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View from India: Preparing for a circular and green economy

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The Union Budget 2022-2023 may be described as an articulation of purposeful intent enabled by a clear action plan. Building on the budget of last year, the government has continued on the path of prioritising economic growth with calibrated fiscal prudence.

The spotlight is on clean and sustainable mobility. The finance minister has indicated that the use of public transport in urban areas will be promoted; this will be complemented by clean tech and governance solutions, special mobility zones with a zero-fossil-fuel policy, and electric vehicles (EVs). Considering the constraint of space in urban areas for setting up charging stations at scale, a battery-swapping policy will be brought in and inter-operability standards will be formulated. “For the Indian automobile sector, which is a significant contributor to the nation’s GDP [gross domestic product], the budget offers continuity and also additional opportunities to drive multi-year growth,” said PB Balaji, Group CFO at Tata Motors. "Specifically, the robust increase in capex [capital expenditure] by 35.4 per cent to Rs 7.5 lakh crore [Rs 7.5tr, or £73bn] and a comprehensive investment plan for infrastructure is a significant growth booster. Additionally, plans to create EV charging infrastructure – including national policy for battery swapping – combined with the already announced automotive production linked incentive (PLI) scheme, furthers the agenda for green mobility,” added Balaji. 

The private sector will be encouraged to develop sustainable and innovative business models for ‘Battery or Energy as a Service’. This is projected to improve efficiency in the EV ecosystem. “The announcement of the much-awaited battery-swapping policy will provide charging solutions to those with space shortages while the to-be-formulated interoperability standards will provide certainty to EV manufacturers and investors looking to build charging stations. With the introduction of special mobility zones with zero fossil fuels as well, the 2022 Budget looks like it will be a game changer for the Indian EV ecosystem,” explained Shreyas Shibulal, founder and director of Micelio.

There is a push for clean energy, with the government announcing that sovereign green bonds will be issued for mobilising resources for green infrastructure. The proceeds will be deployed in public sector projects, which help in reducing the carbon intensity of the economy. “The announcement of green bonds to raise capital focused towards carbon footprint reduction could be a significant milestone for industries that work towards sustainability. The green bonds will aid public sector projects, which in turn would support and grow ancillary private businesses that provide products and services towards this,” explained Dipanjan Purkayastha, co-founder and CEO of HyperXchange.

Along with green and clean energy, the Budget has emphasised a circular economy. An action plan for 10 sectors, including electronic waste, end-of-life vehicles, used oil waste, and toxic and hazardous industrial waste, has been announced. The focus will be on issues related to infrastructure, reverse logistics, technology upgradation, and integration with the informal sector.  

The Ministry of New and Renewable Energy (MNRE) has come up with a simplified procedure for residents to install rooftop solar plants; a national portal will be developed for executing the process. “The in-principle approval of Rs 24,000 crores [Rs 24tr, or £236bn] for PLI allocation towards high-efficiency photovoltaic modules can lead to the setting up of 30-35GW of solar module capacity and 25GW-30GW of cell capacity by 2024. This will reduce dependence on imports, which stand at 90 per cent for cells and 75-80 per cent for modules currently,” observed Hetal Gandhi, director at CRISIL Research. "It will make India not only self-reliant for annual module needs, but also open up export opportunities for domestic module manufacturers. What remains to be seen is if current bids made for PLI funding will be accepted as is, or companies under each category will be asked to match the lowest bidder." Time will tell whether the consumption of petrol and diesel will come down this decade, and if oil refiners will include eco-friendly alternatives in their production. 

The launch of the National Ropeways Development Programme is expected to boost the tourism sector. Likewise, the vision towards developing a self-reliant defence sector could increase the demand of high-tech surveillance and security solutions. Embedded chip and futuristic technology are being leveraged for the issuance of e-passports to enhance convenience for citizens in their overseas travel. “With the government’s infrastructure spending push, we are likely to see more employment and growth opportunities and enhanced private sector investment in manufacturing,” explained Alok Dubey, chief financial officer at Acer India. "The exemption of duty on parts of select electronic items will further boost the domestic manufacturing of electronics goods under the PLI scheme. Overall, the Union Budget 2022-23 is a promising budget and a step forward towards Aatmanirbhar Bharat."

In summary, the Budget seems to be growth oriented for the Indian economy. It appears to be a green-tech budget with self-sufficiency as the underlying theme. “This budget takes a step further in that direction along with long term directional move for the Green Energy Economy and making India a manufacturing hub in the medium to long term," said Amit Jain, CEO and co-founder of Ashika Wealth Management. "From here on, capital goods, infrastructure, and defence sector should be in focus. The government’s move for raising funds through green energy funds may be a game changer for selected PSUs [public sector undertakings]. There are many global funds that invest in these ESG [Environmental, Social, and Governance] bonds and re-engineer the old economy fossil-fuel-based business models to new-age green energy business models across the globe."

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