Financing India’s Green Transition: The Emergence of Sovereign Green Bonds as a Strategic Lever in India’s Sustainable Finance Agenda for Viksit Bharat@2047

Abstract

The most populated country as well one of the largest and fastest developing major economies in the world, India has also the dubious distinction of alarming carbon footprints. However, India is all set to play the role of a responsible climate leader pledged to the Paris Agreement and, as evidences suggest, is trying to evolve as an Inclusive Green Economy (IGE) by balancing environmental sustainability and economic growth. In line with the UN Sustainable Development Goals 2030 and its national vision-plan Viksit Bharat@2047, India has undertaken ambitious climate targets, including achieving net-zero emissions by 2070, reducing greenhouse gas emissions intensity of its GDP by 45% (from 2005 levels) by 2030, and securing 50% of its electricity generation capacity from non-fossil fuel sources by 2030. To realize these climate and environment friendly goals, India needs an estimated $2.5 trillion in climate finance by 2030. In this context, Sovereign Green Bonds (SRGBs) have emerged as a vital financial (read debt) instrument for mobilizing both domestic and international capital towards environmentally sustainable projects. India’s ambitious climate targets necessitate significant capital mobilization, making SGrBs a crucial instrument in its sustainable finance agenda to fund green projects of renewable energy, clean transportation, climate change adaptation, sustainable water and waste management, pollution prevention and control, green infrastructure, etc. This paper argues that India’s sovereign green bond program plays a pivotal role in advancing the country’s sustainable finance agenda by mobilizing ESG-aligned capital; however, overcoming challenges related to market trust, governance, and transparency is essential. This paper employs a SWOT analysis to review India’s SGrBs programme on green bonds and sustainable finance, contextualizing India’s initiative within global trends and evaluating the SGrBs program’s strengths, weaknesses, opportunities, and threats. Key market problems such as transparency issues, low ‘greenium,’ secondary market illiquidity, and the absence of a comprehensive, full-proof green taxonomy are identified. Through a detailed analysis of current policies and market dynamics, the study proposes strategic interventions aimed at enhancing investor confidence and optimizing capital mobilization to support India’s climate and development objectives through SGrBs. Finally, strategies are proposed to enhance market trust and facilitate greater ESG-aligned capital mobilization, including strengthening reporting, optimizing greeniums, boosting secondary market liquidity, and developing a robust green taxonomy aimed at generating sustainable finance over time to realize the vision of Viksit Bharat@2047.