countries such as South Korea, China and USA, who had committed large shares of their stimulus after the GFC 2007–2008 into green initiatives. South Korea, with 79% of its stimulus in green measures, outperformed other OECD (Organisation for Economic Co-operation and Development) countries. USA, on similar lines, witnessed more jobs created from its investments in renewable energy and clean public transport (compared to other investments in their traditional sectors).

Further, the author turns us to a recently published paper in Oxford Review of Economic Policy that has received much global attention amidst the national stimulus announcements of the moment. The paper, co-authored by prominent economists including Nobel laureates, analysed over 700 stimulus packages introduced since the GFC 2007–2008.

It found that most experts, including heads of central banks, finance ministries, bankers, and economists, across the globe believe that stimulus packages aimed at low-carbon economic pathway can bring about,

(i) long-term climate benefit, (ii) while offering both short-term as well as long-term economic benefits.

The piece further, quotes Brian O’Callaghan (co-author of the study and a researcher at the University of Oxford) who suggests that green stimulus packages (compared to traditional stimuli) aligns much better with a country’s ability to get back from a crisis along multiple fronts:

“(i) reducing inefficiencies and waste, (ii) higher short-term job generation (iii) better health outcomes, (iv) better natural capital such as forests and others”.

However, policy makers will have to “looks beyond next quarter’s GDP or next year’s GDP” — which is what India’s ₹ 20 Lakh Crore stimulus package seems to be missing.

The author also quotes Arunabha Ghosh (public-policy expert and founder-CEO of Council on Energy, Environment and Water) who calls for a green-economy push in India and suggests investing in new greenfield sectors can draw private investment, create new resilient infrastructure and deliver real return on investment, besides creating jobs, reducing household costs and increase household incomes.

On her closing notes, the author suggests,

“The evidence of invaluable returns from investments made in green economy is well-documented. If India wants to put its growth engine back on track and regain jobs lost in the rural areas, investments in green economy will reap rich dividends.”

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Article Pick  is a OnePointFive Blog Series  , where we bring to our members interesting articles from around the world that indulge in latest conversations in the realm of climate change, buildings and the building industry.

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