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A Reserve Bank of India (RBI) report has said the country’s green financing requirement is estimated to be at least 2.5 per cent of Gross Domestic Product (GDP) annually till 2030. The country aims to achieve net zero emissions target by 2070. The RBI’s report on Currency and Finance (RCF) for the year 2022-23 covers four major dimensions of climate change to assess future challenges to sustainable high growth in India. The areas are the unprecedented scale and pace of climate change; its macroeconomic effects; implications for financial stability; and policy options to mitigate climate risks.

It said the country’s goal of achieving the net zero target by 2070 would require an accelerated reduction in the energy intensity of GDP by around 5 per cent annually and a significant improvement in its energy-mix in favour of renewables to around 80 per cent by 2070-71. According to the report, a balanced policy intervention with progress ensured across all policy levers will enable India to achieve its green transition targets by 2030, making the net zero goal by 2070 attainable. It said ‘India’s goal of becoming an advanced economy by 2047 and achieving the net zero target by 2070 would require accelerated efforts in terms of reducing the energy intensity of output as well as improving the energy-mix in favour of renewables’.

Further, the report said scenario analysis suggests that delayed climate policy actions could be costlier in terms of larger output losses and higher inflation. As per the report, India’s susceptibility to physical risks emanating from climate change raises significant concerns on policy trade-offs surrounding growth-inflation. It said ‘scenario analysis indicates that the Indian economy may be deeply impacted, with inflation rising and output falling in the medium-term under a lenient mitigation plan’. Risk mitigating domestic policies and global concerted efforts could, however, help in containing the adverse impact on growth and inflation.