India’s central bank, RBI, published a report authored by its internal Department of Economic and Policy Research. The bank as a regulator was looking to create policy instruments that would influence the flow of investments in the country. Their intention is to help the country achieve its sustainability goals.
The report stated that India would spend Rs 85.6 trillion or $1 trillion to make its industry compliant with climate change. The green financing requirements are supposed to be at least 2.5% in terms of GDP.
The report suggested a sector-by-sector approach that would weigh short-term losses to NDC (nationally determined contribution) with medium-term losses if no action is taken. The central bank acknowledged the long-term and medium-term harm that climate change could cause to the economy.
The report stated that if no actions were taken India’s carbon emissions could rise to 3.9 gigatonnes by 2030, from 2.7 gigatonnes in 2021.
The report cautioned that before adding these ‘green’ regulations the government should address bad loans in the system that could become points of weakness in the future. They will act as added stress on a system that would be in the midst of a course correction.
“If green capital regulation amplifies non-performing assets, it could impede monetary policy transmission,” the RBI stated in its report.
The report cautions that lenient policy implementation will have an adverse impact on both growth and inflation in the medium run and the long run.
