Indian Budget Analysis

by TERI | The Energy and Resources Institute
Tuesday, 15 July 2014 09:54 GMT

* Any views expressed in this article are those of the author and not of Thomson Reuters Foundation.

UNION BUDGET 2014: High on growth and infrastructure, but government needs to ensure environmental sustainability



The Government of India has a daunting challenge ahead. On one hand there is a need to revive economic growth, and on the other, as the Prime Minister has stated, the pattern of growth has to be sustainable and in harmony with Nature. While the Union Budget 2014 has signaled that socio-environmental concerns, including adequate sanitation facilities, vibrant rivers and clean energy are high on its agenda, this is a chance for the government to show that high growth and environmental sustainability can not only co-exist, but be mutually reinforcing. The Energy and Resources Institute (TERI), analyzes the Union Budget from a sustainable development perspectiveand identifies some opportunities for strengthening these positive linkages.


The big picture

The Finance Minister’s speech should have highlighted the issue of overall security of energy supply for India. India’s dependence on oil imports is currently around 80 per cent of its total consumption and with current policies and business as usual this problem would accentuate in future. The devaluation of the rupee over the past three years has in itself increased the oil import burden by 50 per cent in rupee terms. “Should any geo-political developments in the region from where we import the bulk of our oil lead to say 50 per cent increase in global oil prices, the impact on the Indian economy could be disastrous. Hence, the Finance Minister could have highlighted the objectives of attaining higher energy security, lowering environmental pollution and tackling global climate change through measures to attain higher energy efficiency, greater use of non-fossil energy sources, and reducing the rate of growth in demand through promoting public transport and energy efficient buildings,” says Dr R K Pachauri, Director General, TERI.


The Budget has emphasized the need for sustained growth of 7-8 per cent or above within the next 3-4 years along with macro-economic stabilization including lower inflation and fiscal deficit and manageable current account deficit. There is recognition that economic growth can usher in prosperity and well-being of the people only of it is socially inclusive and environmentally sustainable. The intention to cover every household by total sanitation by 2019, the 150th year of the birth anniversary of Mahatma Gandhi and provide housing for all by 2022, when the country will celebrate the 75th year of its Independence is laudable. These noble intentions must be implemented in all seriousness with adequate provisioning of funds, efficient mechanisms for delivery and good monitoring systems. It is also crucial that the involvement of the state governments and local bodies is ensured for the success of these important provisions. These goals are of paramount importance and any slippage in stated target dates would be unfortunate.


The latest Economic Survey had rightly highlighted the importance of climate change for sustainable development. The Budget has made a good beginning by constituting a National Adaptation Fund, with an initial allocation of Rs 100 crore. The Government should follow this up by reviewing the National Action Plan on Climate Change announced by the Prime Minister in 2008 and the eight Missions set up under the Action Plan that have not made much progress.


In particular the National Solar Energy Mission needs a substantial increase in the level of ambition, because India is well placed to utilize solar energy on a much larger scale than incorporated in this Mission. If environmental externalities and an energy security premium are to be included in energy prices, solar energy and other renewable forms would acquire economic merit.


The renewed emphasis given on the development of infrastructure – highways, ports, airports and inland transport, urban renewal, smart cities, the promise of substantial investments through budgetary allocations, public-private participation and innovative mechanisms like Infrastructure Investment Trust are encouraging. These initiatives must be designed and implemented in a manner that ensures the protection of the environment and judicious use and regeneration of scarce natural resources. Also, infrastructure including the road network would have significant impact on natural ecosystems and the government should encourage research on understanding and minimizing the impacts of infrastructure on ecosystems.


The Finance Minister has announced a National Programme for “Skilling India”. This is important for us to reap the demographic dividend. It is necessary that the skill sets should include skills which promote 'green jobs' – jobs which either enable the use of energy and resources more efficiently, or which relate to the production and operation of machinery and equipment which rely on renewable energy or are more energy and resource efficient.