The cherry on top would be the lowering of GST from 18 per cent to 5 per cent on lithium-ion batteries, a long-standing demand to support battery-as-a-service

Byline: Vasudha Madhavan, Founder & CEO, Ostara Advisors

India is today on the cusp of its biggest ‘growth spurt’, driven by the largest GenZ & Millennial population in the world, a government committed to progressive policies, increasing global diplomatic influence and a vast consumer market. Despite all of these tailwinds, the biggest challenge in front of India today is to balance economic growth with sustainability.

This is easier said than done, because GDP growth from expanding production & consumption has always come at an environmental cost. A research paper published in 2022 by academics from the Finance, Money and Public Administration Department at the Alexandru Ioan Cuza University of Iasi, Romania, suggested a strong correlation between GDP growth and carbon emissions, stating that on an average, a 1 per cent change in GDP leads to a 0.072 per cent change in CO2 emissions. In the US, greenhouse gas emissions peaked in 2007, having grown significantly through the phase of strong economic growth in the 1980s and 1990s.

Can India pull off the seemingly impossible mission of “Green Growth” in the decades to come?

Since PM Modi set the 2070 target for Net Zero and the vision for Viksit Bharat (a Developed India) by 2047, we have taken several meaningful steps towards decarbonization. Following “Green Growth” as one of the 7 priorities announced by the Finance Minister during her 2023 Budget speech, recent policies have focused on key initiatives like Rooftop solarisation, a greater share of energy generation from Renewable sources like solar, wind, nuclear and hydropower, a commitment to the Green Hydrogen mission as well as Battery Energy storage to support the transition to low-carbon, though intermittent renewable energy.

The steps we take now as a country are expected to have a far-reaching impact on our journey to low-carbon economic growth. In this context, NITI Aayog’s energy transition guidelines expected to be released early this year, outlining a roadmap for India to meet its net-zero carbon emissions target by 2070, as well as the upcoming Union Budget 2025, are crucial milestones on this journey. I outline below 6 key expectations from the Union Budget 2025 to promote decarbonization and sustainable growth for India:

Renewable Energy Generation Capacity: I expect Budget 2025 to support further expansion of Solar, Wind and Nuclear energy capacity to achieve our target of achieving 500 GW of non-fossil fuel capacity by 2030. Greater clarity on customs duties & lower GST on key components for solar manufacturing and increased support for MSMEs to create a local supply chain could provide a fillip to our clean energy ambitions.

Support for Energy Storage: Energy storage goes hand-in-hand with a transition to clean energy. India has been actively promoting energy storage technologies, particularly battery energy storage systems (BESS), alongside alternatives like pumped storage projects (PSPs) and green hydrogen through measures like Viability Gap Funding and the launch of a policy framework for Energy Storage in August 2023. Budget 2025 would do well to extend tax concessions for BESS installations and enable faster implementation of the PLI scheme for Advanced Chemistry cells and Solar PV modules, to make India more self-sufficient in these areas.

Industrial Decarbonization: The Indian Government, along with NITI Aayog, is developing a comprehensive strategy to decarbonize hard-to-abate industrial sectors like Steel, cement, and petrochemicals etc. Biofuels are central to industrial decarbonization as they form a good alternative to fossil fuels, while effectively repurposing agricultural and municipal waste. The Government has set targets for 20% ethanol blending in fuel, 5 per cent biodiesel blending and upto 5 per cent compressed bio-gas blending in the next 4-5 years, lowering carbon emissions and increasing energy security. During this Budget and going forward, I expect to see steps taken to support R&D to reduce emissions and improve the efficiency of raw material used in these sectors.

Circular Economy: Circular Economy is gaining prominence in India as a profitable industry aimed at repurposing, repairing or recycling materials and products to extend their useful life and minimize the utilization of virgin resources like metals & minerals, plastics, etc. I expect to see concrete steps taken to broaden and effectively implement the Critical Minerals Mission (announced in Union Budget 2024) and the Extended Producer Responsibility (EPR) framework to encourage Circular economy.

Electric Mobility: India has followed a conscious policy of incentivizing demand for electric vehicles since 2015, and has also launched PLI schemes to support localized production of Lithium-ion cells, battery packs, EV components like motors & electronics as well as EVs. My top expectation from this budget would be for the inclusion of financing options for electric two-wheelers and three-wheelers under priority sector lending to support gig economy workers and enhance their livelihoods. The cherry on top would be the lowering of GST from 18 per cent to 5 per cent on lithium-ion batteries, a long-standing demand to support battery-as-a-service.

Climate Financing: I expect the Budget to take last year’s Budget announcement on the Climate Finance Taxonomy forward by outlining specific timelines for implementation and detailed strategies for mobilizing climate finance. We are likely to see incentives for green bonds and funding mechanisms for renewable energy projects as well as for diverse funding sources from global capital markets.

Even as India is poised for rapid economic growth, fuelled by a young workforce, progressive policies, and expanding global influence, I am excited to see what the 2025 Budget has to offer. Given the current global developments, including headwinds from changes in US climate policy, we should firmly focus on accelerating our energy transition. These policies will help us achieve a ‘Climate Dividend’ compounding India’s demographic dividend. I hope this Union Budget 2025 will give new meaning to the phrase ‘the grass is greener on the other side’!