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VOL. 2
MACROECONOMIC
IMPLICATIONS
SCENARIOS TOWARDS VIKSIT BHARAT AND NET ZERO
VOL. 11
SOCIAL IMPLICATIONS
OF TRANSITION
SCENARIOS TOWARDS VIKSIT BHARAT AND NET ZERO Copyright © NITI Aayog, 2026
NITI Aayog
Government of India,
Sansad Marg, New Delhi–110001, India
Suggested Citation
NITI Aayog. (2026). Scenarios Towards Viksit Bharat and Net Zero - Macroeconomic
Implications (Vol. 2)
Available at: https://niti.gov.in/publications/division-reports
Disclaimer
1.This document is not a statement of policy by the National Institution for
Transforming India (hereinafter referred to as NITI Aayog). It has been prepared
by the Green Transition, Energy, Climate, and Environment Division of NITI Aayog
under various Inter-Ministerial Working Groups (IMWGs) constituted to develop
Net-Zero pathways for India.
2.Unless otherwise stated, NITI Aayog, in this regard, has not made any representation
or warranty, express or implied, as to the completeness or reliability of the
information, data, findings, or methodology presented in this document. While due
care has been taken by the author(s) in the preparation of this publication, the
content is based on independently procured information and analysis available at
the time of writing and may not reflect the most current policy developments or
datasets.
3.The assertions, interpretations, and conclusions expressed in this report are those
of the author(s) and do not necessarily reflect the views of NITI Aayog or the
Government of India, unless otherwise mentioned. As such, NITI Aayog does not
endorse or validate any of the specific views or policy suggestions made herein by
the author(s).
4.NITI Aayog shall not be liable under any circumstances, in law or equity, for any
loss, damage, liability, or expense incurred or suffered as a result of the use of or
reliance upon the contents of this document. Any reference to specific organisations,
products, services, or data sources does not constitute or imply an endorsement
by NITI Aayog. Readers are encouraged to independently verify the data and
conduct their analysis before forming conclusions or taking any policy, academic,
or commercial decisions. SCENARIOS TOWARDS VIKSIT BHARAT
AND NET ZERO
MACROECONOMIC
IMPLICATIONS
(VOL. 2) xiScenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Authors and
Acknowledgement
Chairperson
Dr. Arvind Virmani
Member, NITI Aayog
Leadership
Sh. Suman Bery
Vice Chairman, NITI Aayog
Sh. B.V.R. Subrahmanyam
CEO, NITI Aayog
Dr. V. Anantha Nageswaran
Chief Economic Advisor, Govt. of India
Dr. Anshu Bharadwaj
Programme Director, Green Transition,
Energy & Climate Change Division,
NITI Aayog
Core Modelling Team
A. Macro-economic Modeling
Mr. Venugopal Mothkoor
Energy and Climate Modelling Specialist,
NITI Aayog
Dr. Stephane Hallegatte
Chief Climate Economist, World Bank
Dr. Lulit Mitik Beyene
Senior Economist, World Bank
Dr. Mei Mei Lam
Economist, World Bank
Dr. Sanjib Pohit
Professor, NCAER
B. Energy Modeling
Dr. Anjali Jain
Consultant G-II, NITI Aayog
Mr. Nitin Bajpai
Consultant, NITI Aayog
Authors
NITI Aayog
Mr. Venugopal Mothkoor
Energy and Climate Modelling Specialist,
NITI Aayog
Ms. Divya Midha
Consultant, NITI Aayog
World Bank
Dr. Stephane Hallegatte
Chief Climate Economist, World Bank
Dr Lulit Mitik Beyene
Senior Economist, World Bank
Dr Mei Mei Lam
Economist, World Bank xii
Authors and Acknowledgement Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
WRI India
Ms. Ulka Kelkar
Executive Director, WRI India
Mr. Subrata Chakrabarty
Associate Director, WRI India
Mr. Varun Agarwal
Program Manager, WRI India
Mr. Devadathan Biju
Program Associate, WRI India
NCAER
Dr. Sanjib Pohit
Professor, NCAER
Dr. Suvajit Banerjee
Fellow, NCAER
Mr. Devender Pratap
Senior Fellow, NCAER
Dr. Chetana Chaudhuri
Fellow, NCAER
Peer Reviewers
Dr. V. Anantha Nageswaran
Chief Economic Advisor, Govt of India
Ms. Chandni Raina
Advisor, Climate Change & Finance Unit,
DEA
Ms. Aditi Pathak
Joint Director, Climate Change & Finance
Unit, DEA
Ms. Gurvinder Kaur
Joint Director, Climate Change & Finance
Unit, DEA
Ms. Ritika Bansal
Deputy Director, Climate Change & Finance
Unit, DEA
Mr. Shard Sapra
Scientist-F, MoEF&CC
Ms. Shweta Kumar
Director, MoEF&CC
Dr. Steven Pennings
Senior Economist, World Bank
Mr. Aurélien Kruse
Lead Country Economist, India
Working Group Coordinators
Dr. Ritu Mathur
Senior Fellow and Director, TERI
Mr. Venugopal Mothkoor
Energy and Climate Modelling Specialist,
NITI Aayog
Ms. Divya Midha
Consultant, NITI Aayog
Ms. Srishti Dewan
YP, NITI Aayog
Mr. Kanishk Jain
Former YP, NITI Aayog
Working Group Members
Sh. Ajay Seth
Former Secretary, DEA,Govt of India;
Chairperson, IRDAI
Dr. V. Anantha Nageswaran
Chief Economic Advisor, Govt of India xiii
Authors and Acknowledgement Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Sh. Sudeep Jain
Former Additional Secretary, MNRE
Ms. Chandni Raina
Advisor (CCFU), Dept of Economic Affairs,
Govt of India
Sh. Nilesh Sah
Joint Secretary, MoEF&CC
Mr. D.K.Ojha
DDG, MoPNG
Ms. Rekha Misra
Advisor (Dept of Economic and Policy
Research), RBI
Mr. Karam Chand
Director, MoPower
Dr. Shikha Anand
Director, MoLabour & Employment
Dr. Lei Lei Song
Director, ADB
Dr. Kirit Parikh
Chairman, IRADe
Dr Jyothi Parikh
Executive Director, IRADe
Dr V.K.Sharma
Professor, IGIDR
Dr Navroz Dubash
Professor, Princeton University & Senior
Fellow, Sustainable Futures Collaborative
Mr. R.R. Rashmi
Distinguished Fellow, TERI
Dr Amrita Goldar
Senior Fellow, ICRIER
Dr. Purnamita Dasgupta
Professor, IEG
Ms. Ulka Kelkar
Executive Director, WRI India
Dr. Sanjib Pohit
Professor, NCAER
Dr. Janak Raj
Senior Fellow, CSEP
Mr. Rajat Gupta
Senior Partner, Mc Kinsey
Dr. Amit Garg
Professor, IIM Ahmedabad
Dr. Vaibhav Chaturvedi
Fellow, CEEW
Dr. Pravakar Sahoo
Senior Lead, NITI Aayog
Technical Editors
Ms. Rishu Nigam
Communication Specialist (Independent)
Ms. Srishti Dewan
YP, NITI Aayog Communication and Research &
Networking Division, NITI
Ms. Anna Roy
Programme Director, Research & Networking
Sh. Yugal Kishore Joshi
Lead, Communication
Ms. Keerti Tiwari
Director, Communication
Dr. Banusri Velpandian
Senior Specialist, Research and Networking
Ms. Sonia Sachdeva Sharma
Consultant, Communication
Sh. Sanchit Jindal
Assistant Section Officer, Research and
Networking
Sh. Souvik Chongder
Young Professional, Communication
NITI Design Team
NITI Maps & Charts Team xvScenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Contents
List of Figures xvii
List of Tables xix
List of Abbreviations xxi
Executive Summary xxv
1. Introduction.....................................................................................................................................1
2. Macroeconomic Landscape of Indian Economy..........................................................................7
2.1 India’s Growth and Global Standing 8
2.2 Structural Transformation: India in Global Context 10
2.3 Infrastructure-Led Growth Strategy 12
2.4 Integrated Strategy: Infrastructure and Fiscal Management 17
3. Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways..............21
3.1 Methodology and assumptions 23
3.2 Results 26
3.2.1 Impact on GDP 26
3.2.2 Impact on GDP components 29
3.2.3 Impact on Sectoral output and shares 32
3.2.4 Impact on Investment 36
3.2.5 Impact on Trade 40
3.2.6 Impact on Household income and consumption 46
3.2.7 Impact on Electricity Prices 49
3.2.8 Impact on labour market 50
4. Implications of the Net Zero Transition for Government Revenue and the Import bill........57
4.1 Revenue Implications of the Net Zero Transition at the National level 58
4.1.1 Context: Revenue Dependence on Fossil Fuels 58
4.1.2 Comparison of Fossil-Fuel Revenues in the Current Policy Scenario and
Net Zero Scenario 59
4.2 Impact of the Net Zero Transition on Imports: Fuels and Critical Minerals 60 xvi
Contents Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
4.2.1 Context: India’s Present Fuel Imports 60
4.2.2 Comparison of Fuel Imports in the Current Policy Scenario and Net Zero
Scenario 62
4.2.3 India’s Dependence on the Import of Critical Minerals and Components
for Energy-Transition Technologies 63
4.2.4 Comparison of the Critical-Minerals and Component Imports in the
Current Policy Scenario and Net Zero Scenario 64
4.2.5 Implications for the Overall Import Bill (Fuels and Critical Minerals) 65
5. India’s Net Zero Pathway: Challenges and Suggestions...........................................................67
5.1 Theme-1: Building a Resilient, Low-Carbon and Globally Competitive Economy 68
5.2 Theme-2: Mobilising Capital for the Net Zero Transition 74
5.3 Theme-3: Reforming Regulatory and Fiscal Systems for Green Growth 77
5.4 Theme-4: Advancing Green Jobs, Skills, and Innovation. 82
Annexures..............................................................................................................................................87
References. ...........................................................................................................................................127 xviiScenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
List of Figures
Figure 2.1Country-wise contribution to global GDP growth9
Figure 2.2Sectoral share in Gross Value Added for India (2014-2024) 9
Figure 2.3Effective Capital Expenditure (% of GDP)13
Figure 2.4General Government Debt (% of GDP)15
Figure 2.5Deficit Trends as % of GDP, 2016–202616
Figure 2.6Total Debt as % of GDP for key economies (2023)17
Figure 3.1Impact of the Net Zero transition on GDP in various scenarios 27
Figure 3.2Net Zero Scenario GDP outcomes across financing channels (deviation
from the Current Policy Scenario in %) – (MANAGE model)
28
Figure 3.3GDP components (at constant 2012 prices) in the Current Policy Scenario
(MANAGE).
30
Figure 3.4GDP components (% deviation from CPS) (MANAGE)31
Figure 3.5GVA sectoral composition in Current Policy Scenario (constant 2012
prices, MANAGE model)
32
Figure 3.6Sectoral investment in Current Policy Scenario and Net Zero Scenarios (%
deviation from Current Policy Scenario) (MANAGE model)
37
Figure 3.7Industry sub-sectoral investment in Current Policy Scenario and Net Zero
Scenario (% Deviation from CPS) (MANAGE model).
39
Figure 3.8Exports and imports by sector in Current Policy Scenario, 2035–2070
(MANAGE model)
41
Figure 3.9Balance of trade and current account deficit in the Current Policy Scenario
(MANAGE model).
42
Figure 3.10Exports and imports as a percentage of GDP (MANAGE model). 43
Figure 3.11Impact of Net Zero Scenarios on India’s export revenue and import
expenditure relative to Current Policy Scenario, 2030–2070 (MANAGE
model)
44
Figure 3.12Declining fuel imports (NCAER)44
Figure 3.13Current Account Balance and Trade Balance in Net Zero Scenarios46
Figure 3.14Impact of the Net Zero transition on real household consumption (%
deviation from Current Policy Scenario, MANAGE model)
47 xviii
List of Figures Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Figure 3.15Electricity price trajectories under Current Policy Scenario and Net Zero
Scenario
49
Figure 3.16Labor market in the Current Policy Scenario and Net Zero Scenario.50
Figure 3.17Direct and indirect jobs in energy sectors in Current Policy Scenario and
Net Zero Scenario (jobs in Millions deviation from CPS)
51
Figure 3.18Real wages in Net Zero Scenarios (% deviation from CPS) (MANAGE).53
Figure 4.1Fossil fuel revenue as a % share of the total central government revenue58
Figure 4.2Fossil fuel revenue as a % share of national GDP58
Figure 4.3Projected total fossil fuel revenue (as % of GDP)60
Figure 4.4Breakdown of projected fossil-fuel revenue (as % share of GDP) by fuel in
Current Policy Scenario and Net Zero Scenario
60
Figure 4.5Oil Import Bill (billion INR, 2011-12 prices) 61
Figure 4.6Oil Imports as a share of total imports (in value terms) 61
Figure 4.7Fuel import bill as a % share of GDP62
Figure 4.8Breakdown of fuel import bill by fuel as a % share of GDP 63
Figure 4.9Import bills of critical minerals and cell technologies as a % share of GDP64
Figure 4.10Contribution of critical minerals to the import bill, by mineral in Million
2011-12 INR
65
Figure 4.11Savings in import bill in Net Zero Scenario compared to Current Policy
Scenario as a % of GDP (Billion 2011-12 INR)
66
Figure 4.12Commodity-wise change in imports in Net Zero Scenario compared to
Current Policy Scenario in years 2050 and 2070 (Billion 2011-12 INR)
66
Figure 5.1R&D as a % of GDP for various countries83 xixScenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
List of Tables
Table 3.1 Summary of Net Zero Scenarios using World Bank and NCAER
models
26
Table 3.2 Sectoral value added (% deviation from Current Policy Scenario,
MANAGE model)
33
Table 3.3 Impact of Net Zero on sectoral output (% deviation from Current
Policy Scenario, MANAGE model)
35
Table 3.4 Sectoral employment (% deviation from Current Policy Scenario,
MANAGE model).
52
Table 3.5 Sectoral real wages (deviation from CPS)54
Table 3.6 Impact of alternate Net Zero scenarios in comparison to Current
Policy Scenario on different economic variables
56 xxiScenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
List of Abbreviations
AIArtificial Intelligence
APMC Agricultural Produce Marketing Committee
APV Agrivoltaics
ASSET Accelerating Sustainable State Energy Transition
BCM Billion cubic meters
BIS Bureau of Indian Standards
BOT Balance of Trade
BSE Bombay Stock Exchange
CAB Current Account Balance
CACP Commission for Agricultural Costs and Prices
CAD Current Account Deficit
CBAM Carbon Border Adjustment Mechanism
CCUS Carbon Capture, Utilization, and Storage
CEA Central Electricity Authority
CGE Computable General Equilibrium
CPS Current Policy Scenario
DBT Direct Benefit Transfer
DFC Dedicated Freight Corridor
DISCOM Distribution Company
DoT Department of Telecommunications
DRC Democratic Republic of Congo
ECSBC Energy Conservation & Sustainable Building Code
ENS Eco-Niwas Samhita
EVElectric Vehicle
FAME Faster Adoption and Manufacturing of Electric Vehicles
FAR Floor Area Ratio xxii
List of Abbreviations Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
FDFiscal Deficit
FDI Foreign Direct Investment
FTAs Free Trade Agreements
FYFiscal Year
GDP Gross Domestic Product
GHG Greenhouse Gas
GSDP Gross State Domestic Product
GST Goods and Services Tax
GVC Global Value Chain
GWGigawatt
IBC Insolvency and Bankruptcy Code
ICED India Climate & Energy Dashboard
IEA International Energy Agency
IISD International Institute for Sustainable Development
IMF International Monetary Fund
IMWG Inter-Ministerial Working Group
INR Indian Rupee
IRENA International Renewable Energy Agency
JAM Jan Dhan–Aadhaar–Mobile
LPG Liquefied Petroleum Gas
LTGM Long-Term Growth Model
MHFW Ministry of Health and Family Welfare
MOAFW Ministry of Agriculture and Farmers Welfare
MoHUA Ministry of Housing and Urban Affairs
MoRTH Ministry of Road Transport & Highways
MOSPI Ministry of Statistics and Programme Implementation
MSP Minimum Support Price
MTMillion ton
Mtoe Million tons of oil equivalent
MWMegawatt
NDC Nationally Determined Contribution
NEER Nominal Effective Exchange Rate
NMP National Monetisation Pipeline xxiii
List of Abbreviations Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
NPCI National Payments Corporation of India
NSQF National Skill Qualification Framework
NZS Net Zero Scenario
NZdom Net Zero Domestic Financing
NZdom+ Net Zero Domestic Financing with Productive Investment
NZdomSub Net Zero Domestic Financing with Subsidy
NZfor Net Zero Foreign Financing
NZfor+ Net Zero Foreign Financing with Productive Investment
NZforRD Net Zero Foreign Financing with Revenue Redistribution
NZforSub Net Zero Foreign Financing with Subsidy
PGE Platinum-Group Elements
PIB Press Information Bureau
PLI Production Linked Incentive
PM-eBus Sewa Prime Minister e-Bus Service Sewa
PM-KUSUM Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan
PPAC Petroleum Planning and Analysis Cell
PSU Public Sector Undertaking
PVPhotovoltaic
R&D Research & Development
RDSS Revamped Distribution Sector Scheme
RERenewable Energy
REE Rare Earth Elements
REER Real Effective Exchange Rate
RERA Real Estate (Regulation and Development) Act
SAF Sustainable Aviation Fuel
SPCB State Pollution Control Board
T&D Transmission and Distribution
TFP Total Factor Productivity
TIMES The Integrated MARKAL-EFOM System
TWTerawatt
TWh Terawatt-hour
UDAN Ude Desh ka Aam Nagrik
ULB Urban Local Body xxiv
List of Abbreviations Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
UN DESA United Nations Department of Economic and Social Affairs
UNCTAD United Nations Conference on Trade and Development
UNESCO United Nations Educational, Scientific and Cultural Organization
USD United States Dollar
UTUnion Territory
WHO World Health Organization
WTO World Trade Organization xxvScenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Executive Summary
India’s Economic Transformation: Foundations of a Resilient and Reform-Driven
Growth Story to become Viksit Bharat@2047: India’s economy has undergone a remarkable
transformation, crossing a GDP of USD 4.18 trillion, to become the world’s fourth-largest
economy driven by macroeconomic stability, institutional reforms, and the rise of digital
public infrastructure. Structural reforms such as Goods and Services Tax (GST), Insolvency
and Bankruptcy Code (IBC), Real Estate Regulatory Authority (RERA), Aadhaar, and Unified
Payments Interface (UPI) have strengthened transparency, formalisation, and private-sector
participation, positioning India as the world’s fastest-growing major economy. Between 2015
and 2025, the country contributed nearly 15% of global GDP growth, supported by strong
domestic demand and sustained policy reform.
Growth remains service-led accounting for 55% of GVA, while employing 30% of the
workforce, compared to agriculture’s 15% GVA share and 46% employment, underscoring the
opportunity to pursue more job-rich growth through manufacturing and industrial development.
Public capital expenditure has emerged as a key growth driver, tripling over the last decade to
over 4.3% of GDP by FY25-26. Energy and electricity consumption have grown, with non-
fossil sources now comprising half of installed power capacity. Fiscal prudence, stable debt
levels, and targeted infrastructure investments have built a foundation for the next phase of
low carbon, inclusive, and broad-based growth.
Balancing Growth and Green Ambition: Climate change poses a direct macroeconomic
risk, threatening agricultural productivity, physical infrastructure, and public health systems.
India’s dependence on imported fossil fuels further aggravates these risks and heightens
macroeconomic uncertainty. These challenges are compounded by a constrained global carbon
budget and evolving trade dynamics including the growing use of carbon-related trade measures
which intensify the headwinds facing developing economies.
Navigating this complex landscape requires aligning India’s aspiration of becoming Viksit
Bharat with a sustained and credible pathway towards achieving Net Zero by 2070. With
per-capita emissions of around three tonnes of CO₂ well below the global average, India is
charting a development pathway that integrates climate ambition with its national priorities,
building on its progress in renewable power, infrastructure development, and energy efficiency
through strategic investments. xxvi
Executive Summary Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
As India advances towards balancing growth and low-carbon transition, it is essential to
understand the macroeconomic implications. A rigorous, economy-wide assessment has
therefore been undertaken to examine the interactions between climate action, growth,
investment, trade, fiscal balances, and employment, and to identify potential trade-offs
and synergies across sectors through a Computable General Equilibrium (CGE) modelling
framework. The implications are examined through multiple Net Zero Scenarios differing by
financing sources, redistributive mechanisms, and productivity co-benefits.
Key modelling insights
Net Zero transition has limited impact on long-term GDP growth but demands high investment.
India’s GDP is projected to stay broadly resilient even in Net Zero (NZ) scenarios, reaching
USD 30 trillion by 2047- aligned to the Viksit Bharat goal. While the transition demands
massive capital mobilisation, scenarios that rely on higher international finance mobilisation
limit GDP deviation from Current Policy Scenario to about -0.5% in a scenario. This highlights
the importance of financing: mobilizing external capital such as FDI reduces pressure on
domestic savings and avoids crowding out private investment.
Growth Structure Shifts from Consumption-Led to Investment-Driven: In Current Policy
Scenario, Private consumption's share in GDP is expected to decrease from 58% in 2025 to
52% in 2070, while investment share changes from 32% in 2025 to around 36% by 2050
before stabilising to 34% by 2070, as the economy matures. In Net Zero Scenarios, financing
the investment from domestic sources tightens liquidity and crowds out consumption, whereas
dominant foreign financing scenarios sustain both investment and demand, signalling a long-
term structural rebalancing toward capital-intensive growth.
Industry Expands driven by clean energy and Fossil Manufacturing Declines: The Net Zero
transition accelerates structural change, boosting industry’s GVA share to 33% by 2050 and
stabilising thereafter, driven by clean energy and manufacturing. Fossil-based manufacturing
is lower by 5.6% compared to Current Policy Scenario under domestic financing; and higher
by 2.5% compared to Current Policy Scenario under dominant foreign financing pathways
by mid-century. Manufacturing remains central as India scales domestic clean-tech capacity.
Investment-Intensive Growth Pathways : India’s growth trajectory is capital-intensive across
all scenarios, with total investment quintupling by 2070 under Current Policy Scenario (~INR
4,200 lakh cr over 2065-70) and rising even further under Net Zero, highlighting the scale of
finance that must be mobilised. The Net Zero pathway drives a sharp reallocation of capital
to support rapid scale-up of renewables.
Trade Becomes More Resilient with Lower Fossil Fuel Dependence: Imports and exports
grow in absolute terms as India moves to high-income status, but remain broadly stable at 23– xxvii
Executive Summary Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
26% of GDP. Under Net Zero pathways, exports are lower relative to Current Policy Scenario
by 6% in scenarios that rely on higher foreign finance and over 9% under domestically
financed pathways by 2050. Imports are lower by 1.6% compared to Current Policy Scenario
in dominant foreign financed scenarios, reflecting reduced fossil fuel dependence. Net Zero
scenarios that rely on higher foreign finance consistently show larger Current Account Deficits
(peaking at around 3.2% of GDP in 2045) compared to domestically-financed Net Zero
scenarios (stabilizing at 2.3-2.5%).
Household Consumption Faces Modest Pressure, mitigated by Policy Support: Without
complementary policies, household consumption falls slightly under Net Zero Scenario,
particularly for lower income groups, due to higher energy prices and investment crowding.
Foreign-financed and redistributive policies such as targeted transfers and RE subsidies help
preserve consumption and can keep the lowest 40% of population at Current Policy Scenario
levels thereby preventing negative impacts on inequality.
Fossil-Fuel Revenue Losses Offset by Import Savings and Green Transition: Fossil-fuel
revenues fall from 2.3% of GDP at present to 0.2% in Net Zero Scenario by 2070, while the
fuel import bill drops from 4% to 0.2% of GDP under the Net Zero Scenario by 2070. Although
critical mineral imports rise, total import savings reach 0.5% of GDP by 2070, strengthening
fiscal and external resilience.
Job Creation Shifts to Renewables, Construction, and Transport: The Net Zero transition
reallocates labour from fossil fuels toward renewable electricity, clean-tech manufacturing, and
infrastructure-intensive sectors such as construction, transport, and trade. Overall employment
effects remain modest, with employment rates deviating by less than ±1 % vs the Current
Policy Scenario by mid-century. Net Zero pathways show the shift from agriculture to services
while strengthening manufacturing and raising demand for skilled labour. Wage impacts are
limited in the near term but diverge over time, with dominant foreign-financed pathways
supporting higher real wages, especially in manufacturing.
Policy Suggestions
I. Reaffirm India’s Civilisational Model of Sustainable Development
India’s development model has long been grounded in balance with nature and resource
efficiency. Civilisational practices such as climate-responsive architecture, sustainable diets,
shared living arrangements, and frugal resource use already embody low-carbon aspects.
Institutionalising these principles through Mission LiFE, circular economy practices, and
energy-efficient design can scale a development pathway where well-being and resilience,
rather than just conventional indicators of growth, define progress. xxviii
Executive Summary Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
II. Build Low-Carbon Competitiveness in a Fragmented Global Economy
With global trade shifting from efficiency to resilience, India must diversify exports and enable
low carbon transition in industries to stay competitive under new carbon-linked regulations
like CBAM. Aligning Monitoring, Reporting, and Verification (MRV), carbon accounting and
interoperability of sustainability certifications with key partners in future FTAs will safeguard
market access and attract investment.
III. Frontload Infrastructure Investment for Net Zero Growth
Increased upfront investment will be needed to achieving Viksit Bharat goals, especially
through a pathway consistent with Net Zero goals. India’s growth path is investment-intensive
under all scenarios: in Current Policy Scenario, investment quintuples by 2070, and under
Net Zero Scenario the scale of required capital is even higher, making India’s development a
uniformly high-investment story that hinges on mobilising unprecedented levels of finance.
Targeted public investment in electricity grids, urban infrastructure, EV charging, multimodal
logistics, etc. will be critical to crowd in private capital, ensuring that low-carbon transition
reinforces, rather than constrains, India’s growth trajectory.
A blended financing approach - combining domestic flows with patient foreign capital
through instruments like green bonds, risk guarantees, co-investment platforms, etc. - can
scale investment while avoiding crowding out of productive private investment. Building
transparent, de-risked pipelines of bankable projects will be essential to sustain investor
confidence and preserve macroeconomic and fiscal stability.
IV. Make Green Jobs a National Employment Mission
The Net Zero transition can be a net job creator if supported by international capital, targeted
reskilling, and flexible labour reforms. Expanding labour-intensive manufacturing for
renewable energy services like solar O&M, battery assembly, efficient building retrofits, etc.-
through a “Green and Digital Skills Stack,” and preparing the workforce for AI & automation
will ensure future-readiness.
V. Strengthen R&D and Innovation for Green Technologies
India must raise R&D investment to match global benchmarks - currently 0.65% of GDP, with
private industry contributing just 37% versus 68% in advanced economies. By comparison, the
US invests ~3% of GDP in R&D, South Korea ~5.2%, and Japan ~3.4%. Expanding private
R&D, fostering industrial innovation clusters, and supporting early-stage commercialisation can
accelerate adoption of technologies like storage, electric mobility, climate-smart agriculture,
Carbon Capture, Utilization, and Storage (CCUS), Small Modular Reactors (SMR), etc. xxix
Executive Summary Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
VI. Strengthening Institutions to Unlock Low-Carbon Growth
Robust, accountable institutions are critical to India’s Net Zero transition. Strengthening
core bodies - particularly DISCOMs and the Bureau of Energy Efficiency, will be critical to
drive energy transition planning at sub-national level. The regulatory burden can be reduced
by overhauling and standardising processes, and by facilitating a single-window approval
mechanism with adequate safeguards. 1
INTRODUCTION 2Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Introduction
1
India stands out as a bright spot in a turbulent global economy, growing faster
and more resiliently than most peers
From 1993 to 2025, India’s economy has grown from under USD 300 billion to nearly USD
4.13 trillion, at a compound annual growth rate (CAGR) of about 8% in nominal terms (IMF,
2025). This growth is particularly striking given that the Indian rupee depreciated by around
3% per year over the same period (Economic Survey 2024). Furthermore, India managed to
preserve macroeconomic stability without a steep rise in external borrowing; its external debt-
to-GDP ratio was just 18.7% in March 2024, among the lowest for major emerging economies
(Economic Survey 2024).
India’s growth has lifted incomes and improved the quality of life for millions
India’s per capita income rose from USD 302 in 1993 to around USD 1,554 in 2024 and an
estimated USD 2,730 in 2025 (IMF; World Bank, 2025), an eightfold increase that translated
into enhanced consumption capacity, stronger savings, and upward social mobility. The
benefits of growth have also been inclusive: between 2015 and 2022, more than 250 million
Indians exited multidimensional poverty, with the MPI headcount ratio falling from 29% to
11% (NITI Aayog 2024; UNDP, 2025). Few other emerging markets have achieved poverty
reduction on such a scale and pace.
Since 2014, India has pursued a new model of growth, focused on building public
goods and trust to unlock private potential
While the 2004–2014 period demonstrated growth, the post-2014 decade has been defined
by institutional and structural reforms that have reshaped India’s growth model. This phase
saw the country pivot from being primarily a provider of services to a builder of platforms,
enabling private enterprise to scale. Key reforms included:
Building public goods: Aadhaar for digital identity, UPI for payments, Gati Shakti
for logistics, and expanding data infrastructure.
Trust-based governance: The Goods and Services Tax (GST) created a unified
domestic market, the Insolvency and Bankruptcy Code (IBC) transformed corporate 3
Introduction Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
resolution, the Real Estate (Regulation and Development) Act (RERA) brought
transparency to real estate. In parallel, welfare delivery was digitised, making public
services faster, more transparent, and more accessible.
8Private sector as partner: Recognising private enterprise as a co-partner in
development, not merely a revenue source
8Boosting agricultural productivity and rural incomes: Through infrastructure,
irrigation and e-markets.
Together, these shifts positioned India’s growth on stronger institutional foundations,
underpinned by digital innovation, productivity gains, and partnership between State and
private actors.
Climate change has become a direct macroeconomic risk for India
Sustaining India’s growth is no longer just about fiscal prudence or trade liberalisation. Climate
change has emerged as a direct macroeconomic risk. For India, it is not a distant possibility
but a present reality: extreme weather events, rising sea levels, droughts, and floods already
affect agricultural productivity, food and water security, public health, and infrastructure. Air
pollution, land degradation, water scarcity and quality compound these risks, reducing growth
potential, straining fiscal balances, and deepening poverty and inequality.
Historical emissions and trade barriers magnify India’s vulnerability
The developed economies relied on fossil fuels for two centuries, but now press developing
nations to decarbonise rapidly through untested pathways. These same countries maintain
higher per-capita emissions and, in some cases, continue investing in fossil fuel extraction and
use, as seen in the recent U.S. oil approvals
1
. Global climate policymaking largely minimizes
the concept of historical responsibility, ignoring the cumulative emissions debt owed to the
Global South. India, home to 18% of the world’s population, has contributed just 4% of
cumulative emissions since 1850, yet bears disproportionate climate impacts.
Carbon tariffs and energy imports reduce India’s competitiveness
Between 2000 and 2024, average tariff rates declined significantly, India’s from 48.9% to
17.3%, China’s from 16.4% to 8.3% (WTO 2024). At the same time, non-tariff measures
(NTMs), especially climate-related ones, surged. Over 26,000 trade and investment restrictions
were imposed globally between 2020 and 2024 (Global Trade Alert 2024). For example, the
EU’s Carbon Border Adjustment Mechanism (CBAM) and Deforestation Regulation (EUDR)
could affect nearly USD 9.5 billion of Indian exports, around 12.9% of India’s total shipments
1 U.S. oil approvals: Recent U.S. oil approvals refer to government decisions allowing new or expanded oil drilling and
infrastructure, reflecting a short-term focus on energy security and price stability, even in the light of long-term climate concerns. 4
Introduction Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
to the EU (Economic Survey 2024–25). These measures, while framed as environmental
safeguards, act as protectionist tools that hinder export-led growth in emerging economies.
Energy dependence adds another layer of vulnerability. While the country has made strong
progress in energy efficiency and diversification of supply sources, a significant share of its
energy needs is still met through imports, exposing the economy to fluctuations in global fuel
prices and supply disruptions.
India’s aspirations are shifting, from poverty alleviation to developed-nation status
Unlike China, which rose during a wave of globalisation, India’s rise is unfolding amid
“slowbalisation”, characterised by fragmented supply chains, shifting tariffs, and rising
geopolitical risks. In this uncertain environment, India’s aspirations are evolving. Under the
banner of ‘Viksit Bharat @2047’, the nation seeks to enhance its goal from poverty alleviation
to full-fledged developed-country status by its centenary of independence. This is not just
an economic ambition but a societal one: to achieve prosperity in a democratic, federal, and
culturally diverse context while staying within ecological limits.
8India is embarking on a development journey with no historical precedent, seeking to
become a developed, high-income economy by 2047 (Viksit Bharat), the centenary
of its independence, while also achieving Net Zero emissions by 2070.
8Unlike past industrial revolutions that relied heavily on fossil fuels, India aims to
lift hundreds of millions into higher-income and better-quality livelihoods while
simultaneously bending its emissions trajectory downward.
8With per-capita emissions of about 3 tonnes of CO₂, less than half the world average
and a fraction of advanced-economy levels, and a cumulative share of roughly four
percent of global emissions since 1850, the transition reflects both constrained carbon
space and extraordinary ambition.
8Unlike fossil-fuel-led industrialisation elsewhere, India’s energy transition is bounded
by acute land and water scarcity. Limited per-capita land availability (0.23 ha) and
widespread water stress mean clean energy expansion directly competes with food
security, livelihoods, and ecosystems, a constraint not faced by early industrialisers.
8 India’s Net Zero pathway requires large-scale investment in public goods and frontier
technologies, including resilient grids, water systems, CCUS, green hydrogen,
offshore wind, SMRs, and long-duration storage, many of which remain commercially
unviable without international finance and risk-sharing, reinforcing climate action
as a global public good under Common But Differentiated Responsibilities and
Respective Capabilities (CBDR–RC). 5
Introduction Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
There are concerns that large-scale investments toward Net Zero could divert resources
from development needs such as health, education, and social infrastructure. However, the
analysis indicates that climate action need not come at the expense of development priorities.
Investments in clean energy, resilient infrastructure, and low-carbon technologies can generate
quality jobs, enhance energy security, and improve public welfare, thereby reinforcing rather
than competing with the country’s broader development objectives.
Toward a Green, Inclusive, and Developed India
Achieving the Viksit Bharat vision will require sustained high real GDP growth (INR terms)
of 7-8% annually over the next two decades. But this trajectory is complicated by external
shocks, global climate commitments, and fast-evolving technologies. India’s development
pathway must therefore reconcile two imperatives: sustaining growth and delivering on Net
Zero commitments.
To steer this path, NITI Aayog set up an Inter-Ministerial Working Group (IMWG) to analyse
the macroeconomic implications of India’s Net Zero transition. Its mandate is to model how
India can simultaneously achieve high growth, create jobs, maintain fiscal stability, and
safeguard trade competitiveness, while advancing towards Net Zero. The IMWG’s scope of
work includes:
Examine different GDP growth trajectories and structure of the economy consistent
with India’s Viksit Bharat and other developmental goals.
Explore the impact of Net Zero Scenarios on GDP, employment, income distribution,
Current Account Deficit, Tax revenues, Trade aspects etc using various analytical
tools.
Examine the impact of various GDP scenarios and population projections on total
energy demand.
Examine the institutional/regulatory frameworks at national and state level required
to drive the transition in a coordinated manner.
By integrating fiscal, trade, energy, and employment considerations into a unified framework,
the IMWG’s work will help shape India’s macroeconomic roadmap. It will provide policymakers
with the evidence base to ensure that India’s journey to Net Zero is not only environmentally
responsible, but also economically resilient and socially inclusive. 2
MACROECONOMIC
LANDSCAPE OF
INDIAN ECONOMY 8Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
2
Macroeconomic Landscape of
Indian Economy
This chapter examines the macroeconomic landscape of India’s development from 2015 to
2025, focusing on growth trends, sectoral composition, labour productivity, public investment,
and fiscal health. It also highlights the growing role of energy transition in shaping these
dynamics. The chapter also underscores the structural reforms and infrastructure push that
have underpinned India’s emergence as a global economic engine.
2.1 India’s Growth and Global Standing
India, with an average annual real GDP growth rate of approximately 7.8% between 2015
and 2025 in nominal terms
2
, contributed around 15% to global GDP growth during this
period, positioning it firmly among the top three engines of global economic expansion
alongside China and the United States (IMF 2025; World Economics 2024). This performance
stands out not just for its scale but also for its resilience, achieved in a decade marked
by geopolitical conflicts, pandemic-related disruptions, and volatile commodity markets. In
contrast, many advanced and emerging economies experienced slower, more uneven recoveries.
India’s sustained expansion thus became a key pillar of global economic resilience and
recovery. Notably, this period also marked the beginning of India’s energy transition, a shift
toward renewable energy and sustainable infrastructure that is reshaping key macroeconomic
parameters.
India’s economic ascent has fundamentally reshaped its global standing. As of April 2025,
India, with a GDP of USD 4.18 trillion, had surpassed Japan to become the world’s fourth-
largest economy (IMF’s World Economic Outlook Report of April 2025). On a purchasing
power parity (PPP) basis, it ranks third globally, behind only China and the United States (IMF
WEO 2025). These milestones reflect India’s expanding domestic market, deepening industrial
base, and a structural shift toward innovation and productivity-led growth (see figure 2.1).
2 10-year Compound Annual Growth Rate (CAGR) of real GDP over FY15–FY25 being 6% and average growth rate excluding
COVID years of FY21 and FY22 being 7.1% between FY15–FY25 9
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
China India USA UK France
Share of 10-year growth (2015-2025)
0%
5%
10%
15%
20%
25%
30%
35%
Figure 2.1: Country-wise contribution to global GDP growth
Source: World Economics 2024
Services-Led Growth
India’s economy remained service-led from FY2014-15 to FY2023-24. In FY2014–15, the
services sector accounted for 52.4% of India’s Gross Value Added (GVA), surpassing both
agriculture (16.5%) and industry (31.1%). Almost a decade later, services remain dominant,
contributing 54.9% of GVA by FY2024–25, while agriculture’s share fell only modestly to
14.4% and industry remained stable (MoSPI, 2025). This reaffirms services-led growth (see
figure 2.2).
AgricultureIndustryServices
% Share in GVA (Constant prices)
2014-152023-24
0%
10%
20%
30%
40%
50%
60%
Figure 2.2: Sectoral share in Gross Value Added for India (2014-2024)
Source: National Accounts 2025 (MoSPI) 10
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Uneven Productivity Across Sectors
India’s labour market reveals persistent productivity divergence with wide sectoral output
divides. As reported by Periodic Labour Force Survey (PLFS) 2023-24, agriculture employed
46.1% of the workforce but produced only 14.7% of Gross Value Added (GVA). Services
generated 54.6% of GVA with just 29.7% of employment, while industry accounted for 30.8%
of GVA with 24.1% of jobs (MoSPI 2025). This imbalance means nearly half the workforce
remains concentrated in a low-productivity agricultural sector, producing only one-seventh
of national output.
Services Far Outpace Agriculture
The productivity differential across sectors is wide and persistent. In 2014–15, agriculture
accounted for nearly half of employment but less than 18% of GVA (World Bank; RBI, 2025).
By 2023, although agricultural productivity had improved, with GVA per worker rising to
about USD 2,029, output per worker in industry and services was much higher, estimated
at USD 6,100-8,961. This suggests that a single worker in services produces three to four
times the output of a farm worker, an imbalance that continues to shape India’s dual economy
(World Bank, 2025).
Low Female Labour Force Participation
Only 35 percent of women participated in India’s labour force in 2023-24, a level lower than
in many emerging economies (PLFS 2023-24). The recent increase in female labor force
participation was driven by gains in rural areas, with only modest progress in urban areas.
Women in urban areas are less likely to participate in the labour force than women in rural
areas across all age groups and levels of education.
2.2 Structural Transformation: India in Global Context
In the international context, India’s employment pattern stands out, reflecting a structural
transformation in progress. While India’s service sector is globally competitive - particularly
in export-oriented business and IT services - it has limited capacity to absorb surplus rural
labour at scale. A few international perspectives are given below:
China underwent dramatic labour reallocation within a generation. In 2005, it
employed 44.8% of its workforce in agriculture which contributed about 11.5%
of GDP, similar to India’s 2023 profile. By 2023, only 22.3% of Chinese workers
remained in agriculture, contributing only 6.9% of GVA. Over the same period,
industry grew to employ 32% of the workforce and generate 36% of GDP, while
services accounted for over half of both output and employment (World Bank 2024;
Our World in Data 2024). 11
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Indonesia followed a similar trajectory: from 44% of employment in agriculture in
2005, it declined to about 29% by 2023, with agriculture contributing just 12.5% to
GDP. Services employed around 49% of Indonesian workers and generate over 40%
of GDP, demonstrating an effective transition into labour-intensive manufacturing
and services (World Bank 2024).
Brazil represents a largely transformed middle-income economy. In 2023, agriculture
employed just 8% of the workforce and contributed around 6% to GDP. Over 70% of
Brazil's employment was in services, and nearly 20% in industry (World Bank 2024).
The United States and Germany exemplify advanced economies, where agriculture
employed less than 2% of the workforce and contributed under 1% to GDP. In both
countries, services generated over 70–80% of GDP and employment (BLS 2024;
Eurostat 2024).
Comparatively, India’s sectoral transition is still a work in progress. It continues to show a
significantly higher farm employment share than that of some middle-income countries. While
its service sector is globally competitive and output-dominant, it has limited capacity to absorb
surplus rural labour. Meanwhile, manufacturing’s share of GVA (about 18% as of 2023-24) is
below that of China (~25%) and Vietnam (~24%). This is a key reason India’s productivity
growth has yet to match that of its Asian peers.
Interstate Divergence
There is also a large productivity and income gap across states. In 2023, states such as
Maharashtra, Gujarat, Karnataka, Tamil Nadu, and Delhi accounted for 26% of India’s
population and contributed ~44% of its GDP (UIDAI, 2023; RBI, 2023). In contrast, states
such as Uttar Pradesh, Bihar, Madhya Pradesh, and Rajasthan accounted for 38% of India’s
population but only 19% of GDP. As with many developing economies, India exhibits regional
differences in development levels; sustained convergence across states would further strengthen
overall national growth.
Macroeconomic Implications
This productivity divergence has critical macroeconomic implications. The limited reallocation
of labour from agriculture to high-productivity sectors such as manufacturing and modern
services dampens aggregate productivity gains and household income growth. While services
have expanded its share in output, its employment intensity remains modest. At the same
time, industrial employment has been static, reducing the sector’s historical role as a conduit
for rural-to-urban mobility and formal job creation. There is a need for more job-intensive
manufacturing growth. 12
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Structural Reforms and Growth Enablers
The last decade has seen India initiate a series of bold structural reforms aimed at accelerating
sectoral transformation and boosting competitiveness. The implementation of the Goods and
Services Tax (GST) unified India’s domestic market and reduced transaction costs. The Make
in India initiative, combined with the Production Linked Incentive (PLI) scheme, sought to
expand domestic manufacturing across critical sectors like electronics, pharmaceuticals, and
solar modules, offering fiscal incentives tied to output. The Skill India mission was launched
to upskill the workforce and better align labour supply with emerging sectoral demand, while
Digital India expanded digital infrastructure and service delivery across rural and urban
India alike. Together, these reforms laid the foundation for deeper industrialisation, broader
formalisation, and smoother labour mobility. The impact of these structural efforts is visible
in the rapid growth seen in FY25 and H1FY26. India remains the world's fastest growing
large economy by all estimates of World Bank, IMF, etc, not only now but for the next few
years even in turbulent times. This is a result of the decisive policy shift toward enabling
productivity-led, employment-generating growth across sectors.
2.3 Infrastructure-Led Growth Strategy
Infrastructure has emerged as the cornerstone of India’s growth strategy over the past
decade, fueling connectivity, productivity, and inclusion across sectors. Recognising the
high multiplier effect of capital expenditure on output, employment, and private investment,
the Government of India substantially increased public infrastructure investment. This push
proved critical when the private sector was deleveraging or facing uncertainty, most notably
during the pandemic.
Between FY2016–17 and FY2025–26, public capital expenditure more than tripled, rising
from INR 4.5 lakh crore (2.9% of GDP) to INR 15.5 lakh crore (4.3% of GDP), highlighting
a deliberate shift towards infrastructure-led growth (Union Budget 2025) (See Fig 2.3).
Complementing this spending thrust, institutional reforms like the creation of the Infrastructure
Finance Secretariat aimed to crowd in private capital and improve project execution. 13
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Efective Central Government Capital Expenditure (% of GDP)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Figure 2.3: Effective Capital Expenditure (% of GDP)
Source: Union Budget 2025, Budget at a Glance
Infrastructure Outcomes: Capacity Creation Across Sectors
This surge in capex translated into tangible capacity creation across physical, digital, and
social infrastructure:
Power generation: Installed electricity capacity rose from 303 GW (2014–15) to
467.9 GW (2024–25), enhancing grid reliability and access (CEA 2025).
Renewables boom: Renewable capacity jumped ~ 6.5 times, from 33 GW (2014–15)
to ~ 220 GW (MNRE 2025).
Roads and highways:
National highways expanded by over 60% from 91,287 km to 1,46,204 km
State highways rose from about 1,00,000 km to 1,79,535 km
India’s total road network reached over 6.3 million km, second only to the US
(MoRTH 2025).
Railways: Track length increased from 1,26,366 km to 1,32,310 km, with 97% of
broad-gauge routes electrified. Introduction of 136 Vande Bharat trainsets enhanced
intercity mobility (Indian Railways 2025).
Airports: Operational airports rose from 132 to 149, with Ude Desh ka Aam Nagrik
(UDAN) scheme, expanding regional air connectivity (MoCA 2025).
Ports: Major port capacity expanded from 1,359 MTPA to about 1,800 MTPA,
supporting India’s rising trade throughput (MoPSW 2024). 14
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Urban mobility: Metro rail network expanded from about 250 km in 5 cities to
over 930 km in 21 cities, with over 1,500 km under construction (MoHUA 2025).
Digital infrastructure:
BharatNet connected 210,000 gram panchayats with 1.5 million km fibre (DoT
2025).
Broadband subscribers grew from 61 million to more than 900 million (TRAI
2025).
UPI adoption surged from 0 in 2014 to more than 14.3 billion transactions per
month in 2025, worth over INR 250 lakh crore annually (NPCI 2025).
Financial inclusion and logistics:
Jan Dhan accounts increased from fewer than 15 crore to more than 52 crore.
FASTag adoption rose to over 7 crore users, covering 97% of NH tolling.
1,400 km of Dedicated Freight Corridors (DFCs) became operational,
significantly reducing freight transit times.
Strategic and Inclusive Infrastructure Build-out
India’s infrastructure build-out is not merely quantitative, it is also strategic, inclusive, and
digitally integrated. These developments have reduced logistics costs, improved access to
markets and services, and facilitated business operations. The synergy of transport, energy,
and digital connectivity has laid the groundwork for productivity-driven growth, particularly
in Tier 2–3 cities and rural areas.
Climate-oriented public investments (e.g., in solar parks, grid upgrades for renewables)
have expanded, dovetailing with the broader infrastructure push. Investments in non-fossil
energy are not only an environmental milestone but also a macroeconomic one, as the
transition strengthens energy security and creates new growth industries, such as solar panel
manufacturing and battery storage, contributing to sustainable development. India now ranks
3rd worldwide in solar capacity and 4th in wind capacity, demonstrating global leadership in
the clean energy economy.
Fiscal Strategy and Debt Prudence
What makes India’s fiscal strategy stand out is its combination of infrastructure ambition with
debt prudence. While many advanced and emerging economies saw steep rises in general
government debt post-2008 and again after the pandemic, India’s General Government debt-
to-GDP ratio remained stable, from 82.4% in 2005 to 81.3% in 2024 (IMF Debt Database). 15
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
In contrast, Japan’s debt rose from 174.6% to 236.7%, the U.S. from 65.6% to 120.8%, China
by over 200%, and the U.K. by more than 145% over similar periods (See Fig 2.4).
India’s moderation stems from sustained growth, a favourable growth-interest rate differential
(Economic Survey 2022–23), and the predominance of rupee-denominated domestic liabilities.
External public debt is just 2.8% of GDP, while the weighted average residual maturity of
dated securities is nearly 12 years, limiting rollover and currency risks.
Japan UK France USA BrazilChina IndiaGermany
General Government Debt (as % of GDP)
2005 2015 2023
0%
50%
100%
150%
200%
250%
300%
Figure 2.4: General Government Debt (% of GDP)
Source: IMF, Global Debt Database
Fiscal Consolidation and Quality of Spending
India’s fiscal consolidation is not just numerical, it is structurally sound and quality-enhancing.
After peaking at 9.2% of GDP in FY2020–21 during the pandemic, India’s fiscal deficit has
declined steadily to 5.8% in FY2023–24, with a glide path to 4.4% by FY2025–26. More
importantly, this consolidation reflects a qualitative shift, away from revenue expenditure
toward asset-creating capital outlays. The revenue deficit dropped from 7.3% to 2.9%, while
the effective revenue deficit, which excludes capital grants, fell from 5.9% to just 1.1% of
GDP, signalling a deeper structural correction (see figure 2.5).
By contrast, the combined gross fiscal deficit of the Centre & states increased from 2.3% in
FY2018-19 to 3.2% in FY2023-24, reflecting higher spending by the state governments (RBI
2025). 16
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Deficit trends (% of GDP)
Fiscal deficit Revenue deficit Effective revenue deficit
Figure 2.5: Deficit Trends as % of GDP, 2016–2026
Source: Union Budget 2025
Inflation Management and Monetary Stability
Throughout this period, India benefited from a favourable growth-inflation dynamic. Inflation
averaged between 4–6%, barring temporary supply-side shocks, while the Reserve Bank
of India (RBI) maintained a prudent monetary stance to ensure a growth-friendly interest
rate environment. Despite global monetary tightening cycles, domestic inflation remained
contained due to proactive food price management, energy subsidies during global spikes, and
the moderating impact of renewables in the energy mix. This monetary stability, coupled with
high nominal GDP growth, sustained a favourable growth-interest rate differential, reinforcing
debt sustainability.
Revenue Mobilization and Tax Reform
Robust tax revenue growth has been central to this fiscal turnaround. India’s gross tax revenue-
to-GDP ratio increased from 11.1% in FY2016–17 to about 12% in FY2024–25. In absolute
terms, gross tax collections more than doubled, from INR 16.5 lakh crore in FY2014–15
to over INR 36.5 lakh crore in FY2024–25 (Revised Estimates, RE). This growth reflects
post-GST formalisation, better compliance, and digital enforcement mechanisms. Notably,
the share of direct taxes rose from about 51% to 56% of gross tax revenue, indicating a more
progressive tax structure and expanding formal incomes.
Debt Sustainability and Investment Protection
India’s fiscal consolidation did not compromise investment or stability. Compared to global
benchmarks, India’s overall debt burden remains moderate. Total debt-to-GDP stood at about 17
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
171% in 2024, well below the levels seen in China, France, the UK, and the US (IMF Debt
Database). Government debt, at 83% of GDP, mirrors China’s, but what distinguishes India
is its low private debt, at only 98.4% of GDP versus over 150% in most advanced economies
(See Fig 2.6). This conservative leveraging by households and firms adds a vital cushion to
financial stability, especially in uncertain global conditions.
0%
50%
100%
150%
200%
250%
300%
350%
Brazil China France Germany India*IndonesiaUnited
Kingdom
United
States
Govt Debt Private Debt
Total Debt (as % of GDP)-2023
Figure 2.6: Total Debt as % of GDP for key economies (2023)
Source: IMF Global Debt Database
2.4 Integrated Strategy: Infrastructure and Fiscal Management
India’s strategy of combining an aggressive infrastructure push with disciplined fiscal
management has proved effective. Public investment was deployed as a counter-cyclical
tool, not a structural imbalance. Institutional reforms, such as the Fiscal Responsibility and
Budget Management (FRBM) Act, GST-led revenue buoyancy, and real-time digital budget
management, enabled high-impact spending without compromising debt sustainability.
External Debt and Sustainability
India’s external debt is low, long-term, and well-covered. As of FY2023–24, India’s total
external debt stood at just 18.7% of GDP, among the lowest in its peer group. Short-term
debt comprised only 18.5% of total external debt, and the short-term debt-to-forex reserves
ratio was just 19%. Importantly, foreign exchange reserves cover 97% of total external debt,
underlining external sustainability. Most borrowings are long-term and concessional in nature,
limiting rollover and currency risks. 18
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Investment-Led Growth Anchored in Structural Rebalancing
India’s strong external macroeconomic position is underpinned by a balanced investment-
savings framework that enabled high growth without jeopardising external sustainability.
India’s growth momentum during FY2015–24 was supported by a healthy investment rate
averaging at about 32% of GDP, (MosPI 2025). The quality and composition of investment
improved, reflecting India’s pivot toward infrastructure, energy transition, and digital
connectivity. Significant potential remains, especially compared with China, which recorded
an investment rate of 41.5% of GDP over the last two decades (World Development Indicators,
World Bank).
Domestic Savings and Composition Shifts
On the savings side, gross domestic savings averaged around 31% of GDP in FY2015–25.
The composition of savings has improved significantly:
Net Household financial savings rose from INR 6.4 lakh crore (current prices) in 2011-
12 to INR 15.5 lakh crore, enabled by financial inclusion (Jan Dhan), digital access
(UPI), and mutual fund/SIP expansion (MoSPI, 2024). According to the Economic
Survey 2022–23, digitalization and formalization improved the efficiency of financial
intermediation, channeling household savings into productive investments. This
qualitative improvement in savings means a larger portion of savings is available
to fund infrastructure and industry, rather than sitting idle in unproductive assets.
Corporate savings improved as deleveraging reduced interest outflows and rising
profitability boosted retained earnings (Economic Survey 2023–24).
Government dissaving narrowed with the fiscal consolidation path reducing revenue
deficits, from 7.3% in FY2020–21 to 2.54% in FY2023–24 (Union Budget 2024–25).
External Balance and Current Account
This internal balance meant that India’s investment needs were largely financed domestically,
with only a modest reliance on foreign borrowings. As a result, the current account deficit
(CAD) averaged a sustainable 1.1% of GDP over FY2015 -24, much lower than the 2.5–3%
range seen during earlier high-growth periods (RBI BoP Data; Ministry of Finance CAD
analysis 2024). In FY2023–24, CAD fell below 1%, reflecting stronger net exports of services,
remittances of over USD 125 billion, and improved terms of trade.
Energy Dependence and Transition
Even so, India remains exposed to global energy price fluctuations, it imports 85% of its oil
and 50% of its gas, which adds pressure to the trade deficit and inflation (IEEFA 2024). This 19
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
made the macroeconomy vulnerable to oil price shocks in the 2010s. The past decade’s pivot
to renewable energy has gradually mitigated this risk. By mid-2025, non-fossil sources already
accounted for roughly half of India’s installed power capacity. In the long run, a greener energy
mix should improve the current account and cushion the economy from commodity shocks.
FDI as a Growth Driver
India has established itself as a top global investment destination. Between FY2015–16 and
FY2024–25, the country received USD 748.8 billion in cumulative gross FDI inflows, more
than double the USD 308.4 billion during FY2005–06 to FY2014–15 (DPIIT; Economic
Survey). FDI inflows averaged about 2.5% of GDP during FY2015–25, up from about 2.2%
in the previous decade. The peak inflow was USD 83.6 billion in FY2021–22 (PIB, 2022),
while the average annual inflow over the past decade stood at about USD 68 billion, well
above peer economies like Brazil and Indonesia. This sustained performance, even amid
global volatility, reflects India’s macroeconomic stability, improving ease of doing business,
and strong long-term growth prospects.
Foreign Exchange Reserves and Rupee Stability
India’s foreign exchange reserves have more than doubled, from about USD 304 billion in
FY2013–14 to over USD 646 billion by FY2023–24, making them among the largest globally
(Economic Survey 2023-24). This buffer enabled smooth external adjustment even in periods
of global volatility. As India reduces energy import dependence via domestic renewables,
pressure on reserves and exchange rate volatility may ease further.
Over the past decade, the Indian rupee exhibited far lower volatility compared to the previous
one. In FY2023–24, the rupee’s coefficient of variation was just 0.58, reflecting macroeconomic
credibility and improved external positioning. Despite bouts of global dollar strength, the
NEER (Nominal Effective Exchange Rate) remained broadly stable, while the REER (Real
Effective Exchange Rate) appreciated modestly, indicating that India retained competitiveness
without excessive depreciation.
Capital Markets and Financial Deepening
India’s financial markets have transformed over the past decade, emerging as some of the best-
performing and most resilient globally. The BSE market capitalization surged to over 136%
as share of GDP by December 2024, crossing USD 5 trillion for the first time. The Nifty 50
delivered a 10-year CAGR of 8.8% in USD terms, outperforming most emerging markets and
rivaling global benchmarks like the Dow Jones (Economic survey 2024-25). This performance
reflects robust corporate profitability, policy reforms, expanding investor participation, and
world-class digital financial infrastructure. 20
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Equity market participation broadened significantly through UPI, Jan Dhan, and mutual fund
SIPs, enabling financial intermediation to play a stronger role in channeling household savings
into productive investments
Conclusion: Resilience and Opportunity
Over the past decade, India has shifted from being seen as a structurally constrained economy
to one that is far more stable and reform-oriented. Strong public investment, prudent
fiscal and monetary management, and rising private capital inflows have together opened
space for a new phase of productivity-driven and more inclusive growth. India’s decision to
lean into the energy transition, supported by deeper financial markets and a sizable domestic
savings pool, has also turned climate policy into a macroeconomic opportunity rather than
just a cost. Taken together, these factors mean that India is now in a position to aim for high
growth that is not only more durable, but also more fiscally responsible, competitive in global
markets, and less burdensome on the environment. 3
MACROECONOMIC
MODELLING:
APPROACH AND
RESULTS FOR INDIA’S
NET ZERO PATHWAYS 22Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
3
Macroeconomic Modelling:
Approach and Results for
India’s Net Zero Pathways
This chapter outlines the macroeconomic modelling framework used to assess India’s Net
Zero transition. It explains the approach, assumptions, and scenario design, and presents the
results on GDP, investment, trade, fiscal balances, labour markets, and sectoral shifts under
different financing and policy pathways.
Achieving India’s development objectives, including a high-income status by 2047 with energy
security while reducing emissions to Net Zero by 2070 will require a profound transformation
of the economy. The structural changes needed to boost economic growth and achieve low-
carbon transition will reshape not only the energy system, but also patterns of production,
consumption, trade, and investment, generating both opportunities and adjustment costs. A
holistic assessment of these impacts is essential for informing policy choices that balance
growth, equity, and sustainability.
Given the complexity of these interactions, this chapter applies Computable General Equilibrium
(CGE) models, which capture the behaviour of households, firms, and government, and links
them through markets for goods, services, factors (labour and capital), and energy. By reflecting
how resources are reallocated across the economy, driven by substitution possibilities between
capital, labour, and diverse energy sources, CGE models provide a robust framework for
analysing the macroeconomic dimensions of India’s development and Net Zero transition.
This chapter assesses the macroeconomic, sectoral, and employment implications of India’s
development pathways using two CGE modelling frameworks: the NCAER model and the
World Bank’s MANAGE model. The models simulate different development and financing
scenarios and trace their effects on GDP growth, employment, income distribution, external
balances, trade flows, and fiscal outcomes. By integrating sectoral activity, factor markets, and
energy use within a consistent economy-wide framework, the models provide a comprehensive
assessment of India’s development pathways.
A first projection, referred to as the Reform Scenario, is developed using the Long-Term
Growth Model (LTGM)
3
, a supply-side growth projection tool that links GDP growth to Total
3 Long Term Growth Model (LTGM) is an Excel-based tool to analyze long-term growth scenarios building on the celebrated
Solow-Swan Growth Model. 23
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Factor Productivity (TFP), the human capital index, labour force participation, the incremental
capital-output ratio (ICOR), and investment rates. The Reform Scenario is calibrated to align
with India’s aspiration of achieving a USD 30 trillion economy by 2047, underpinned by
ambitious assumptions of higher female labour force participation, substantial improvements
in human capital, sustained investment, and accelerated Total factor productivity (TFP)
4
.
The GDP trajectory produced through this LTGM exercise provides the macroeconomic
baseline against which the impacts of the Net Zero energy transition are assessed using the
CGE models.
Practically, the real GDP growth rates from the LTGM are used as an input for the energy
system model to estimate energy mix and investment needs in Current Policy Scenario and
Net Zero Scenario. Then, the inputs from LTGM and energy models are combined to create
long-term growth scenarios in CGE framework. The implications for GDP growth, income
and consumption, structural change and employment, and other macroeconomic aggregates
such as public debt and the current account deficit are analyzed in the following sections.
3.1 Methodology and assumptions
Energy Model Scenario definition
Starting from the real GDP growth rates generated using Long-Term Growth Model (LTGM),
the study developed two energy scenarios using The Integrated MARKAL-EFOM System
(TIMES) and India Energy Security Scenarios (IESS) which are discussed below:
Current Policy Scenario (CPS): The Current Policy Scenario represents a level
of effort that is realistically achievable based on historical trends and continuation
of current policies (as of 2023), thereby projecting ongoing trends in low-carbon
technology deployment.
Net Zero Scenario (NZS): The Net Zero Scenario reflects an ambitious pathway
aligned with India’s commitment to achieve Net Zero GHG emissions by 2070.
It incorporates both existing and additional policy measures to accelerate demand
electrification, enhance circularity, improve energy efficiency, promote the rapid
development of low-carbon technologies/fuels and encourage behavioural shifts.
These scenarios provide inputs to the CGE models, especially:
Additional investments required to provide the same energy services with lower
emissions.
Changes in the energy and power mix, and in energy expenditures and imports.
4 The trajectory rests on sustaining an investment rate near 34% of GDP through 2047, increase in female labour-force participation
toward high-income benchmarks (about 70%), and human-capital convergence toward developed-economy levels. Total factor
productivity (TFP) growth is assumed at 2.18% per year to 2035 (versus about 1.88% in 2010–2019), moderating to 1.88% by
2047. 24
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
The details of the scenarios and methodology are available in the Scenarios towards Viksit
Bharat and Net Zero: Sectoral Insights (Vol.3-8), Financing Needs (Vol. 9) and Study report
on Scenarios towards Viksit Bharat and Net Zero: An overview (Vol. 1) reports.
Investment and Financing
The Scenarios towards Viksit Bharat and Net Zero: Financing Needs (Vol. 9) report estimates
investment requirements under the Current Policy Scenario and the Net Zero Scenario. The
report projects cumulative investment needs of USD 14.7 trillion under the Current Policy
Scenario and USD 22.7 trillion under the Net Zero Scenario by 2070, indicating that the
Net Zero Scenario is more capital-intensive. The macroeconomic implications of this higher
investment requirement are analysed separately in this report.
Macroeconomic model scenario definition
The MANAGE model
5
(World Bank) explores seven macroeconomic Net Zero Scenarios
each combining different sources of financing and complementary policies (See Table 3.1
for summary) while the NCAER model explores only one Net Zero Scenario. Both models
(MANAGE and NCAER) have Current Policy Scenario which aligns with Energy Model-
Current Policy Scenario (described earlier). The macro-economic scenarios are summarised
below:
8Current Policy Scenario: Current Policy Scenario incorporates long-term
macroeconomic assumptions and energy projections, serving as reference cases in
both MANAGE and NCAER model.
8Net Zero Scenario: Net Zero Scenario quantifies the macroeconomic impacts of
India’s pathway consistent with achieving Net Zero emissions by 2070, while keeping
all other growth assumptions unchanged.
MANAGE model Net Zero Scenarios
Net Zero Scenario-1 (NZdom) & Scenario-2 (NZfor)
The two scenarios represent the transition being financed through domestic savings (NZdom)
or through foreign capital inflows (NZfor), without additional subsidies or redistribution
mechanisms.
6
The two scenarios represent two extreme cases in which funding is either
completely through domestic or foreign sources. These are theoretical constructs assumed
for the purpose of modelling. Reality will be somewhere between these two extremes.
5 MANAGE-World Bank is a Computable General Equilibrium (CGE) model developed by a network of CGE modelers to support
World Bank teams and clients in conducting macroeconomic analyses across a broad range of topics. It is a single-country, open-
economy CGE model featuring multiple sectors, institutions, and factors of production.
6 These scenarios are conservative as they assume there are no co-benefits from using low-carbon technologies, beyond energy
savings and reduced GHG emissions; they ignore benefits from lower air pollution, lower dependency to energy import and
associated volatility, or lower congestion in urban areas, all of which could further enhance economic and welfare outcomes. 25
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Policy variants of Scenario-1 and Scenario-2 with Subsidies: Scenario-3
(NZdomSub) and Scenario-4(NZforSub)
The scenarios NZdomSub and NZforSub represent the same scenarios as NZdom and NZfor,
but adding renewable energy (RE) subsidy financing through domestic and foreign sources,
respectively. These subsidies improve the affordability of electricity for consumers and
industrial users in the Net Zero Scenario by offsetting the electricity price increases associated
with the transition. Under these scenarios, electricity prices in the Net Zero Scenarios were
assumed to remain at the levels of Current Policy Scenario.
Scenario-5 with Revenue redistribution (NZforRD)
The scenario NZforRD introduces a redistribution mechanism designed to ensure that the
poorest households are protected during the transition to a Net Zero economy. In this scenario,
financial transfers maintain the income and consumption levels of the bottom 40% of
households, ensuring they are not worse off compared to Current Policy Scenario. It promotes
social equity, helping ensure the Net Zero transition is fair and inclusive. While additional
investments are financed domestically, the transfers are financed through an expansion of the
fiscal deficit, supported by additional external borrowing.
Variants of Net Zero Scenario-1 and Scenario-2 with productive investment:
Scenario-6 (NZdom+) and Scenario-7(NZfor+)
More efficient and low-carbon technologies also tend to be more productive and deliver
co-benefits such as improved air quality (with health and labor productivity gains), greater
production reliability (with competitiveness gains), and reduced congestion (leading to higher
productivity in cities). However, the extent of these benefits is uncertain and not quantified in
the energy scenario. To capture these potential benefits and the uncertainty surrounding them,
scenarios are differentiated by whether the additional investments in the Net Zero Scenario
also generate such co-benefits, represented as additional output. In scenarios marked with a ‘+’
(e.g., NZdom+), co-benefits are included by asssuming that additional investments in the Net
Zero Scenario are productive: they contribute to the capital stock and have a positive output
effect (only the positive spin-offs on output are captured and not the actual co-benefits). In
contrast, in scenarios without co-benefits (e.g., NZdom), additional investments reduce GHG
emissions but do not contribute to capital formation in the model and do not generate economic
value
7
. As the reality is somewhere between these two extremes, these two types of scenarios
provide the upper and lower bounds of the potential impact of the transition towards Net Zero
emissions on GDP and economic growth.
7 The reduction in emissions and air pollution is likely to have long-term growth benefits by reducing the negative impact of air
pollution on labor productivity. Although the MANAGE-WB model can incorporate such mechanisms, the growth benefits of
lower air pollution are not included in the current analysis. 26
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Table 3.1: Summary of Net Zero Scenarios using World Bank and NCAER models
Benefits from incremental
investment in the Net Zero
Scenarios
Main source of
financing
Complementary measures
to facilitate the transition
Emission
reduction only
Output effect Domestic Foreign
RE
subsidy
Redistribution
NZdom✔ ✔
NZdom+✔ ✔ ✔
NZfor✔
✔
NZfor+✔ ✔ ✔
NZforSub✔ ✔ ✔
NZdomSub✔ ✔ ✔
NZforRD✔✔ ✔ ✔
NCAER✔
3.2 Results
3.2.1 Impact on GDP: Net Zero transition has limited impact on long-
term GDP growth but demands high investment.
In the Current Policy Scenario (CPS), India’s GDP is projected to grow at an average annual
rate of 7.4% during 2026–30, reflecting strong momentum. Growth moderates slightly to
~7% between 2030 and 2045, remaining robust enough to support India’s goal of attaining
developed-economy status by 2047. Beyond that, growth eases to about 5% in 2046–60 and
to 2.8% in 2060–70. Across both models (NCAER and MANAGE), the impact of the Net
Zero pathway on GDP growth is marginal. The economy remains resilient in all scenarios,
reaching roughly USD 6.8 trillion by 2030 and achieving high-income status in 2047 even
under Net Zero. Even with higher penetration of low-carbon technologies under the Net
Zero Scenario, the impact on real GDP growth remains limited. Real GDP growth rates
are endogenously determined and differ only marginally from the Current Policy Scenario,
irrespective of financing assumptions. This finding holds even when accounting for financing
uncertainties and the inclusion or exclusion of co-benefits from the low-carbon transition. (See
Figure 3.1). By 2047, India reaches USD 30–31 trillion across all scenarios (NCAER and
MANAGE), meeting the “Viksit Bharat” target. 27
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Y2030Y2047
Trillion USD
Trillion INR
Year
Nominal GDP
CPS NZS 0% 1% 2% 3% 4% 5% 6% 7% 8% Y2026-30 Y2031-35 Y2036-40 y2041-45 Y2046-50 Y2051-55 Y2056-60 Y2061-65 Y066-70 Year CPS NZS
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Real GDP growth rates (MANAGE)
CPSNZdom+NZdom
NZfor+NZforNZforSub
NZdomSubNZforRD
0
500
1000
1500
2000
2500
3000
3500
4000
2022
2028
2034
2040
2046
2052
2058
2064
2070
Real GDP levels
CPSNZdom+NZdom
NZfor+NZforNZforSub
NZdomSubNZforRD
0
5
10
15
20
25
30
35
(A)(B)
(C)(D)Real GDP Growth Rate (NCAER)
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.1: Impact of the Net Zero transition on GDP in various scenarios
(A) Real GDP levels (trillion INR) — MANAGE model
(B) Real GDP growth rates (%) — MANAGE model
(C) Real GDP growth rates (%) — NCAER model
(D) Nominal GDP — NCAER model 28
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
The incremental investment requirements of Net Zero affect GDP outcomes differently under
varying assumptions (See Figure 3.2). When additional investments are productive because
of co-benefits, they expand the capital stock, reduce emissions, and enhance output, leading
to positive growth effects, especially in foreign-financed pathways. By contrast, if these
investments are treated as unproductive (serving only emission reduction without any co-
benefit), GDP temporarily dips below Current Policy Scenario before recovering. The size
of this dip depends on the financing mix: under domestically financed Net Zero (NZdom),
GDP is lower than the Current Policy Scenario projections by up to 4.5% around 2046-50 at
its lowest point, while under foreign-financed Net Zero Scenario (NZfor), the decline from
Current Policy Scenario is limited to about 0.5%. This highlights the importance of financing
structure: mobilizing external capital such as FDI prevents pressure on domestic savings,
avoids crowding out private investment, and enlarges the transition budget. However, Foreign
financed scenario combined with renewable energy subsidies, can lead to overall positive
impact on GDP throughout in comparison to Current Policy Scenario, even if incremental
investment is treated as unproductive.
2022
2028
2034
2040
2046
2052
2058
2064
2070
All scenarios
NZdom+NZdomNzfor+
NzforNZforSubNZdomSub
NZforRD
-4.5%
-3.5%
-2.5%
-1.5%
-0.5%
0.5%
1.5%
2.5%
% deviation from CP
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.2: Net Zero Scenario GDP outcomes across financing channels
(deviation from the Current Policy Scenario in %) – (MANAGE model)
Caveat: These results exclude both negative externalities and positive co-benefits of climate
change. The negative impacts include reduced labour productivity or agricultural losses from
rising temperatures whereas the positive co-benefits include improvements in air quality and
health outcomes, which the model does not capture. The analysis also excludes the costs of 29
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
climate adaptation, and therefore reflects transition-related mitigation economic effects rather
than the full welfare impacts of climate change and climate action.
While there are concerns that large-scale investments toward Net Zero could divert resources
from pressing development needs such as health, education, and social infrastructure, the
analysis indicates that climate action need not come at the expense of development priorities.
Investments in clean energy, resilient infrastructure, and green technologies can generate
quality jobs, enhance energy security, and improve public welfare, thereby reinforcing rather
than competing with the country’s broader development objectives.
Key Messages
GDP resilience with high investment needs: Across all Net Zero Scenarios, GDP
growth is projected to remain broadly resilient. However, each pathway demands
very high investment and substantial capital mobilisation, particularly to scale up
nascent and emerging technologies.
Difference from Current Policy Scenario: Net Zero Scenario growth rates diverge
slightly from Current Policy Scenario, with GDP reaching USD 30–31 trillion by
2047 in all scenarios, meeting the Viksit Bharat target. Under the assumption of total
absence of co-benefit, GDP is lower by 0.5–4.5% below Current Policy Scenario
around 2046–50 before recovering.
Role of financing design: Foreign financing helps sustain growth by avoiding
domestic crowding-out, and when combined with RE subsidies, Net Zero Scenarios
even outperform Current Policy Scenario across the entire transition, even without
co-benefits. However, the foreign financing implications on Current Account Deficit
are discussed subsequently.
3.2.2 Impact on GDP components: In the Net Zero transition, domestic
financing reduces investment and consumption, while foreign financing
and productive investment support stronger outcomes.
In the Current Policy Scenario, GDP composition (Consumption, Investment and Net Exports)
evolves significantly between 2022 and 2070. The share of private consumption declines from
about 58% in 2025 to 52% by 2070, while the share of investment rises to sustain growth. This
trend is counterbalanced by increases in other components: the share of public consumption
increases from about 9% in 2025 to 14% in 2070, while the total investment (public+private)
share climbs from roughly 32% in 2025 to a peak of 36% by 2050, reflecting capital deepening,
before easing to 34% by 2070 as the economy matures (See Figure 3.3). 30
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
60%
50%
40%
30%
20%
10%
0%
2022 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070
GDP components (at constant 2012 prices)
Private consumption Public consumption Private investment
Public investment Net exports
Figure 3.3: GDP components (at constant 2012 prices) in the Current Policy Scenario (MANAGE).
Financing choices drive different macro outcomes. An increase in government borrowing
raises the demand for funds in the economy, reducing their availability for private firms. This
higher demand puts upward pressure on interest rates, which can crowd out private investment
and consumption. By contrast, external financing relaxes the domestic savings constraint, eases
interest-rate pressures, and supports higher investment with smaller consumption trade-offs.
Domestic financing, whether public or private, will either require an increase in savings to
finance new investment by forgoing consumption, or a shift of investment away from other
sectors towards Net Zero transition sectors. Foreign financing puts less pressure on the domestic
market but increased foreign capital inflows contributing to exchange rate appreciation and
impacts Current Account Deficit. Further, foreign exchange flows are also impacted by skewed
credit rating methodologies, which often penalise countries on narrow parameters, overlooking
strong fundamentals and a consistent record of external debt servicing.
Hence, scenarios relying on domestic financing (NZdom, NZdom+, NZdomsub) generally
exert pressure on investment compared to Current Policy Scenario (See Figure 3.4). This
effect is most pronounced between 2040 and 2050, when investment under NZdom falls about
5% below Current Policy Scenario. By contrast, scenarios with external financing (NZfor,
NZfor+, NZforSub, NZforRD) show an increase in investment. The main driver is the higher
real interest rate under domestic borrowing, which constrains access to affordable capital and
reduces investment.
In domestically financed net zero scenarios, relative to Current Policy Scenario, consumption
is lower driven by higher interest rates nudging household to save more. In the productive
investment cases (NZdom+, NZfor+), however, higher household incomes outweigh the drag
from higher interest rates, producing a net increase in consumption. 31
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Depending on the scenario, exports are lower by 2% (NZfor+) to 9% (NZdom) relative to
Current Policy Scenario, with the largest variation during 2040-2050 period, though pressures
ease in later years. These scenarios represent extreme scenarios with others falling within this
range. In case of imports, during 2040-50, imports are higher by 4% (NZfor+) compared to
lower by 7% (NZdom) relative to Current Policy Scenario. A detailed analysis of these trade
dynamics follows in the next section.-10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 2030 2035 2040 2045 2050 2060 2070 -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 2030 2035 2040 2045 2050 2060 2070 -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 2030 2035 2040 2045 2050 2060 2070 -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 2030 2035 2040 2045 2050 2060 2070 NZdom+ NZdom NZfor+ NZfor NZforSub NZdomSub NZforRD
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.4: GDP components (% deviation from CPS) (MANAGE) 32
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Key Messages
Shift in composition: In Current Policy Scenario, the share of private consumption
in GDP steadily declines (from 58% in 2025 to 52% by 2070), while public spending
and investment gain importance.
Role of financing: Under Net Zero Scenarios, outcomes differ across financing
pathways. Domestic financing lowers investment and consumption compared to
Current Policy Scenario due to higher interest rates, while foreign financing boosts
investment by easing pressure on domestic savings.
Rebalancing under Net Zero: Across all pathways, GDP components shift from
private consumption toward higher investment shares, underscoring the scale of
capital mobilisation required for achieving the 2047 high-income objective and the
low carbon transition.
3.2.3 Impact on Sectoral output and shares: Net Zero accelerates India’s
structural shift, expanding industry, especially clean energy and
construction, while agriculture and fossil-based manufacturing shares
decline.
Under Current Policy Scenario, the share of agriculture in GVA gradually declines, reflecting
the ongoing structural shift. Industry’s
8
share increases to about 33% by 2050 from 30.2%
in 2022 before stabilizing, while services remain the dominant sector, expanding to around
55% by 2050 and continuing to grow as India progresses toward a more advanced economy
(Figure 3.5).
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2022 20252030 20352040 2045 2050 20552060 20652070
Sectoral composition of value added
(at constant 2012 prices)
Agriculture Industry Services
Figure 3.5: GVA sectoral composition in Current Policy Scenario
(constant 2012 prices, MANAGE model)
8 Construction is included in Industry 33
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
The Net Zero transition has a marginal impact on the overall economic structure (captured
through sectoral GVA), with outcomes primarily driven by financing mechanisms. Two
opposing forces operate simultaneously: higher electricity prices in Net Zero Scenario relative
to Current Policy Scenario increases production costs, while stronger demand for electricity
and low-carbon technologies boosts industrial activity. Financing mechanism and productivity
of incremental finance also impact industrial outputs.
In domestically financed Net Zero Scenario (NZdom), higher interest rates amplify cost
pressures, resulting in 5.6% lower industrial output in 2045 relative to the Current Policy
Scenario (CPS). In contrast, foreign-financed NZ scenario (NZfor, NZfor+) benefit from
lower interest rates, but outcomes differ depending on the productivity of incremental finance:
industrial output is lower by 1.1% under NZfor relative to Current Policy Scenario, while it
is 2.3% higher under NZfor+ relative to Current Policy Scenario by mid-century.
Compared to industry, shifts in services and agriculture are more modest in Net Zero Scenarios
compared to Current Policy Scenario reflecting offsetting sub-sectoral dynamics. Within
services, some activities contract relative to Current Policy Scenario due to higher electricity
prices, most notably the “other services” sub-sector, but these declines are partially offset by
growth in air transport and abatement-related services. The agricultural sector shows a similar
pattern of internal adjustment: fisheries expand moderately, benefiting from lower petroleum
costs, while forestry faces pressure from rising land prices driven by increased demand for
land for biofuel production (Annex Figure B1).
Across all sectors, transition costs peak during 2040–2050 and are followed by recovery by
2060–2070, with foreign-financed scenarios consistently outperforming domestic-financed
ones. (See Table 3.2).
Table 3.2: Sectoral value added (% deviation from Current Policy Scenario, MANAGE model)
9
2030 2035 2040 2045 2050 2060 2070
Agriculture
NZdom+ 0.23 0.06 -0.47 -0.83 -0.94 -0.22 -0.57
NZdom -0.56 -1.59 -2.76 -3.50 -3.74 -2.62 -2.36
Nzfor+ 0.99 1.81 2.11 2.30 2.48 3.03 2.12
Nzfor 0.20 0.18 -0.13 -0.25 -0.15 0.80 0.46
NZforSub 0.16 0.35 0.55 1.01 1.48 2.01 1.04
NZdomSub -0.61 -1.42 -2.06 -2.19 -2.05 -1.44 -1.85
NZforRD -0.37 -0.89 -1.71 -2.32 -2.62 -1.84 -1.75
9 Colours represent the direction and magnitude of deviation relative to the Current Policy Scenario (CPS). Greener shades indicate
positive deviations, yellow denotes values close to CPS, and orange to red shades indicate negative deviations, with darker
colours reflecting larger absolute changes. 34
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
2030 2035 2040 2045 2050 2060 2070
Industry
NZdom+ 0.60 -0.09 -1.30 -1.96 -1.97 0.15 0.51
NZdom -0.64 -2.52 -4.49 -5.56 -5.64 -2.85 -1.72
Nzfor+ 2.06 2.71 2.42 2.32 2.52 4.09 3.69
Nzfor 0.82 0.31 -0.68 -1.10 -0.90 1.36 1.66
NZforSub 0.66 0.87 1.11 1.79 2.43 3.53 2.93
NZdomSub -0.84 -1.96 -2.70 -2.65 -2.29 -0.75 -0.57
NZforRD -0.25 -1.58 -3.34 -4.46 -4.75 -2.31 -1.39
Services
NZdom+ 0.12 -0.39 -1.23 -1.77 -1.87 -0.87 -1.18
NZdom -0.92 -2.42 -3.87 -4.76 -4.93 -3.27 -2.82
Nzfor+ 1.12 1.69 1.64 1.62 1.71 2.16 1.09
Nzfor 0.08 -0.30 -0.92 -1.23 -1.14 -0.02 -0.39
NZforSub 0.02 -0.08 -0.11 0.31 0.93 1.47 0.32
NZdomSub -0.99 -2.20 -3.05 -3.21 -2.89 -1.84 -2.18
NZforRD -0.69 -1.66 -2.85 -3.70 -4.01 -2.72 -2.45
The most pronounced sectoral impacts are observed in industry subsectors. By 2045, the share
of fossil fuel-based manufacturing, such as petroleum, is lower by about 1.1% compared
to Current Policy Scenario. Conversely, this decline is offset by growth in the construction
sector and in green energy industries, including electricity generation, distribution, and green
hydrogen, which together expand by around 1.5% in NZfor compared to Current Policy
Scenario (Annex Figure B1).
These patterns in GVA are mirrored in sectoral output dynamics. Under the domestically
financed Net Zero Scenario (NZdom), industrial output is lower by 6.4% and services output
is lower by 4.6% in 2045 relative to Current Policy Scenario. In contrast, the foreign-financed
Net Zero Scenario (NZfor+) supports sustained sectoral expansion, leading to 2.1% increase in
industrial output in 2045, relative to Current Policy Scenario, underscoring the role of financing
conditions in shaping transition outcomes (Table 3.3). 35
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Table 3.3: Impact of Net Zero on sectoral output (% deviation from
Current Policy Scenario, MANAGE model)
10
2025 2030 2035 2040 2045 2050 2060 2070
Agriculture
Nzdom+ 0.07% 0.22% 0.10%-0.33%-0.63%-0.74%-0.16%-0.45%
NZdom 0.07%-0.49%-1.35%-2.34%-2.94%-3.15%-2.26%-2.05%
Nzfor+ 0.07% 0.85% 1.57% 1.82% 1.98% 2.13% 2.61% 1.89%
Nzfor 0.07% 0.14% 0.13%-0.12%-0.21%-0.13%0.67% 0.41%
NZforSub 0.07% 0.10% 0.28% 0.45% 0.82% 1.21% 1.67% 0.91%
NZdomSub 0.07%-0.54%-1.21%-1.74%-1.85%-1.76%-1.27%-1.60%
NZforRD 0.07%-0.34%-0.76%-1.43%-1.92%-2.18%-1.58%-1.51%
Industry
Nzdom+ 0.12% 0.66%-0.37%-1.75%-2.63%-2.73%-0.58%-0.34%
NZdom 0.12%-0.68%-2.95%-5.11%-6.36%-6.47%-3.51%-2.45%
Nzfor+ 0.12% 2.43% 2.82% 2.40% 2.08% 2.13% 3.58% 2.99%
Nzfor 0.12% 1.10% 0.27%-0.85%-1.46%-1.34%0.92% 1.08%
NZforSub 0.12% 0.94% 0.85% 0.94% 1.41% 1.90% 2.90% 2.17%
NZdomSub 0.12%-0.87%-2.38%-3.29%-3.45%-3.18%-1.59%-1.48%
NZforRD 0.12%-0.17%-1.86%-3.83%-5.16%-5.53%-2.93%-2.09%
Service
Nzdom+ 0.11% 0.16%-0.42%-1.27%-1.66%-1.55%-0.38%-1.23%
NZdom 0.11%-0.87%-2.39%-3.85%-4.61%-4.58%-2.70%-2.71%
Nzfor+ 0.11% 1.06% 1.53% 1.42% 1.55% 1.90% 2.42% 0.74%
Nzfor 0.11% 0.04%-0.41%-1.07%-1.25%-0.94%0.33%-0.58%
NZforSub 0.11%-0.03%-0.14%-0.08%0.73% 1.87% 2.30% 0.20%
NZdomSub 0.11%-0.95%-2.13%-2.85%-2.65%-1.88%-0.84%-2.00%
NZforRD 0.11%-0.67%-1.70%-2.91%-3.63%-3.73%-2.22%-2.42%
Fossil share energy mix is lower in Net Zero Scenario at 58% (Compared to 75% in Current
Policy Scenario) in 2050 and 14% in 2070 (Compared to 54% in Current Policy Scenario)
(refer Pathways to Net Zero - Towards Viksit Bharat and Net Zero: An Overview - Vol. 1).
This result is also reinforced in CGE model results wherein the fossil output in Net Zero
Scenario is lower relative to Current Policy Scenario: Coal output is lower by 94%, gas by
10 Colours represent the direction and magnitude of deviation relative to the Current Policy Scenario (CPS). Greener shades indicate
positive deviations, yellow denotes values close to Current Policy Scenario, and orange to red shades indicate negative deviations,
with darker colours reflecting larger absolute changes. 36
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
60%, petroleum by 23-24% in 2070 compared to compared to Current Policy Scenario. On
the other hand, green hydrogen, biogas and electricity see substantial increase in Net Zero
Scenario compared to Current Policy Scenario (See Annex Figure B2)
11
.
Key Messages
Current Policy Scenario: Agriculture’s share declines steadily, industry rises
modestly, and services remain the dominant driver of output.
Net Zero Scenario: The transition to Net Zero has marginal impact on economic
structure with differential impacts depending on source of financing and productivity
of incremental finance, while fossil fuel–based manufacturing declines.
3.2.4 Impact on Investment: The Net Zero transition requires a major
reallocation of investment: renewables and green hydrogen expand
rapidly, while fossil fuel sectors have reduced shares compared to
Current Policy Scenario; manufacturing remains central across all
scenarios.
Under Current Policy Scenario, investment requirements rise steadily over time, driven
primarily by the service sector, followed by industry and agriculture. By 2066–2070, cumulative
five-year investment reaches nearly INR 4200 lakh crore, ~5 times higher compared to the
2031–2035 period. This long-term increase reflects both capital replacement and expansion
to support growth as well as the structural transformation of the economy (Figure 3.6).
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Sectoral investment
(A)
Agriculture Industry Service
INR lakh crore
0
-1%
-2%
-3%
-4%
-5%
-6%
-7%
-8%
-9%
-10%
NZdom
7%
6%
5%
4%
3%
2%
1%
0
NZfor+
(B)(C)
Agriculture Industry Service
% deviation from CPS
% deviation from CPS
11 There is still use of fossil fuels in 2070 in the Net Zero Scenario as these scenarios are gross positive emissions, largely
compensated by negative emissions from CCS and land-use. 37
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Sectoral investment
(A)
Agriculture Industry Service
INR lakh crore
0
-1%
-2%
-3%
-4%
-5%
-6%
-7%
-8%
-9%
-10%
NZdom
7%
6%
5%
4%
3%
2%
1%
0
NZfor+
(B)(C)
Agriculture Industry Service
% deviation from CPS% deviation from CPS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.6: Sectoral investment in Current Policy Scenario and Net Zero Scenarios
(% deviation from Current Policy Scenario) (MANAGE model)
(A) Sectoral investment in Current Policy Scenario.
(B, C) Net Zero Scenario investment (% deviation from Current Policy Scenario)
Industry remains the most resilient and largest beneficiary of capital allocation in the Net
Zero transition. Under NZdom, capital allocation to all three sectors is lower relative to
Current Policy Scenario due to crowding-out effects; however, industry experiences the
smallest reduction in 2035-50 (compared to Current Policy Scenario), highlighting its central
role in supporting the transition through technology deployment, equipment production, and
electrification. In NZfor+, where all additional investment is productive and foreign financed,
industry becomes the largest beneficiary of crowding-in, attracting the highest capital inflows
during the transition. Agriculture also sees investment growth in this scenario, driven by the
expansion of biomass based activities.
Investment patterns during the transition period indicate a rapid scale-up of investments in the
renewable energy sector, alongside significantly lower investments in fossil fuels relative to
the Current Policy Scenario. Compared to the Current Policy Scenario, electricity generation
and distribution attract higher levels of investment under both domestic and foreign financing
scenarios through 2070.
Under the domestic Net Zero scenario (NZdom), mining sector investment declines by INR
27 lakh crore during 2026–2050 but more than doubles to INR 52 lakh crore in the post-
2050 period relative to the Current Policy Scenario. In contrast, under the Net Zero foreign
financing scenario (NZfor+), the decline in mining investment is smaller, as the availability
of foreign capital helps avoid crowding-out effects. Similarly, investment in the construction
sector is lower under the Net Zero domestic financing scenario compared to the Current
Policy Scenario. However, under the Net Zero foreign financing scenario, construction sector
investment exceeds the Current Policy Scenario, reflecting the mitigation of crowding-out
through increased access to foreign finance. (Figure 3.7). 38
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
(A)
Sectoral investment CPS (Industry)Sectoral investment CPS (Industry)
0
200
400
600
800
1000
1200
ConstructionMachinery and equipment
(including electrical)
Others (Non-ferrous metal,
Chemical, textiles, Petroleum)
Cement and non-metallic metalsIron and SteelMining Electricity
INR lakh crore
0
200
400
600
800
1000
1200
ConstructionMachinery and equipment
(including electrical)
Others (Non-ferrous metal,
Chemical, textiles, Petroleum)
Cement and non-metallic metalsIron and SteelMining Electricity
INR lakh crore 39
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
-250
-200
-150
-100
-50
0
50
100
2025-50
2050-70
(B)(C)
Electricity
Mining
Iron and Steel
Cement and non-metallic metalsOthers (Non-ferrous metal, Chemical, textiles)
Machinery and equipment (including electrical)
Construction
-60
-40
-20
0
20
40
60
80
100
120
140
2025-502050-70
Deviation from CPS
(INR lakh crore)
Deviation from CPS
(INR lakh crore)
NZdomNZfor+
Figure 3.7: Industry sub-sectoral investment in Current Policy Scenario and Net Zero Scenario (% Deviation from CPS) (MANAGE model).
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario 40
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
(A) Sectoral investment in Current Policy Scenario.
(B) Net Zero investment (NZdom) (% deviation from Current Policy Scenario)
(C) Net Zero investment (NZfor+) (% deviation from Current Policy Scenario)
According to NITI Aayog’s investment requirements and financing gap model, India’s Net
Zero pathway is increasingly driven by emerging and hard-to-abate technologies, with total
investment needs rising from USD 8 trillion till 2050 to USD 22.7 trillion till 2070. By 2070,
transmission and distribution (T&D) infrastructure accounts for roughly 18% of required
investments, while grid storage, battery storage, and charging infrastructure together make up
about 39%. This shift highlights the growing importance of system reliability, grid flexibility,
and deep electrification in the later decades of India’s transition.
Key Messages
High investment trajectory: India’s growth path is investment-intensive under all
scenarios: in Current Policy Scenario, investment quintuples by 2070, and under Net
Zero Scenario the scale of required capital is even higher, making India’s development
a uniformly high-investment story that hinges on mobilising unprecedented levels
of finance.
Sectoral shifts under Net Zero Scenario: Without co-benefits, investment under
Net Zero Scenario falls below Current Policy Scenario across most sectors, though
industry is least affected till 2050. In productive scenario with higher foreign-
financing (NZfor+), industry and agriculture both exceed Current Policy Scenario
levels, with industry attracting the largest capital inflows.
Clean energy surge: Net Zero drives massive investment in emerging sectors, green
hydrogen is higher by +160% to +500% versus Current Policy Scenario across
successive decades, electricity investment more than doubles during 2046–60, while
petroleum investment is lower compared to Current Policy Scenario (about –40% in
NZfor+ by 2046–50 comapred to Current Policy Scenario).
3.2.5 Impact on Trade: Trade patterns shift decisively under Net Zero,
exports dip modestly, but import savings and structural change drive
a more resilient external sector.
India’s move to high-income status in Current Policy Scenario is marked by rises in exports
and imports. Under the Current Policy Scenario, India’s imports and exports in value terms,
rise to INR 840 trillion by 2050 and further to INR 3,200 trillion by 2070, while imports
increase to INR 1,080 trillion by 2050 and INR 3,920 trillion by 2070 (Figure 3.8). 41
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Services Transport-Road, Rail,
Water and Air
Trade ConstructionOther industryElectrical equipment, electronics,
machinery and equipment
Ferrous metalsGreen HydrogenFossil Energy-Coal, Oil and GasAgriculture & Allied
0
500
1000
1500
2000
2500
3000
3500
4000
4500
20352045205020602070
0
500
1000
1500
2000
2500
3000
3500
20352045205020602070
INR Trillion
INR Trillion
Import by ValueExport by Value
(A) (B)
Figure 3.8: Exports and imports by sector in Current Policy Scenario, 2035–2070 (MANAGE model)
(A) Sectoral Imports by value (INR trillion)
(B) Sectoral Exports by value (INR trillion) 42
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
With respect to sectoral break-up, in Current Policy Scenario, exports are driven by services
and industry. On the import side, agriculture (driven by livestock imports) increase notably
(Figure 3.8). These trade dynamics are simulated under the assumption of unchanged trade
rules and tariff regimes; any future changes in trade policy could affect the magnitude and
composition of the results.
In Current Policy Scenario, the Current Account Deficit (CAD) is assumed to grow to 2.3% of
GDP by 2030 and remain at that level thereafter, with the exchange rate adjusting endogenously
to maintain this deficit (See Figure 3.9). The adjustment is shaped by an appreciating real
exchange rate of 0.9 percent on average annually. Over time, the trade deficit–to–GDP ratio
narrows as GDP expands faster than net exports, leading to a decline in the ratio. Offsetting
adjustments in the income and transfer accounts ensure that the overall current account deficit
remains at its targeted level (Figure 3.9).-3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 Curent nAcoDtfii(runtshta fG 0 0.5 1 1.5 2 2.5 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070
Current Account Deficit (share of GDP)
Figure 3.9: Balance of trade and current account deficit in the Current Policy Scenario
(MANAGE model).
Across all scenarios, imports and exports increase rapidly in absolute terms. As a share of GDP,
however, they remain broadly stable overtime in Current Policy Scenario, with only marginal
differences under the Net Zero Scenarios (Figure 3.10). Under Current Policy Scenario, export-
to-GDP ratio rises slightly from 23% in 2030 to 24% in 2050, while the Import to GDP remain
largely stable at 26% over the same period. 43
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
30%
25%
20%
15%
10%
5%
0
35%
30%
25%
20%
15%
10%
5%
0
20222025203020352040204520502055206020652070
Exports (% of GDP)
CPS NZdom NZfor+CPS NZdom NZfor+
20222025203020352040204520502055206020652070
Imports (% of GDP)
Figure 3.10: Exports and imports as a percentage of GDP (MANAGE model).
Under the Net Zero Scenarios, India’s imports are generally lower than Current Policy
Scenario, with most scenarios showing reductions of 2-8%, driven primarily by declining
fossil fuel dependence (Figure 3.11). Domestically financed scenarios show lower imports as
compared to Current policy Scenario, whereas foreign financed variants impact vary depending
on the productivity of incremental finance. NZfor shows -1.6% by 2050 and recovers slightlyto
+0.7% by 2070 compared to Current Policy Scenario, whereas in NZfor+, imports show +2.4%
by 2050 and +3.0% by 2070 compared to Current Policy Scenario (See Figure 3.11).
i. Fossil fuel-related imports is lower compared to Current Policy Scenario, with
reduced imports of oil, coal, ferrous metals, other chemicals and manufactured
products (Figure 3.12), reflecting the fundamental shift away from carbon-intensive
energy sources.
ii. However, livestock imports is higher across scenarios compared to Current Policy
Scenario as consumption increases with changing dietary patterns. Competition
among cropland, grazing, and forests, plus limits on land conversion and rising
demand for biomass, drives up land prices, making domestic livestock production
costlier and imports more economically viable.
iii. Similarly, business services imports are higher compared to Current Policy Scenario
as higher electricity prices under the Net Zero transition erode the competitiveness
of domestic service-sector, prompting a shift toward more cost-effective foreign
providers. 44
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Export expenditure
(% Deviation from CPS)
Import expenditure
(% Deviation from CPS)
-10%
-8%
-6%
-4%
-2%
0%
2%
2030 203520402045205020602070
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
2030 203520402045205020602070
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.11: Impact of Net Zero Scenarios on India’s export revenue and import expenditure
relative to Current Policy Scenario, 2030–2070 (MANAGE model)
Similarly, under Net Zero Scenarios, exports are lower across all scenarios relative to
Current Policy Scenario, though impacts vary significantly by financing channel and
policy design. The domestic financing scenarios show the most impacts, with NZdom showing
-9.5% by 2050 and recovering to -5% by 2070 compared to Current Policy Scenario, though
this is offset by significant falling fossil fuel imports, implying lower overall trade exposure
rather than diminished competitiveness. In contrast, foreign financed variants impact vary
depending on the productivity of incremental finance. NZfor shows -6.2% by 2050 and
recovers to -3% by 2070 compared to Current Policy Scenario, whereas in NZfor+, exports
show -1.7% by 2050 and -0.4% by 2070 compared to Current Policy Scenario, as foreign
capital inflows prevent domestic resource crowding out (Figure 3.11). In parallel, falling fossil
fuel imports reduce overall trade exposure, underscoring a structural realignment of trade flows
rather than a deterioration in performance.
0%
1%
2%
3%
4%
2022 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070
CPS NZS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.12: Declining fuel imports (NCAER)
Total fuel import bill (as % of GDP) 45
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
i. The overall decline in exports is driven mainly by falling fossil fuel products, partially
offest by gains in textiles, cement, and ferrous metals.
ii. Exports of fossil fuels, including petroleum, coal, and related chemical products are
projected to fall as domestic supply adjusts. In the model, this outcome reflects world
prices treated as exogenous, since the demand and price response from the rest of
the world is not modeled. Accordingly, the drop in demand from other countries is
attributed to the effect of India’s climate policies on supply and domestic prices.
iii. The business services sector has lower export competitiveness, primarily due to
higher electricity prices during the Net Zero transition, which raise operational costs.
In contrast, notable export gains are expected in industrial goods such as textiles,
cement, and ferrous metals, supported by declining domestic coal prices during the
transition (Annex Figure B4). This cost advantage reduces production expenses and
enhances the global competitiveness of these industries.
The Trade Deficit widens slightly under Net Zero Scenario compared to Current Policy
Scenario, but is projected to improve steadily across all pathways. In the near term (2030),
the Trade Deficit grows to between 3.5%–4.5% of GDP across different scenarios, with
foreign-financed pathways showing the largest deficits. This gradually moderates, narrowing
to to 2.5-3.3% of GDP by 2050, and further improving to 1.7-2.3% by 2070 (Figure 3.13).
The Current Account Deficit (CAD) is slightly higher under Net Zero Scenario compared
to Current Policy Scenario, with -1% variation in mid-2050s to -.5% in 2070. Foreign-
financed scenarios consistently show larger Current Account Deficits (peaking at around 3.2%
of GDP in 2045) compared to domestically-financed pathways (stabilizing at 2.3-2.5%). This
reflects the role of additional capital inflows, which enable higher investment levels but also
necessitate larger external deficits to sustain balance-of-payments equilibrium (Figure 3.13).-5.0 -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 2025 2030 2040 2050 2070 NZdom+ NZdom NZfor+ NZfor NZforSub NZdomSub NZforRD
[B]
[A]-3.5 -3 -2.5 -2 -1.5 -1 -0.5 0 2025 2030 2040 2050 2070 [B]]ABA [B]A]] 46
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications -5.0 -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 2025 2030 2040 2050 2070 NZdom+ NZdom NZfor+ NZfor NZforSub NZdomSub NZforRD
[B]
[A]-3.5 -3 -2.5 -2 -1.5 -1 -0.5 0 2025 2030 2040 2050 2070 [B]]ABA [B]A]]
Figure 3.13: Current Account Balance and Trade Balance in Net Zero Scenarios
(A) Current account deficit (% of GDP, MANAGE model).
(B) Balance of Trade (% of GDP, MANAGE model).
Key Messages
Imports and exports as a share of GDP, remain broadly stable across scenarios, till
2050 but increase in absolute terms in Current Policy Scenario.
Under the Net Zero Scenario (NZS), trade outcomes differ by financing mode.
In NZdom, imports show -8.5% by 2050 and -4.5% by 2070 in NZdom, whereas in
NZfor+, imports show +2.4% by 2050 and 3% by 2070 compared to Current Policy
Scenario. Similarly, exports show -9.5% by 2050 and -5.0% by 2070 in NZdom,
whereas in NZfor+ exports show -1.7% by 2050 and -0.4% by 2070 compared to
Current Policy Scenario.
Trade balance: The Trade Deficit widens in the near term (3.5-4.5% of GDP by
2030) but improves steadily to 1.5–2.5% by 2070 in Current Policy Scenario. While
in Net Zero Scenario, Trade Deficit widens under foreign financed scenarios by
0.5-1% compared to Current Policy Scenario, while it remains same under domestic
financing scenarios. Current Account Deficit follows a similar pattern, with higher
deficits in foreign-financed pathways.
3.2.6 Impact on Household income and consumption: Net Zero puts
marginal pressure on household consumption, with poorer groups
most affected unless cushioned by redistributive policies.
The financing mechanism also shapes outcomes. Domestic financing raises capital costs,
crowds out private investment, dampens output and labor demand, and reduces household 47
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
incomes, effects that fall more heavily on poorer households whose consumption is concentrated
in necessities. By contrast, foreign financing eases these pressures: external capital inflows
prevent crowding out, sustain labor demand and incomes, and moderate consumption losses,
especially in rural areas (Figure 3.14).
Redistributive policies can offset these adverse effects. Targeted transfers financed through
higher public debt maintain the consumption of the bottom 40 percent at Current Policy
Scenario levels, demonstrating that redistribution can mitigate short-term distributional impacts
of Net Zero. Similarly, electricity subsidies funded by phasing out fossil fuel subsidies reduce
household electricity costs, cushioning welfare losses.
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZDom
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZDom
Urban householdsRural households
Urban Quintile 1 (poorest) Urban Quintile 2
Urban Quintile 3Urban Quintile 4
Urban Quintile 5 (richest)
Rural Quintile 1 (poorest) Rural Quintile 2
Rural Quintile 3Rural Quintile 4
Rural Quintile 5 (richest)
2070
2030
2040
2045
2050
2060
2065
2070
2030
2040
2045
2050
2060
2065% Deviation from CPS
% Deviation from CPS
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
1.50%
NZDomSub
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZDomSub
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
1.50%
2.50%
NZFo r
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
1.50%
2.50%
NZFor
-4.50%
-2.50%
-0.50%
1.50%
3.50%
5.50%
NZForSub
-4.50%
-2.50%
-0.50%
1.50%
3.50%
5.50%
NZFo rSub
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZForRD
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZForRD
Urban Quintile 1 (poorest) Urban Quintile 2
Urban Quintile 3Urban Quintile 4
Urban Quintile 5 (richest)
RuralQuintile 1 (poorest) RuralQuintile 2
RuralQuintile 3RuralQuintile 4
RuralQuintile 5 (richest)
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.14: Impact of the Net Zero transition on real household consumption
(% deviation from Current Policy Scenario, MANAGE model) 48
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
1.50%
NZDomSub
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZDomSub
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
1.50%
2.50%
NZFo r
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
1.50%
2.50%
NZFor
-4.50%
-2.50%
-0.50%
1.50%
3.50%
5.50%
NZForSub
-4.50%
-2.50%
-0.50%
1.50%
3.50%
5.50%
NZFo rSub
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZForRD
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZForRD
Urban Quintile 1 (poorest) Urban Quintile 2
Urban Quintile 3Urban Quintile 4
Urban Quintile 5 (richest)
RuralQuintile 1 (poorest) RuralQuintile 2
RuralQuintile 3RuralQuintile 4
RuralQuintile 5 (richest)
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.14: Impact of the Net Zero transition on real household consumption
(% deviation from Current Policy Scenario, MANAGE model)
Key Messages
Urban-Rural Impacts are different: Urban–rural income gaps remain unchanged
across scenarios, with poorer households more vulnerable to consumption losses.
Financing matters: Domestic financing deepens household budget pressures, while
foreign financing cushions impacts by sustaining incomes and demand.
Policies can protect: Targeted transfers and electricity subsidies offset losses, keeping
the bottom 40 percent at Current Policy Scenario levels. 49
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
3.2.7 Impact on Electricity Prices
The Current Policy Scenario and Net Zero Scenario show distinct electricity price trajectories
(Figure 3.15). In the Current Policy Scenario, slower pace of demand electrification (increases
from 21% in 2025 to 40% by 2070 in Current Policy Scenario vs 60% in Net Zero Scenario)
and resultingly lower investment needs in Current Policy Scenario, leads to electricity prices
largely remaining stable till 2040 and declining thereafter.
By contrast, the Net Zero Scenario exhibits higher electricity prices in the near to medium
term, particularly over 2030–2045, as rapid electrification of transport and industry drives
up electricity demand. Meeting this surge requires substantial upfront capital investment in
renewable generation, storage, transmission upgrades, and emerging demand-side electrification
options such as heat pumps and electric boilers, which can be several times more capital
intensive than conventional technologies. These higher upfront costs temporarily push Net
Zero Scenario electricity prices above Current Policy Scenario levels during the initial phase
of the transition.
After 2045, however, Net Zero Scenario electricity prices begin to fall, from their peaks but
continue to remain above Current Policy Scenario due to higher electrification in Net Zero.
This decline reflects economies of scale, technology learning effects, and continuing cost
reductions in low-carbon technologies. By the 2050s and beyond, electricity becomes more
affordable under Net Zero Scenario, supporting long-term competitiveness, consumer welfare,
and sustained economic growth.
Electricity price trajectories under CPS and NZS
(Index, 2025–2030 = 100)
0
20
40
60
80
100
120
140
2025-20302031-20352036-20402041-20452046-20502051-20602061-2070
CPS NZS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.15: Electricity price trajectories under Current Policy Scenario and Net Zero Scenario 50
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
3.2.8 Impact on labour market: Under Net Zero, jobs will shift from fossil
fuel sectors into renewable electricity, while construction, transport,
and trade emerge as major sources of new employment.
In all scenarios, employment shifts steadily from agriculture toward industry and
services, mirroring the structural transformation of the economy. By 2050, in the Current
Policy Scenario, the agricultural share of total jobs falls from about 46% in 2024 to 34%,
while services gains a modest share and industry continues to expand as the main source of
employment. This sectoral transition is accompanied by a rising demand for higher-skilled
labour, reflecting the growing weight of skill-intensive services and more technologically
advanced industries. At the same time, labour force participation increases, with the overall
employment rate rising from about 55% in 2025 to 64% in 2050 and 70% in 2070, reflecting
higher employment rate over time as the economy develops (Figure 3.16).
The impacts on the overall employment rate are shown to be relatively modest. Scenarios such
as NZforSub and NZfor+ result in a slight higher employment rate by +0.7-0.8% compared
to Current Policy Scenario by 2050. Conversely, the NZDom and NZforRD scenarios show a
slightly lower employment rate (-0.3 to -0.5%) compared to Current Policy Scenario by 2050.
80%
70%
60%
50%
40%
30%
20%
10%
0%
100%
80%
60%
40%
20%
0%
20252030203520402045205020602070
Employment rate in CPS
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
Employment rate
(% Deviation from CPS)
2030 2040 2045 2050
45%
40%
35%
30%
25%
20%
15%
10%
5%
0
AGRINDSER
Sectoral employment
20302040205020602070
2030 2035 2040 2045 2050 2060 2070
Share of skilled/unskilled
SkilledUnkilled
(A)(B)
(C)
(D)
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.16: Labor market in the Current Policy Scenario and Net Zero Scenario. 51
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
(A) Current Policy Scenario employment rate (MANAGE model).
(B) Deviation of employment from Current Policy Scenario in Net Zero Scenarios.
(C) Share of skilled and unskilled labour (MANAGE model)
(D) Employment in three broad sectors (%, MANAGE model).
In the Current Policy Scenario, the broad employment pattern in energy sector largely remains
stable with employment of 6 million by 2050. Coal, Oil, gas and Electricity account for the
bulk of employment. By 2070, total jobs decline to 4 million primarily due to improvements in
energy efficiency and technological progress. As the economy becomes less energy-intensive,
fewer workers are required both in direct energy production and in the upstream and downstream
sectors that supply or depend on energy, leading to a gradual contraction in employment.
However, in Net Zero Scenario, industry records higher employment than Current Policy
Scenario, for both skilled and unskilled workers, reflecting rising demand from clean technology
manufacturing and renewable energy infrastructure. With rapid expansion in clean energy, energy
sector jobs increase to 7 million by 2050 (1 million higher than Current Policy Scenario) and
4.5 million in 2070 (0.5 million higher than Current Policy Scenario). (Figure 3.17).
Coal Gas OilGreen hydrogenPetroleum, coal productsBiomass production Electricity
0.0
0.5
1.0
1.5
2.0
2.5
2030 2040 2050 2070
Direct jobs (CPS)
(A)(B)
(C)(D)
(E)(F)
0
1
2
3
4
5
6
2030 2040 2050 2070
Indirect jobs (CPS)
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
2030 2040 2050 2060 2070
Direct job change (NZdom)
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2030 2040 2050 2060 2070
Indirect job change (NZdom)
-0.4
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
2030 2040 2050 2060 2070
Direct job change (NZfor+)
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2030 2040 2050 2060 2070
Indirect job change (NZfor+)
Deviation in Million from CPSDeviation in Million from CPSDeviation in Million from CPS
Deviation in Million from CPSDeviation in Million from CPSDeviation in Million from CPS
Figure 3.17: Direct and indirect jobs in energy sectors in Current Policy Scenario and Net Zero
Scenario (jobs in Millions deviation from CPS)
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario 52
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
(A-B) Direct and indirect jobs in energy sectors under CPS (MANAGE model).
(C-D) Direct and indirect jobs change in energy sector under NZdom (compared to CPS)
(MANAGE model).
(E-F) Direct and indirect jobs change in energy sector under NZfor+ (compared to CPS)
(MANAGE model).
The impact of Net Zero transition on structure of employment varies according to source of
financing, productivity of incremental capital and role of complementary policies. By 2050, all
Net Zero Scenarios show higher employment in agriculture, ranging between +0.4% (NZfor)
and + 3.2%(NZdomsub) compared to Current Policy Scenario. In industry, the Net Zero
Scenarios range from -0.1% to -1.5% in domestic-financed scenarios compared to Current
Policy Scenario whereas in Net Zero foreign-financed scenarios, the impact ranges between
+0.7% to +2% compared to Current Policy Scenario by 2050 (See Table 3.4).
Table 3.4: Sectoral employment (% deviation from Current Policy Scenario, MANAGE model)
12
.
2030 2035 2040 2045 2050 2060 2070
Agriculture
NZdom+ 0.25 0.33 0.19 0.54 1.02 1.71 0.63
NZdom 0.06 -0.18 -0.62 -0.26 0.49 1.77 1.12
Nzfor+ -0.20 0.24 0.39 0.69 0.85 0.86 -0.83
Nzfor -0.38 -0.27 -0.35 0.03 0.43 0.92 -0.41
NZforSub -0.48 0.06 0.97 2.17 2.80 2.42 0.51
NZdomSub -0.04 0.17 0.81 2.16 3.16 3.40 2.13
NZforRD -0.15 -0.04 -0.02 0.55 1.30 2.15 1.32
Industry
NZdom+ 0.37 0.15 -0.04 0.00 -0.06 -0.10 -0.46
NZdom -0.05 -0.66 -1.05 -1.09 -1.16 -0.95 -1.05
Nzfor+ 1.50 1.77 1.86 2.04 2.04 1.75 1.08
Nzfor 1.10 0.98 0.89 1.04 1.05 1.01 0.56
NZforSub 1.14 0.87 0.61 0.65 0.75 0.83 0.36
NZdomSub 0.01 -0.78 -1.38 -1.55 -1.52 -1.19 -1.32
NZforRD 0.38 -0.12 -0.60 -0.77 -0.99 -0.81 -0.99
Services
NZdom+ -0.01 -0.05 -0.34 -0.77 -0.95 -0.41 -0.05
NZdom -0.32 -0.64 -1.13 -1.72 -1.94 -1.20 -0.63
12 Colours represent the direction and magnitude of deviation relative to the Current Policy Scenario (CPS). Greener shades indicate
positive deviations, yellow denotes values close to CPS, and orange to red shades indicate negative deviations, with darker
colours reflecting larger absolute changes. 53
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Nzfor+ 0.18 0.43 0.40 0.15 0.06 0.46 0.60
Nzfor -0.12 -0.14 -0.37 -0.73 -0.84 -0.25 0.09
NZforSub -0.16 0.02 0.11 0.05 0.06 0.32 0.38
NZdomSub -0.39 -0.48 -0.62 -0.89 -1.00 -0.64 -0.35
NZforRD -0.30 -0.46 -0.85 -1.39 -1.63 -1.02 -0.50
Total
NZdom+ 0.20 0.15 -0.05 -0.05 0.03 0.33 -0.03
NZdom -0.09 -0.47 -0.92 -0.98 -0.84 -0.22 -0.34
Nzfor+ 0.42 0.77 0.87 0.96 1.00 1.05 0.42
Nzfor 0.13 0.15 0.04 0.12 0.24 0.56 0.15
NZforSub 0.09 0.30 0.58 1.01 1.24 1.13 0.41
NZdomSub -0.13 -0.33 -0.34 0.00 0.25 0.36 -0.09
NZforRD -0.04 -0.20 -0.46 -0.49 -0.40 0.00 -0.22
The Net Zero transition impact on wages depends on source of financing. In Net Zero
Scenarios real wage deviations from Current Policy Scenario remain small in the near term
but widen after 2040. In the NZfor+, real wages are higher by up to 3% above Current Policy
Scenario by 2050. In contrast, domestically financed scenarios (e.g., NZdom) put downward
pressure on incomes, with wages being lower than Current Policy Scenario by about 5.6% in
2050 (Figure 3.18).
Industry records the strongest real wage gains in the transition. In Net Zero foreign-financed
scenarios such as NZfor+, real wages in industry are higher by 5.5% above Current Policy
Scenario by 2050, driven by demand for clean technology and renewable energy infrastructure.
(Table 3.5).
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
NZdom NZforSub NZforRD NZfor NZfor+ NZdom+ NZdomSub
Real wage (% deviation from CPS)
% Deviation from CPS
2030 2040 2045 2050
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.18: Real wages in Net Zero Scenarios (% deviation from CPS) (MANAGE). 54
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
The Net Zero transition drives a reallocation of jobs from fossil fuel industries to
renewable electricity, requiring complementary policies such as reskilling and relocation
support. Under Net Zero Scenario, employment is reallocated across energy sub-sectors.
Direct jobs rise in electricity by up to 1.23 million and 1.61 million cumulatively through
2050 and 2070 compared to Current Policy Scenario, supported by large-scale deployment
of renewables (solar, wind) and grid expansion, while indirect jobs along clean-tech supply
chains add up to 1.48 million and 3.30 million cumulatively through 2050 and 2070 (NZdom)
compared to Current Policy Scenario. By 2050 and 2070, the electricity sector is the largest
contributor to net job gains relative to Current Policy Scenario.
Beyond the energy sector, the Net Zero transition can deliver substantial economy-
wide job gains under supportive policies. Job creation is concentrated in construction,
road transport, and trade. Under the NZforSub, construction emerges as the single largest
contributor, adding about 4.6 million jobs by 2050 compared to Current Policy Scenario,
driven by the labour needs of utility-scale RE build-out, grid expansion, and low-carbon
infrastructure. Road transport and trade also expand, with road transport adding 880,000 jobs
by 2045, and together with trade contributing a cumulative 5.17 million jobs over 2030–2070.
This demonstrates that the Net Zero transition can be a major engine of employment outside
the energy sector when combined with targeted complementary policies (Annex Figure B6).
Table 3.5: Sectoral real wages (deviation from CPS)
13
2030 2035 2040 2045 2050 2060 2070
Agriculture
NZdom+ 0.52% 0.37% -0.85% -1.48% -1.65% -0.72% -0.79%
NZdom -0.59% -2.11% -3.68% -4.40% -4.33% -2.45% -1.80%
Nzfor+ 1.74% 2.56% 2.34% 1.89% 1.54% 1.52% 0.64%
Nzfor 0.61% 0.37% -0.37% -0.81% -0.87% 0.00% -0.25%
NZforSub 0.49% 0.83% 1.08% 1.37% 1.41% 1.19% 0.33%
NZdomSub -0.74% -1.78% -2.07% -2.07% -1.90% -1.24% -1.27%
NZforRD -0.26% -1.15% -2.44% -3.25% -3.46% -2.07% -1.63%
Industry
NZdom+ 0.73% 0.67% 0.55% 0.56% 0.55% 0.65% 0.21%
NZdom -0.36% -1.70% -2.32% -2.65% -2.75% -2.07% -1.70%
Nzfor+ 2.59% 4.07% 4.66% 5.26% 5.52% 5.17% 3.86%
Nzfor 1.48% 1.70% 1.81% 2.12% 2.36% 2.67% 2.11%
NZforSub 1.40% 2.05% 2.67% 3.60% 4.17% 3.74% 2.50%
13 Colours represent the direction and magnitude of deviation relative to the Current Policy Scenario (CPS). Greener shades indicate
positive deviations, yellow denotes values close to CPS, and orange to red shades indicate negative deviations, with darker
colours reflecting larger absolute changes. 55
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
2030 2035 2040 2045 2050 2060 2070
NZdomSub -0.45% -1.33% -1.46% -1.19% -0.99% -1.09% -1.46%
NZforRD 0.24% -0.57% -1.14% -1.61% -1.97% -1.53% -1.40%
Services
NZdom+ 0.40% -0.54% -1.47% -2.26% -2.50% -1.39% -1.83%
NZdom -0.88% -3.14% -4.64% -5.81% -6.10% -4.25% -3.79%
Nzfor+ 1.75% 2.38% 2.19% 2.05% 2.09% 2.61% 1.31%
Nzfor 0.47% -0.21% -0.90% -1.36% -1.31% 0.02% -0.47%
NZforSub 0.38% 0.26% 0.18% 0.50% 1.03% 1.50% 0.11%
NZdomSub -0.98% -2.67% -3.54% -3.94% -3.80% -2.85% -3.33%
NZforRD -0.53% -2.15% -3.50% -4.73% -5.27% -3.77% -3.54%
Key Messages:
Employment remains stable: Net Zero has only modest effects on overall jobs (–1%
to +1% relative to Current Policy Scenario), though outcomes vary by financing.
Jobs shift, wages diverge: Fossil fuel employment declines while renewables and
manufacturing expand; real wages are lower under domestic financing and are higher
with foreign capital as compared to Current Policy Scenario.
Summary of the results
Table 3.6 highlights the broad macroeconomic implications across Net Zero Scenario. Pathways
reliant on domestic financing (NZdom and NZdom+) generally see lower GDP, consumption,
and investment growth in short/medium-run compared to Current Policy Scenario. These
scenarios also show lower trade deficits but higher fiscal deficits.
By contrast, the scenarios reliant on higher foreign financing (NZfor, NZfor+) show better
macroeconomic performance compared to domestic as the external borrowing does not crowd-
out domestic investment. NZfor+ delivers the most positive outcomes, with notable gains in
GDP, household consumption, investment, and exports compared to Current Policy Scenario.
These pathways also see larger import growth and worsening trade balances. Still, fiscal
outcomes strengthen due to higher economic activity, and the employment rate improves in
these foreign-oriented scenarios.
Subsidy-based variants (NZforSub and NZdomSub) sit between domestic and foreign extremes:
These variants show higher fiscal deficit and face current account pressures. Overall, the
results show consistent inter-linkages: GDP, trade flows, fiscal balances, and employment
move together depending on whether Net Zero investment relies on reallocating domestic
resources or on expanding productive capacity through foreign inflows. 56
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Table 3.6: Impact of alternate Net Zeroscenarios in comparison to Current Policy Scenario on
different economic variables
GDP
Household
consumption
Government
consumption
InvestmentExportsImports
Fiscal
deficit
Tax
revenue
on GDP
BOTCAB
Employment
rate
NZdom+ -- - -- -- -- + + +---- -
NZdom -- -- -- -- ------+ +---- -
Nzfor+ ++ +++ ++ ++ + +++++ ------ +
Nzfor - ++ - ++ --+++ + ------ +
NZforSub + ++ + ++ -+++++ ------ +
NZdomSub -- - -- -- -----++ +---- -
NZforRD -- - -- -- -----++ +----- -
Green symbols indicate positive outcomes, red symbols indicate negative outcomes.
Ranking scale: +/–: positive or negative changes below 1%, ++/––: positive or negative changes between 1 and 2.5%;
+++/– – –: positive or negative changes between 2.5 and 5% 4
IMPLICATIONS OF THE
NET ZERO TRANSITION
FOR GOVERNMENT
REVENUE AND THE
IMPORT BILL 58Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
4
Implications of the Net Zero
Transition for Government
Revenue and the Import Bill
This chapter examines how India’s Net Zero transition will affect government revenues, the
import bill, and emerging critical-mineral dependencies, drawing on a comparative assessment
of a Net Zero 2070 scenario against a current policy scenario.
4.1 Revenue Implications of the Net Zero Transition at the
National level
4.1.1 Context: Revenue Dependence on Fossil Fuels
Fossil fuels constitute a significant share of government revenue. Central government revenue
from taxes, duties and cesses on primary fossil fuels (coal and petroleum products) ranged from
INR 2.4 trillion to INR 3.2 trillion (in constant 2011-12 prices) during fiscal years FY 2019-20
to 2023-24 (PPAC, 2025). Over this period, revenue from primary fossil fuels accounted for
20 to 33% of total central government revenue (Ministry of Finance, 2025) (Figure 4.1) and
1.5 to 2.3% of national Gross Domestic Product (GDP) in real terms (Ministry of Statistics
and Program Implementation, 2024) (Figure 4.2). Petroleum products provided the bulk of
these receipts, with coal contributing about 16% and petroleum about 84%, on average, of
total primary fossil fuel revenue.
0%
5%
10%
15%
20%
25%
30%
35%
2019 2020 2021 2022 2023
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
2019 2020 2021 2022 2023
Figure 4.1: Fossil fuel revenue as a % share
of the total central government revenue
Figure 4.2: Fossil fuel revenue as a % share
of national GDP 59
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Subsidies for primary fossil fuels are negligible compared to the revenue earned by the
government from them. Since 2010, India has steadily reduced primary fossil fuel subsidies,
with an approximately 85% decline between 2013 and 2023 (Asian Development Bank, 2024).
In 2023, subsidies to the petroleum sector were about INR 707 billion out of the total estimated
subsidies worth INR 3.2 trillion for all fossil fuels in the same year (IISD, 2023). These
amounts represented only a small fraction of government revenue from the two sectors: for
coal, subsidies equaled about 1% of revenue earned, and for petroleum about 4%, primarily
to cover under-recovery in the retail price of LPG (Powell et al., 2024).
At the state level, on average, petroleum products contribute about 7% of total state government
revenue on average, ranging from 2 to 13% across states. Coal revenues are smaller, accounting
for 3 to 16% in major coal-producing states (Upadhyay et al., 2024).
4.1.2 Comparison of Fossil-Fuel Revenues in the Current Policy
Scenario and Net Zero Scenario
As a share of GDP, fossil-fuel revenue declines from around 2.3% of GDP at present to around
0.4% of GDP by 2070 in the current policy scenario and to 0.2% of GDP in the Net Zero
Scenario (Figure 4.3). The decline in the Current Policy Scenario reflects a combination of
structural economic change and policy-driven shifts in energy use. As the economy grows and
diversifies, fossil-fuel consumption and associated tax revenues fall, while ongoing efficiency
improvements, gradual electrification of end-use sectors, and the increasing competitiveness
of renewables reduce demand for taxed fossil fuels over time. Electrification levels in the Net
Zero Scenario are significantly higher than in the Current Policy Scenario, accelerating this
revenue decline. Figure 4.4 summarizes the breakdown of projected fossil-fuel revenue by fuel
for both scenarios in 2030, 2050 and 2070. Across all years and in both scenarios, revenue
from diesel makes up the highest share of total fossil-fuel revenue, accounting for around half
of government revenue from fossil fuels. Petrol follows, contributing about one-third of total
revenue, while coal accounts for the remaining one-sixth.
14
14 Details regarding assumptions on start year fuel prices, tax rates and price escalation factors can be found in Annexure C-1. 60
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
20222025203020352040204520502055206020652070
CPS NZS
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.3: Projected total fossil fuel revenue (as % of GDP)
0.0%
0.5%
1.0%
1.5%
CPSNZSCPSNZS
20502070
Coal Petrol Diesel
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.4: Breakdown of projected fossil-fuel revenue (as % share of GDP) by
fuel in Current Policy Scenario and Net Zero Scenario
4.2 Impact of the Net Zero Transition on Imports: Fuels and
Critical Minerals
4.2.1 Context: India’s Present Fuel Imports
India’s total primary energy consumption was approximately 850 million tons of oil equivalent
(Mtoe), of which around 51% was met through imports in FY 2022-23 (Ministry of Statistics
and Program Implementation, 2024).
OiI imports: In FY-2022-23, India met 87% of its crude oil demand through imports (Ministry
of Statistics and Program Implementation, 2024). In the past five years, the average oil import 61
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
bill has been about INR 4.7 lakh crore (PPAC, Monthly Snapshot of Oil and Gas imports, 2024)
(2011 prices; Figure 4.5). Crude oil imports add significantly to national imports, contributing
on average 23% of the total import bill during this period. (MoPNG, 2024)(Figure 4.6).
Figure 4.5: Oil Import Bill (billion INR,
2011-12 prices)
Figure 4.6: Oil Imports as a share of total
imports (in value terms)
Natural gas imports: In FY 2022-23, natural gas consumption was 51.83 billion cubic meters
(BCM), of which 44% was met through imports (MoPNG, 2024). India’s gas import bill has
been relatively constant over the past five years, averaging INR 634 billion (2011-12 prices)
(PPAC, Ready Reckoner, 2024). In value terms, the gas import bill is only about one-tenth
of the oil import bill.
Coal imports: Coal imports averaged INR ₹458 billion (2011-12 prices) between 2019–20 and
2022–23, rising sharply in the last two years (Ministry of Coal, 2025). In value terms, India’s
coal import bill is roughly equal to the gas import bill (PPAC, Ready Reckoner, 2024). Coal
imports are increasing over time, driven by rising energy demand and industrial demand for
coking coal. Given the high ash content of domestic coal, coking coal demand must be met
through imports (Gupte, 2023). An Inter-Ministerial Committee (IMC) has been constituted
in the Ministry of Coal to support coal-import substitution (PIB, 2024)
Nuclear Fuels: Nuclear power generation remains limited, with 8.1 GW operating and 7.3
GW under construction (NITI Aayog, 2024). Nuclear currently generates 48 TWh per year,
just over 3% of total electricity generation and 12% of non-fossil sources (NITI Aayog,
2024), amid volatile uranium imports. The recent Government of India announcement of a
100 GW nuclear capacity target by 2047, to be achieved through a mix of conventional reactors
and small modular reactors, signals renewed ambition (Press Information Bureau, 2025). A
key challenge to this expansion is India’s limited uranium reserves, which necessitate heavy
reliance on imports. Given the scale of nuclear ambitions, accounting for uranium in the overall
fuel import bill is crucial, as reflected in this analysis.
0%
5%
10%
15%
20%
25%
30%
2019 2020 2021 2022 2023
0
1000
2000
3000
4000
5000
6000
7000
20192020 202120222023
Oil Imports (Billion INR) 62
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
With India’s aspiration of robust growth toward Viksit Bharat, energy requirements are
expected to keep increasing, exerting pressure on imports unless reliance on domestic energy
sources increases.
4.2.2 Comparison of fuel imports in the Current Policy Scenario and
Net Zero Scenario
The Net Zero transition could generate significant savings in the national fuel import bill,
considering declining trend for imports of fossil fuels (coal, oil, and gas). The Net Zero
Scenario’s fuel import bill is projected to be lower by 38% in 2050 and 47% in 2070 compared
to the Current Policy Scenario. This translates to an annual saving of INR 6.6 trillion in 2050
and INR 8.8 trillion in 2070 comparted to the Current Policy Scenario.
As a share of GDP, the total fuel import bill falls steadily in both scenarios. From around
4% of GDP at present, the total fuel import bill falls to about 0.7% of GDP by 2070 in the
Current Policy Scenario and to 0.2% of GDP in the Net Zero Scenario (Figure 4.7). Looking
at the breakdown of the fuel import bill by fuel (Figure 4.8), oil accounts for the largest share.
Majority of savings in fuel import bills in the Net Zero transition are a result of reduction in
oil imports, followed by gas and then coal. The increase in the uranium import bill associated
with nuclear expansion under the Net Zero transition is negligible compared with the savings
on fossil fuel imports.
0%
1%
2%
3%
4%
2022 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070
CPS NZS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.7: Fuel import bill as a % share of GDP 63
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0%
1%
2%
CPSCPSNZSNZS
20502070
Oil Gas Coking coal Nuclear fuel
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.8: Breakdown of fuel import bill by fuel as a % share of GDP
4.2.3 India’s Dependence on the Import of Critical Minerals and
Components for Energy-Transition Technologies
India’s clean energy shift hinges on critical minerals like lithium, cobalt, nickel, rare earths,
and copper, which are vital for EV batteries, solar PVs, and storage. Currently, India imports
over 90% of copper and is fully dependent on imports for lithium, cobalt, and nickel (PIB,
2023), posing supply risks. China refines over 60% of the world’s lithium and 85% of rare earth
elements, while the Democratic Republic of Congo (DRC) supplies over 70% of global cobalt
(Investing News Network, 2025). The Net Zero transition could reduce fossil-fuel imports but
increase dependence on critical mineral imports. The Ministry of Mines has identified key
minerals and is pursuing domestic exploration, global partnerships, and recycling (Ministry
of Mines, 2023).
Domestic solar PV manufacturing currently meets just 8% of national demand, with 92%
imported, mostly from China, requiring investment in polysilicon refining, wafer production
and module assembly (IRENA, 2017). India’s domestic battery-storage manufacturing is also
in its early stages. As India’s production-linked incentive (PLI) scheme achieves its targeted
capacity of 55 GWh of domestic battery manufacturing by 2030, it would comprise about 6%
of the overall projected battery storage requirement (Warrior et al., 2023) necessitating rapid
scale-up in cell production, raw material processing, and recycling. 64
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
4.2.4 Comparison of the Critical-Minerals and Component Imports in
the Current Policy Scenario and Net Zero Scenario
We estimate that the total import bill for solar PV and battery storage under the Net Zero
Scenario is about INR 400 billion higher in 2050 and INR 1.2 trillion higher in 2070 compared
with the Current Policy Scenario (in 2011-12 prices). Solar imports far outweigh battery-
related imports despite EV-batteries accounting for the bulk of the overall battery requirement.
As India’s economy grows, the import bill initially rises but later declines relative to GDP, as
economic expansion outpaces the increase in mineral-related imports (Figure 4.9). As capacity
additions and associated import bills stabilize for both technologies in later years, GDP growth
attenuates the effect of import bills when expressed as a share of GDP. Here it is important to
note that no price escalation has been assumed for minerals and their associated technologies.
The import bill of critical minerals and cell technologies peaks as a share of GDP at 0.13%
in 2030 under the Current Policy Scenario and 0.17% in 2035 under the Net Zero Scenario,
before stabilizing in later years.
0.00%
0.02%
0.04%
0.06%
0.08%
0.10%
0.12%
0.14%
20502070
CPS NZS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.9: Import bills of critical minerals and cell technologies as a % share of GDP
When the total import bill is divided into critical-mineral imports and finished-component
imports, critical minerals account for about 2-3% of the total, over time and across both
scenarios. Figure-4.10 presents a further breakdown by minerals. Copper and Silicon together
constitute the overwhelming share of the import bill in any given year in both scenarios. The
relatively small contribution of critical minerals compared with finished components in the
import bill reflects the base-case assumption of domestic manufacturing shares of 8% for
Solar PV and 6% for battery components that are kept constant. 65
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0
5
10
15
20
25
30
35
40
CPSNZSCPSNZS
20502070
Copper NickelLithiumCobaltSiliconTotal
Million 2011-12 INR
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.10: Contribution of critical minerals to the import bill, by mineral in Million 2011-12 INR
Scenarios with alternative domestic-manufacturing assumptions: The analysis also tested
higher domestic-manufacturing shares for solar PV (30% & 50% by 2070) and batteries (25%
& 40% by 2070) against a base case of 8% and 6% (base scenario), respectively. Higher
domestic manufacturing shifts imports from finished products to critical minerals, lowering the
total import bills significantly for solar PV (because of small cost differences) with reductions
of 28% by 2050 and 49% by 2070 compared to base scenario. The equivalent cost reduction
is marginal for batteries. In addition to the savings in the import bill from increased domestic
manufacturing, scaling domestic PV and battery manufacturing remain crucial for job creation
and economic growth.
4.2.5 Implications for the Overall Import Bill (Fuels and Critical
Minerals)
Net savings in the overall import bill occur under the Net Zero transition when all imports
namely fuels, energy-transition technology components, and critical minerals are considered
together. Transitioning to cleaner energy technologies requires additional expenses for imports
of critical minerals, solar and battery cells, and nuclear fuel. However, the scale of this increase
is modest relative to the sharp and sustained decline in fossil-fuel imports and is more than
offset by falling imports of fossil fuels such as oil, gas, and coal, as shown in Figure 4.12.
When all imports are considered, the Net Zero Scenario results in substantial savings in the
import bill compared with the Current Policy Scenario. Figure 4.11 shows that savings appear
as early as 2035, at about 0.07% of GDP, rising to about 0.5% of GDP by 2050-70. 66
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
2030 2035 2040 2045 2050 2055 2060 2065 2070
% of GDP
Figure 4.11: Savings in import bill in Net Zero Scenario compared to Current Policy
Scenario as a % of GDP
-12000
-10000
-8000
-6000
-4000
-2000
0
2000
Oil and gas Coal Critical minerals +
Solar & battery cells
Nuclear fuel
2050 2070
Million 2011-12 INR
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.12: Commodity-wise change in imports in Net Zero Scenario compared to Current Policy
Scenario in years 2050 and 2070 (Million 2011-12 INR)
Potential savings in the import bill are possible by enhancing domestic exploration of critical
minerals and establishing early-stage recycling programs. Even in the absence of domestic
availability of critical minerals, increasing domestic manufacturing can produce savings since
the import of finished components is replaced with imports of critical minerals and other
raw materials. Greater savings can be achieved through enhanced efforts for exploration of
domestic critical-mineral reserves and the development of production capacity. Implementing
recycling initiatives for degraded photovoltaic panels and battery cells can significantly reduce
dependence on imported raw materials. Recycling not only conserves resources but also
mitigates the environmental impacts of mining and processing new materials. 5
INDIA’S NET
ZERO PATHWAY:
CHALLENGES AND
SUGGESTIONS 68Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
India’s Net Zero transition will be underpinned by technology & capital, a purposeful
development model, reforming fiscal and regulatory systems, and strengthening institutions
that deliver change. This chapter distills the key challenges ahead and outlines a reform
agenda to turn them into opportunities. If executed as an integrated package, these measures
can anchor macroeconomic stability, accelerate emissions reductions, and position India as a
global exemplar of sustainable development.
India’s successful transition to Net Zero will hinge both on expanding clean technologies and
mobilising capital, and on reorienting its broader development model, strengthening institutions,
and undertaking deep structural reforms. If pursued as a coherent package, these reforms can
convert Net Zero from a constraint into a strategic growth opportunity—enabling India to
sustain high employment, enhance export competitiveness, and demonstrate an alternative
model of sustainable prosperity. The following chapter is organised into four broad themes:
(1) Building a resilient, low-carbon and globally competitive economy
(2) Mobilising capital for the Net Zero transition
(3) Reforming regulatory and fiscal systems for green growth, and
(4) Advancing green jobs, skills, and innovation.
These themes collectively provide a comprehensive roadmap for enabling India’s long-term
transition.
5.1 Theme-1: Building a Resilient, Low-Carbon and Globally
Competitive Economy
Building a resilient, low-carbon and globally competitive economy is central to sustaining
India’s growth in an era of rising climate risks and trade protectionist measures. As living
standards rise and resource pressures intensify, the development model must increasingly
prioritise reforms, efficiency and sustainability. This theme delves into aspects of promoting
climate-friendly lifestyles and how India can realign its trade to emerge stronger in a highly
volatile global economy.
5
India’s Net Zero Pathway:
Challenges and Suggestions 69
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
1. Redefine Development: Leverage India’s Civilisational Wisdom and
Mission LiFE as Blueprints for Sustainable Growth
The globally promoted development paradigm remains heavily skewed toward resource-
intensive growth, often prioritising consumption over sustainability. Across the world,
development is increasingly measured through a narrow set of urban and economic indicators,
reinforcing a model that equates prosperity with material abundance rather than ecological
balance, cultural rootedness, or long-term resilience. If India were to follow this trajectory
uncritically, it risks locking itself into energy- and carbon-intensive patterns of growth at odds
with its climate commitments and social priorities.
Conventional Development Indicators:
Per capita Income (USD): Often treated as the single most important measure
of development. US: >85,000; OECD avg: > 45,000; India: ~2700 (2024) (IMF
2024)
GDP per worker: Commonly used to compare economic efficiency (USD/
worker)
US: ~153,000; World average: ~48,000; China: ~45,000; India: ~24,000
(Our Word in Data, 2024)
Per capita electricity generation (kWh):
World avg: ~3,780 kWh; High-income countries: >8,900 kWh; India:
~1,400 kWh (Our World in Data, 2024)
Cooling demand: Global building stock is moving toward 24/7 HVAC
dependence—almost half of global building energy use is now for cooling and
heating (IRENA, 2023). AC penetration in developed economies >80%; India:
10% (IEA, 2018)
Per capita floor area: Often viewed as a proxy for prosperity. OECD
metropolitan cities: > 40–450 sqm (Banquet, A. et al. 2022); India: 12 sqm
(NITI Aayog, 2024)
Car ownership (per 1,000 people): US: >850; Australia, Canada, Italy:
>700; India: ~30, (but growing fast, linked with urban sprawl and energy use)
(OICA, 2024)
Average household size: OECD average: ~2.4; India: ~4.5. Evidence suggests
larger households consume lower per-capita energy and material.
These indicators provide useful benchmarks, but they are not the full story. The aim is not to
discard them, but to complement them with measures that capture the quality, sustainability, 70
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
efficiency, and resilience of growth. For instance, material wealth alone is a poor predictor of
well-being: Japan, with a GDP per capita less than two-thirds of the US, has a life expectancy
nearly six years higher (84.8 years vs. 78.9 years)(WHO 2023). Costa Rica, whose GDP
per capita is barely one-fifth that of the US, achieves comparable life expectancy (80.3
years) through preventive healthcare, community cohesion, and active lifestyles. These cases
highlight that prosperity and well-being can be achieved without replicating high-consumption
pathways, opening space for India to advance an alternative development approach by drawing
on its civilisational wisdom and climate-conscious practices.
Traditional Indian homes, built with local materials, natural ventilation, and passive
cooling, consume far less energy than the globally favoured glass-and-steel structures
reliant on artificial climate control.
Multi-generational households, a longstanding feature of Indian living, can
significantly reduce per capita energy and material demand, especially in dense
urban settings.
According to the Pew Research Center (2021), about 39% of Indian adults identify
as vegetarian, far higher than in most Western countries, limiting meat consumption
for cultural, religious, or health reasons. These diets are both climate-friendly and
supportive of health outcomes.
Key Suggestions:
i. Energy efficiency has a central role in meeting our developmental needs: The
study estimates that India’s cooling demand will increase by 3 times as the living
standards of people improve. However, with widespread adoption of high-efficiency
appliances and building designs rooted in passive cooling, energy demand can be
reduced by 1/3rd. Similar measures across various end-use sectors will result in
India’s energy intensity of GDP reducing from 0.22 MJ per INR in 2025 to 0.09
by 2047 and 0.05 by 2070, decoupling growth from energy consumption while
maintaining quality of life. Therefore, the developmental norms need to shift from
energy-intensive practices to promotion of localized resources and climate-resilient
designs.
ii. Mission LiFE and Behavioural Shifts: The Prime Minister's Mission LiFE (Lifestyle
for Environment) provides a crucial platform to mainstream sustainable behaviours.
Small but systemic shifts, like setting ACs at 24–25°C, discouraging single-use
plastics in favour of reusable fabric bags, harvesting rainwater, promoting public
transport systems, promoting multi-generational households, promoting access to
clean cooking fuels (reducing the use of traditional biomass) and embracing natural
farming, can reshape household consumption and resource use at scale. 71
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
iii. Promoting circularity for sustainable growth: Operationalizing the circular
economy paradigm through interventions such as reduced demand for virgin steel
and cement through greater material circularity and recycling of critical minerals
will be crucial.
2. Adapt to Geopolitical Fragmentation by Diversifying Exports and
Anchoring Low-Carbon Competitiveness
Global trade is entering an era of fragmentation. The post-pandemic world has seen a
marked shift from hyper-globalisation towards “geoeconomic fragmentation” (IMF 2023).
Rising resource nationalism and supply chain insecurity are reshaping trade strategies. “Just-
in-time” efficiency is giving way to “just-in-case” resilience, as countries prioritise supply
security over cost optimisation. Analysis of the recent trade-volume patterns suggests that
“China+1” has not yet delivered any desired shift with China’s export volumes continuing to
grow since 2020, while world exports excluding China have remained stagnant. Moreover,
much of global import growth has been driven by the United States rather than a widespread
reallocation of demand to alternative export hubs. This implies that any meaningful decoupling
from China would likely require stronger protectionist or quasi-protectionist measures such
as tariffs, local-content requirements, subsidies, and tighter screening which can raise input
costs and reduce efficiency, shifting resilience into a higher-cost equilibrium.
This challenge is compounded by the fact that the development context that enabled East
Asia’s rapid catch-up and industrial upgrading in the 20th century was materially different.
The geopolitical backdrop then was more supportive (often described as a “trade–security
nexus/umbrella” anchored in U.S. alliances) (Min Gyo Koo et al., 2011), there was no energy-
transition constraint, demographics were more favourable, and industrial policy was tightly
focused on productivity and performance backed by sustained investment in primary education
and vocational training.
In contrast, India is attempting to develop under constraints that China and the rest of East Asia
did not face: a global model of capital-intensive growth that sits at odds with India’s labour
endowment, an energy-transition “double-whammy” for capital-led manufacturing ambitions,
and rising AI/robotics pressures that threaten services jobs first and physical labour later
together posing risks to social stability if jobs and productivity do not keep pace. For India,
the IMF estimates potential GDP losses of 1.5–3.3% if fragmentation intensifies, making it
imperative to combine resilience measures such as domestic manufacturing capacity, strategic
stockpiling with continued engagement in global value chains (GVCs) and trade agreements.
Prepare for Non-Tariff Barriers and Emerging Carbon Standards: While average global
tariffs have declined, recent policy shifts in key markets such as the United States suggest tariff
measures could once again play a prominent role in trade tensions. At the same time, non-tariff 72
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
measures (NTMs) have surged. The UNCTAD–UNESCAP 2024 database shows that 2,366
NTMs, 2.6% of all such measures, are climate-related, concentrated in CO₂-intensive sectors
such as steel, aluminum, cement, and electricity.
The EU’s Carbon Border Adjustment Mechanism (CBAM) and Deforestation Regulation
(EUDR) are prominent examples. Together, they could affect USD 9.5 billion of Indian exports
to the EU, about 12.9% of India’s exports to the bloc (Economic Survey 2024-25). Although
positioned as green policy, such measures also act as protective trade barriers. At the same
time, they reward exporters, European or otherwise, who can demonstrate the lowest carbon
footprint. With little steel production capacity remaining in Europe, the most competitive non-
European producers will be those that can decarbonise rapidly and credibly.
Since FY 2014–15, India’s merchandise trade has grown at a 4.3% CAGR (Ministry of
Commerce and Industry), but its share of world exports remains just 1.8%, compared to
China’s 14.6% (WTO, 2025). China’s success was built on high-volume specialisation in
“network products” such as electronics, an area where India has potential. It will be critical
to review the current export potential, accelerate industrial decarbonisation and strengthen
compliance systems to expand India’s share in global trade.
Key Suggestions:
In a fragmented trading system, market access is increasingly shaped by standards, subsidies,
investment screening, and climate-linked compliance not tariffs alone. Export diversification
and low-carbon competitiveness therefore need to be pursued as a single strategy: diversifying
into products and services less exposed to carbon and compliance shocks, while building
credible, verifiable low-carbon production to reduce exposure to instruments such as CBAM
and to compete in green procurement markets. In parallel, FDI and supply chains are being
re-routed by geopolitical alignment (“friend-shoring”), so trade agreements must increasingly
function as investment corridors supporting technology transfer, scale, and predictable rules
rather than relying on tariff relief alone.
i. Diversify Exports and Build Monitoring Systems for Global Standards: Climate
action will reshape India’s trade profile. Modeling from the current study indicates
that under a Net Zero global scenario, India’s exports could be lower than the exports
under the Current Policy Scenario by 4.75% by 2050 and 2.2% by 2070 in a Net Zero
domestic-financing pathway, driven largely by falling demand for carbon-intensive
goods. Imports would also dip modestly, although foreign-financed Net Zero
pathways could see higher imports. This reinforces the urgency of diversifying into
low-carbon export sectors and investing in certification and monitoring infrastructure
to comply with emerging global standards. 73
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
ii. Strengthening Domestic Manufacturing to Leverage Shifting Global
Manufacturing Patterns and GVC Realignments: A focused industrial strategy
under the National Manufacturing Mission can raise manufacturing’s GDP share and
GVC integration. Priority sectors include electronics & semiconductors; apparel &
textiles; automobiles & components; toys, capital goods, etc. Low-carbon production
could become a significant comparative advantage in each of these sectors, not only
where price incentives like CBAM are in play, but also in meeting the evolving
sustainability demands of global customers.
Participation in these value chains will also require India to import parts and
equipment efficiently, implying the need to lower selected import barriers and to
attract greater foreign direct investment (FDI) to bring in technology, scale, and
market access. Recent Economic Survey 2024-25 data points to early trends:
Apple assembled 14% of its global iPhones in India in FY24.
Foxconn is building component plants in Karnataka and Tamil Nadu.
India attracted interest from 28 of 130 global firms seeking supply chain
diversification.
iii. Leverage FTAs to Secure Market Access and Align Regulations: Strategic
free trade agreements (FTAs) are critical to India’s future market access. FTAs
can unlock market opportunities, but with Non-Tariff measures proliferating, their
success will depend on India’s ability to meet regulatory, sustainability, and carbon
standards. Future agreements should move beyond tariff cuts to include cooperation
on certification systems, carbon measurement protocols, and digital trade rules.
Aligning domestic regulations with those of key partners, will be critical to sustaining
competitiveness in a fragmented trade environment.
Prioritise FTA sequencing using a “demand + capital” lens: partners that combine (a)
large shares of global manufactured imports (as end-markets) and (b) large shares
of global outward FDI (as sources of capital, technology, and production networks)
should be treated as first-order priorities. This points to the EU and the United States
at the top of the list, alongside major outward investors such as Japan, the United
Kingdom, and the Republic of Korea.
For these partners, FTAs should be structured as deep economic partnerships not just
tariff schedules covering investment facilitation, supply-chain cooperation, workable
rules of origin, and regulatory alignment to reduce behind-the-border friction and
unlock sustained GVC participation.
Finally, embed low-carbon competitiveness into these priority FTAs through
cooperation on Monitoring, Reporting, and Verification, carbon accounting, 74
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
interoperability of sustainability certifications, and digital rules that enable traceability
and reporting at scale so exporters face lower, more predictable compliance costs as
standards tighten.
5.2 Theme-2: Mobilising Capital for the Net Zero Transition
Mobilising capital at scale is central to India’s Net Zero transition and its broader development
vision for 2047. Investment needs far exceed current flows, making it essential to expand
financing for infrastructure, industry, and emerging low-carbon technologies while safeguarding
macroeconomic stability. This theme focuses on how a balanced mix of domestic savings,
patient foreign capital, and sustained public investment can crowd in private finance, lower
the cost of capital, and ensure that the Net Zero transition strengthens, rather than constrains,
long-term growth.
1. Finance the Green Transition with a Balanced Mix of Domestic and
Foreign Capital
As per the Scenarios towards Viksit Bharat and Net Zero: Financing Needs (Vol. 9) report,
investment requirements even in the Current Policy Scenario (CPS) are estimated at ~ USD
14.7 trillion until 2070, translating to roughly USD 300 billion per year, compared to current
inflows (2024) of only about USD 135 billion (of which ~USD 87 billion corresponds to
clean sources (IEA 2025)). This means that mobilising significantly more capital toward
infrastructure and industrial capacity will be essential for achieving the 2047 development
vision, regardless of whether Net Zero is pursued. Further, pursuing Net Zero will significantly
raise the investment demand to USD ~22.7 trillion (USD 500 billion per year).
Avoid Over-Reliance on Domestic Financing: Model results indicate that Net Zero pathways
relying solely on domestic financing (NZdom, NZdom+, NZdomsub) tend to exert a negative
impact on investment relative to the Current Policy Scenario, most notably between 2040 and
2050, when investment is lower than the Current Policy Scenario by 3–5%. The mechanism
is straightforward: higher domestic borrowing lifts real interest rates, making capital more
expensive for both public and private projects. This aligns with IMF findings that heavy
reliance on domestic debt in emerging markets can crowd out private investment by raising
financing costs (IMF 2024).
In these scenarios, higher interest rates encourage savings over consumption, reducing
household spending. While productive-investment variants (NZdom+) raise household
incomes enough to offset this effect, the domestic-financing cases see small but significant
net consumption declines. 75
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Leverage External Capital to Ease Rate Pressures: External capital can ease financing
pressures and sustain growth. In contrast to domestic-only pathways, externally financed
scenarios (NZfor, NZfor+) tend to increase investment relative to Current Policy Scenario.
By lowering interest rate pressures, foreign capital allows more projects to be financed on
competitive terms, supporting the view that blended finance is essential to scaling climate
investments in emerging markets and developing economies (World Bank 2023).
However, the external-financing scenarios carry a higher current account deficit (CAD),
around 3–3.5% of GDP compared to 2–2.5% in domestic-only cases. A CAD in this range
should be sustainable, especially if India maintains high growth rates near 7-8% per year, as
global patterns show several fast-growing economies financing even higher CADs without
instability. As the IMF notes, "a country can run as large a CAD as the rest of the world is
willing to finance" But in a world where developed economies are also competing for green
capital, India must actively court this investment rather than assume it will arrive.
Key Suggestions:
i. Crowd-In Patient Foreign Capital: Strengthen India’s ability to attract long-term
foreign capital by expanding technology partnerships, demonstrating a long-term
policy vision, and building a pipeline of bankable projects. Scale co-investment
platforms in GIFT City to attract foreign institutional investors like sovereign wealth
funds, global pensions funds, etc.
ii. Broaden Domestic financial savings:
a. Deepen the corporate bond market by lowering issuance costs, enabling bank
refinancing through bonds, and broadening the investor base to include PFs,
Insurers, retail investors, supported by risk guarantees, improved financial
literacy, and more diverse savings products. Unlock domestic insurance and
pension funds investment into investment-grade green bonds; deepen the
corporate bond market beyond AA/AAA issuers via partial credit guarantees
(SEBI, 2024).
b. Leverage recent advances in digital banking and offer households attractive, low-
risk savings products transparently linked to infrastructure and green investment.
iii. Lower Cost of Capital via De-Risking: Establish clear and predictable policies,
strengthen payment-security mechanisms, and apply blended finance for early-stage
technologies.
iv. Shift to Targeted Subsidies: Replace universal electricity subsidies with direct
benefit transfers (DBTs) for vulnerable households. This approach preserves fiscal 76
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space, maintains consumption resilience and strengthens the financial viability of
DISCOM sector.
v. Develop a Pipeline of Bankable, De-Risked Projects: India needs a pipeline of
bankable, de-risked projects with transparent revenue models and predictable policy
environments. Lessons can be drawn from the National Monetisation Pipeline (NMP)
and mega-project execution in renewable parks, highways, and DFC corridors,
demonstrating that large-scale, well-structured projects can mobilise significant
private capital.
A balanced financing mix, anchored in domestic savings but amplified by long-term patient
foreign capital, can maintain investment momentum, keep trade competitive, and ensure the
Net Zero transition strengthens rather than strains macroeconomic stability.
2. Continue and Intensify Infrastructure Investments for a Net Zero
Future
India has already scaled up infrastructure investments, with visible gains in access to services
and productivity. These efforts must be sustained and intensified to meet the country’s
development objectives for 2047. Rapid urban population growth, rising economic output, and
surging energy demand require large investments in core infrastructure systems. These needs
will be further magnified by climate change impacts and the necessity of building resilience
into new infrastructure.
Key Suggestions:
i. Frontload Investment to Enable the Net Zero Transition: As per the Scenarios
towards Viksit Bharat and Net Zero: Financing Needs (Vol. 9) report,, over the course
of India’s Net Zero transition, investment requirements rise sharply, reflecting both
the scale and urgency of low carbon transition. In the near to medium term (2026-
2050), Current Policy Scenario calls for USD 5.8 trillion in investments, while the
Net Zero pathway demands USD 8.05 trillion, creating an incremental gap of USD
2.25 trillion–about USD 90 billion annually, equivalent to about 2-2.5% of India’s
GDP in 2025. These early years are the most challenging, as investments must be
front-loaded in renewable capacity, grid expansion, and industrial decarbonisation
technologies.
Over the long-term horizon (2050–2070), Current Policy Scenario investments total
USD 8.86 trillion, compared with USD 14.69 trillion under Net Zero Scenario. The
incremental gap widens to USD 5.83 trillion, with annual needs climbing to around
USD 290 billion during 2050-70. Although the absolute financing requirement peaks
in this period, its share of GDP becomes more manageable as India’s economy 77
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expands, the near term remains the harder test, given the urgency of accelerating clean
energy and enabling infrastructure. Although the costs are higher in the near term,
they are offset by reduced operational costs and energy imports. These investments
deliver high returns and accelerate technological upgradation and productivity
growth, explaining why the transition has a small impact on GDP and income growth
in macroeconomic simulations.
ii. Use Public Investment to Unlock Private Capital: Public sector investments,
particularly in basic infrastructure and network systems are critical especially in
areas such as electricity transmission and distribution, which enable the integration
of privately-financed renewable energy. Similarly, public support for EV charging
stations, can catalyse larger flows of private investment in e-mobility, including
e-buses.
iii. Prioritize Key Infrastructure Areas for Green Growth: To maximize productivity
gains, leverage private investments, and support rapid growth consistent with a Net
Zero pathway, India should focus on the following areas:
The electricity grid;
Urban infrastructure, such as bus and bike lanes;
Charging infrastructure for e-mobility;
Multimodal transport and logistics systems, including electrified railways and
waterways;
Efficient irrigation systems and water storage;
Energy efficiency and electrification end-use sectors;
Sanitation and wastewater treatment;
Solid waste management.
5.3 Theme-3: Reforming regulatory and fiscal systems for green
growth
As India’s economy grows and evolves, its institutional, regulatory and fiscal systems need
to keep pace so they can better support new industries and promote low-carbon growth. This
theme examines how India can strengthen institutions, streamline regulatory frameworks, and
reorient fiscal tools to support a greener, efficient and competitive economy.
1. Strengthening Institutions to Deliver the Green Transition
India’s ability to deliver on its energy transition and broader growth ambitions is not constrained
only by capital or technology, it is equally limited by the capacity, mandate, and incentives 78
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of the institutions tasked with implementation. Be it agriculture or manufacturing, buildings
or power or transport, enforcement, fragmented mandates, and fiscal stress in nodal agencies
risk delaying or distorting outcomes. Strengthening and, where necessary, restructuring these
institutions, including through private participation, can unlock efficiency, reduce fiscal
leakages, and attract investment at scale.
In the power sector, state-owned DISCOMs remain the weakest institutional link in India’s
energy system, with chronic AT&C losses (~15–20%), delayed subsidy payments, and tariff
freezes. The Revamped Distribution Sector Scheme (RDSS) ties central funding to loss
reduction and cost recovery targets, but enforcement has been inconsistent. Similarly in the
transport sector, State Road Transport Undertakings (SRTUs) and urban bus agencies remain
fiscally stressed, with outdated fleet procurement models that focus on vehicle ownership
rather than contracting services. As a central institution in India’s green transition, the role
of the Bureau of Energy Efficiency needs to be strengthened as it rolls out Carbon Credit
Trading Scheme (CCTS) and implements Energy Conservation and Sustainable Building Code
(ECSBC) and Energy Conservation-New Indian Way for Affordable & Sustainable Homes
(ECO NIWAAS) norms.
Key Suggestions:
i. Align Agriculture Energy Support with Climate Outcomes: The PM-KUSUM
scheme’s solar irrigation component may be paired with groundwater metering and
buyback of surplus solar power.
ii. Strengthen the role of Bureau of Energy Efficiency: Multi-year cap-and-trade
roadmaps for CCTS, harmonised monitoring, reporting and verification protocols
aligned with global standards, and predictable compliance and penalty frameworks will
be essential for improving CCTS’s operational effectiveness. The same institutional
strengthening can support more consistent, on-ground implementation of Energy
Conservation and Sustainable Building Code (ECSBC) and Energy Conservation-
New Indian Way for Affordable & Sustainable Homes (ECO NIWAAS) norms,
creating an integrated regulatory architecture for industrial and building-sector
decarbonisation.
iii. Fix DISCOM Finances Through Tariff Reform and Private Participation:
a. Privatisation, full or partial, whether through full sale (as in Delhi’s BSES model)
or input-based franchisees, has shown measurable improvements in collection
efficiency and service quality. The Ministry of Power’s evaluations suggest
AT&C losses can fall by 30–50% within three years of private management. 79
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b. Tariff rationalization is equally urgent. Many states maintain very high cross-
subsidies, with industrial/commercial tariffs over 150% of cost and agriculture/
residential tariffs at 50% or less. The National Tariff Policy (2016) recommends
reducing cross-subsidies to within ±20% of average cost of supply, but state
regulators have been slow to act.
iv. Shift from Asset Procurement to Service-Based Contracts in Transport: Under
PM-eBus Sewa and FAME-II, agencies are pivoting to gross-cost contracts with
standardised payment-security mechanisms, aggregated state-level procurement,
and integrated depot/charging infrastructure. Institutionalising this service-based
approach can reduce operating costs, improve utilisation, and accelerate deployment
of clean public transport.
2. Overhaul Regulatory Systems to Accelerate the Green Transition
IMF Article IV Staff Report (2024) highlights that state-level clearance delays and inconsistent
environmental permissions remain barriers to clean tech adoption. It also highlights that if
India narrowed its distance to the EM frontier
15
by 25% in areas such as credit market, it could
unlock a ~5% rise in private investment. Embedding these improvements into building, labour,
and compliance reforms will not only advance India’s green transition, but also structurally
elevate investor confidence and growth potential.
The Energy Conservation Building Code (ECBC) and Eco-Niwas Samhita (ENS) provide
a national framework for energy-efficient construction, but state adoption and municipal
enforcement remain patchy. The Ministry of Housing and Urban Affairs’ Model Building
Bye-Laws (2016) and the Bureau of Indian Standards’ codes are often diluted at the city
level, with excessive setbacks, mandatory parking minima, and outdated FAR norms locking
in high lifetime energy demand.
Key Suggestions:
i. Enforce Energy Codes and Modernise Municipal Bylaws: Linking budgetary
allocations to verified ECSBC/ENS enforcement rates, and streamlining digital
building approvals, can make energy-efficient construction the default. Harmonise
state building codes with the Model Building Bye-Laws (MoHUA, 2016) and the
National Building Code (BIS) to optimise setbacks, ground coverage, floor area ratio
(FAR), and parking requirements. Permit higher FAR and mixed-use zoning along
transit corridors to reduce commuting distances and transport energy demand.
15 Distance to the frontier is defined as the difference in values between the frontier (best performer) and India. 80
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
ii. Promote land-neutral RE solutions: Agrivoltaics (APV) present a promising
pathway, combining agricultural production as the primary use with electricity
generation as the secondary. This model reduces land-use conflict while allowing
efficient water use, since water withdrawn for panel cleaning can be reused for
irrigation. Similarly, floating solar and decentralized solar can reduce the demand
for land.
Further, India’s extensive stock of degraded lands offers an underutilised opportunity
for clean energy. These lands have limited agricultural value but can host solar and
wind projects with relatively low social cost. Additionally, repurposing the 2,500
km² of land already mined for coal and lignite (Kiesecker et al., 2024) would serve
dual goals: advancing decarbonisation while supporting a just transition in mining-
dependent regions by creating new jobs and infrastructure.
iii. Streamline Approvals through the National Single Window System: Expand
coverage to construction, power, and environment clearances, integrate digitally with
state pollution control boards (SPCBs) and urban local bodies (ULBs) through APIs;
and publish state-wise median and 95th-percentile clearance timelines.
iv. Streamline Dispute Resolution and Compliance
a. Fast-Track Dispute Resolution: Extend commercial court and mediation fast
tracks to EPC and O&M disputes in clean energy and manufacturing; align
with Insolvency and Bankruptcy Code (IBC) timelines to reduce investor risk.
b. Simplify Compliance: Consolidate overlapping returns and inspections into a
single compliance calendar; expand self-certification and risk-based inspections
under labour codes; adopt “no-surprise” inspection protocols.
v. Ensure Regulatory Predictability
a. Sustain Corporate Reform Momentum: Continue decriminalising minor
company law offences and digitising RERA processes to reduce friction for
smaller developers and green real estate projects.
b. Build Investor Confidence: Stable, transparent regulations will lower the cost
of capital for climate-aligned infrastructure, making projects bankable for both
domestic and foreign long-term investors. Introduce performance standards for
key sectors, such as appliances, vehicles, and industrial equipment, five to ten
years in advance to give businesses the certainty needed to invest in low-carbon
technologies.
Many of these reforms, particularly those involving land-use norms, zoning, and outdated
labour restrictions, will require substantial amendments to state-level regulations. Ensuring 81
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close Centre–State coordination, model guidelines with fiscal incentives, and capacity support
for state departments will be essential. Without alignment at the state level, the pace and impact
of national green-transition reforms will remain constrained.
3. Reform Subsidies and Fiscal Instruments
India’s central government subsidies have risen over the past decade, rising from 1.3% of
GDP in 2016–17 to 2% in 2022–23, with a pandemic peak of 3.6% in 2020–21 (Ministry
of Finance, 2024). Over 90% of this spending is concentrated in food and fertiliser support.
In FY 2022, total public support for the energy sector, including subsidies, PSU capital
expenditure, and PFI lending, was about INR 5 lakh crore (USD 68 billion). Subsidies alone
accounted for INR 2.25 lakh crore, with fossil fuels receiving more than four times the support
allocated to clean energy. While clean energy subsidies doubled for the first time since FY
2017—reaching INR 11,529 crore, largely driven by a 155% surge in solar PV installations,
they remain far below what is required to meet climate targets (IISD, 2022).
RBI’s State Finances: A Study of Budgets 2023–24 (2022–23 RE) reveals sharp interstate
variation in subsidy intensity, measured as a share of GSDP. While most large states allocate
between 1% and 2% of GSDP to subsidies, several diverge sharply from this range:
High-burden states: Chhattisgarh (5.8%), Tamil Nadu (5.0%), Madhya Pradesh
(3.2%), and Punjab (3.0%), largely due to expansive power tariff support, public
distribution schemes, and farm input subsidies. These elevated commitments reduce
fiscal flexibility to fund infrastructure, green transition projects, and climate resilience
measures.
Mid-range states: Karnataka (1.4%), Gujarat (1.2%), Maharashtra (1.2%), Andhra
Pradesh (1.1%), and West Bengal (1.1%), which combine targeted welfare with some
fiscal space for development.
Low-burden states/UTs: Kerala (0.2%), Assam (0.3%), and Union Territories such as
Delhi, Goa, and Sikkim, maintain minimal subsidy outlays relative to GSDP, often
reflecting narrower welfare portfolios or reliance on centrally funded schemes.
The contrast underscores a structural policy challenge: high subsidy-to-GSDP ratios risk
crowding out productive public investment unless schemes are better targeted and efficiency
is improved.
Key Suggestions:
i. Rationalize inefficient fossil subsidies: Rationalise inefficient fossil fuel subsidies
over the medium term while ensuring targeted support for vulnerable groups.
ii. Scale Direct Benefit Transfers (DBTs) to Improve Targeting: A transition from 82
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
untargeted price subsidies to DBTs, leveraging India’s JAM stack (Jan Dhan–
Aadhaar–Mobile), offers a proven pathway to improve targeting, cut leakages, and
preserve equity. Scale DBTs across electricity, fertiliser, and PDS, with Aadhaar-
linked beneficiary lists and public dashboards on coverage and savings.
iii. Broaden the Tax Base to Support Green Transition: The Economic Survey
highlights India’s narrow personal and corporate tax base. A coordinated Centre-
State approach, modeled on the GST Council, could review personal income tax
thresholds, remove exemptions, and simplify compliance, thereby widening fiscal
capacity without hurting small farmers.
iv. Earmark savings for a “Green Fiscal Space” to finance renewable integration,
grid upgrades, and storage.
5.4 Theme-4: Advancing green jobs, skills, and innovation.
India’s demographic window is open until the 2040s. UN DESA’s World Population Prospects
projects India’s working-age population (15–59 years) will keep rising until about 2044,
adding millions of job seekers each year. The challenge is structural: nearly 46% of workers are
in agriculture, while organised manufacturing accounts for just 2.8% of total share (compared
with China’s 28.8%) (Economic Survey 2023-24). Expanding labour-intensive manufacturing
and modern services, while raising agricultural productivity, is therefore critical. Without
targeted measures, compared with the Current Policy Scenario, Net Zero could mean 16
million cumulative job losses by 2045. With the right policy package, it could deliver 32
million net job gains by 2070.
India’s ability to convert its demographic strength into green jobs will depend not only on
expanding labour-intensive sectors but also on building the technological capabilities that
anchor future industries. The transition demands a workforce equipped for new energy systems
and climate-resilient value chains, making innovation, skilling, and R&D central to sustaining
competitiveness.
India invests just 0.65% of GDP on R&D, less than half the average of top economies
according to World Bank’s Development indicators. India’s R&D expenditure is far below
global innovation leaders such as South Korea (~5.2%), Japan (~3.4%), and the US (~3.5%). 83
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0.0%
1.5%
3.0%
4.5%
6.0%
South Korea US Japan China Brazil India
R&D (as % of GDP)-2022
Figure 5.1: R&D as a % of GDP for various countries
Source: World Bank
Business sector contribution remains India’s weak link. Private industry accounts for only
37% of total R&D spending, far below the 68% average among the world’s top ten economies
(UNESCO, 2023). Moreover, India’s R&D effort is concentrated in a narrow band of sectors,
namely pharmaceuticals, IT, transport, defence, and biotech, with limited investments in
cleantech and industrial decarbonisation.
India has export strengths and manufacturing capabilities in products and technologies that
will be in high demand during the global green transition (International Monetary Fund’s
2025 Article IV Report). However, India has produced comparatively few environment-related
patents (2,800 in the last decade, only 10 percent of what China or Germany have produced)
and ISO 14001 certifications (3.7% of total global share).
1. Make “Jobs for the Green Transition” a National Mission
Net Zero job outcomes hinge on financing and complementary policies. Model estimates show
the employment impact of Net Zero is moderate in aggregate, but varies sharply depending
on financing and policy support:
Domestic-financed pathways (NZdom): Employment is lower by nearly 1%
compared to Current Policy Scenario; cumulative jobs less than Current Policy
Scenario by ~16.1 million by 2045; real wages are lower than Current Policy Scenario
by up to 6% due to reduced productivity and tighter capital.
Foreign-financed pathways with subsidies (NZforSub): Employment is higher
by 1.0–1.2% compared to Current Policy Scenario from 2045–2060; cumulative
jobs more than Current Policy Scenario by ~32.45 million jobs by 2070; real wages
are higher than Current Policy Scenario by about 3% as green investment boosts
productivity. 84
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Complementary measures: particularly renewable energy subsidies, targeted
reskilling, and flexible labour regulations, turn the transition into a net job creator
rather than a drag.
These findings are consistent with international experience: across economies, the impact
of climate mitigation policies on employment tends to be modest and either net positive or
neutral, although distributional outcomes can be uneven (Godinho, 2022).
Sectoral shifts will be significant, and policies must enable workers to move where demand
grows. Without supportive measures, Net Zero could slow the shift from agriculture to services.
In NZdom scenario, services’ employment share is lower than Current Policy Scenario by 0.35%
while agriculture is higher than Current Policy Scenario by 0.60%. Even in the NZdomSub
scenario, services jobs are lower than Current Policy Scenario by 0.40%, agriculture jobs are
higher than Current Policy Scenario by 1.0%, signaling a need to smooth labour mobility.
Manufacturing shows mixed results, gains in some scenarios, declines in others, depending
on specialisation and technology uptake.
Coal mining, petroleum and coal products manufacturing jobs see significant decline in Net
Zero Scenario compared to Current Policy Scenario by mid-century
In contrast, the non-fossil energy sector employement (especially nuclear and wind) is higher
by 140–300% compared to Current Policy Scenario, adding about 400,000 jobs by 2050 and
up to 2.5 million cumulatively by 2070 (NZdom).
Key Suggestions:
i. Harnessing the Demographic Dividend through Green and Digital Skills: India’s
young population (~65% under 35) presents a once-in-a-generation opportunity. Yet,
only 51.25% of youth are currently deemed employable, up from 34% a decade ago
(Economic Survey 2023-24). Skilling efforts must now scale and focus on green and
digital sectors.
This push must be grounded in strong foundational capabilities, particularly literacy,
numeracy, and problem-solving, so workers can adapt to evolving technologies rather
than being locked into skills that may quickly become obsolete. To convert India’s
demographic edge into economic strength, skilling must align with market demand,
particularly for green, digital, and gig economy jobs. A “Green & Digital Skills
Stack” should include:
National Skill Qualification Framework (NSQF)-aligned green skills catalogue
consisting of solar O&M, battery assembly, efficient building retrofits etc.
Dual training/apprenticeship models tied to MSME clusters. 85
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Micro-credentials enabling laddered progression from technician to supervisor
to manager.
Industry-co-designed curricula in ITIs/polytechnics with modern CNC/PLC/
energy-efficiency labs.
ii. Prepare the Workforce for AI and Automation: AI is reshaping the global labour
market, and India must prepare its workforce. Technology, especially artificial
intelligence (AI), is becoming a strategic economic differentiator. While it can boost
productivity, it also threatens labour displacement. According to Cazzinaga et al.
2024, 26% of Indian workers are in high AI-exposure occupations.
14% are in roles where AI is complementary (e.g. diagnostics, logistics),
potentially raising productivity and wages.
12% are in high-risk jobs, vulnerable to displacement without reskilling.
India’s relative insulation, 46% of the workforce still in agriculture, may delay
immediate AI shocks, but this advantage will erode as structural transformation
advances. Without preparing the labour force, AI could worsen inequality and
constrain job creation for youth.
iii. Integrate Gig Economy Roles into the Green Transition:
Expand social protection via full operationalisation of the Code on Social
Security (2020).
Ensure portability of benefits and aggregator contributions for gig and platform
workers.
Recognise gig roles like, EV drivers, solar installers, e-waste handlers, as part
of India’s green economy.
iv. Fully Implement Labour Codes across States: Operationalise new labour codes
uniformly to improve hiring flexibility, promote formalisation, and attract industrial
investment, especially in labour-intensive manufacturing.
However, it is important to recognise that these projections operate amid significant “unknown
unknowns” around technological change, labour mobility, and global market shifts.
2. Launch a Bold Innovation Push for India’s Net Zero Ambitions
Many critical green technologies are not yet commercially viable and public-private R&D
must bridge the gap. According to the IEA’s Energy Technology Perspectives (ETP 2023) and
Net Zero by 2050 Roadmap, nearly 50% of the required emissions reductions by 2050 depend
on technologies that are still at prototype or demonstration stage, especially in: 86
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Clean hydrogen and ammonia.
Carbon Capture, Utilisation and Storage (CCUS).
Battery chemistries for long-duration storage.
Green steel and cement
Advanced biofuels and sustainable aviation fuels (SAFs)
Without a robust R&D and demonstration pipeline, India risks being a technology follower,
dependent on costly imports, and missing the strategic opportunity to lead in areas such as
green hydrogen, battery manufacturing, or process innovations for low-carbon manufacturing.
Progress in near-commercial products and technologies is best promoted by creating niche
markets where they can compete. This can be achieved through demand creation by public &
private entities , such as voluntary offtake agreements, green procurement, long-term contracts
by anchor firms, and early-adopter coalitions that provide revenue certainty and incentivise
firms to invest in applied R&D and demonstration.
Key Suggestions:
i. Scale Business-Sector R&D Capacity: Increase business contribution to R&D
personnel and researchers from 30% and 34% respectively to levels closer to the
top-ten economy average (58% and 53% respectively) by 2035 (Economic Survey
2020-21).
ii. Create Mission-Driven R&D Clusters: Like China, establish mission-driven R&D
clusters pooling resources across academia, national labs, and industry, with a focus
on commercialization of breakthrough technologies.
iii. Mandate Sectoral Innovation Funds: Require large carbon-emitting sectors (steel,
cement, refining) to invest in dedicated innovation funds for low-carbon technology.
Anchor these missions at leading CSIR labs, IITs, IISc, and other institutions with
clear tech-to-commercialisation pathways. ANNEXURES 88Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex A
Description of the Models
The analysis of India’s Net Zero transition relies on a two CGE models to provide an assessment
of the economy-wide impacts. First, a long-run GDP growth pathway, the Reform Scenario, is
produced with the World Bank’s Long-Term Growth Model (LTGM). This projection serves as
the official reference baseline. Subsequently, two different Computable General Equilibrium
(CGE) models: the MANAGE-WB CGE model and the NCAER CGE model use this baseline
to analyze how various Net Zero (NZ) policy scenarios would cause the economy to deviate
from its projected path, assessing impacts on GDP, employment, and other key indicators.
This section summarizes the three modeling approaches, with detailed descriptions provided
in the Annex A (NCAER) and Annex B (MANAGE).
Annex A.1. NCAER Methodology
A.1.1 Introduction
Historically, there has been a significant association between the energy consumption and
countries’ development, a composite indicator of human well-being (Pasternik 2000, WEO
2004). There is a positive causality between the level of electricity consumption which is a
representative of modern energy, and human development of a country. The higher the income
of a country, the greater is its electricity consumption and the higher is its level of human
development (Niu, et al., 2013). Considering the importance of energy in social and economic
development of a country, the energy systems and the energy security problems, ranging from
energy poverty to climate change also vary across different countries. Energy security based
on the principles of affordability, availability, accessibility and acceptability, is one of the
main drivers of energy policies in countries (Cherp & Jewell, 2014). Being under the grip
of energy poverty and mostly being a net importer of fossil fuel energy resources, energy
security is crucial for India (Bhide & Monroy, 2011). Affordability, availability, accessibility
and acceptability of energy is of central focus when drafting the national energy policy.
India has already taken steps towards the goal of sustainable energy development by setting
the goal to make available 24x7 power to all by 2019, achieve 175 GW of renewable energy 89
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
generation capacity by 2022, reduce imports of oil and gas by 10 per cent by 2022-23, and
continue to reduce emission intensity of GDP in a manner that will help India achieve the
intended nationally determined contribution (INDC) target of 2030 (Niti Aayog, 2018). At
the Glasgow COP Summit, India revised its commitment that its renewable energy capacity
will reach 500 GW by 2030, meeting 50% of the country’s energy requirements by then. It
would reduce its total projected carbon emissions by one billion tonnes by 2030, reduce the
carbon intensity of its economy by 45% by the same year, over 2005 levels, and achieve Net
Zero emissions by 2070.
The transition to a low carbon pathway requires a methodology to provide an economy
wide assessment of alternative policy choices towards sustainable and inclusive economic
development. Only by understanding the combined forces of behavioral realities, markets and
prices, and technological innovation and infrastructure together, can coherent responses be
built to transition energy systems (Grubb, Hourcade, & Neuhoff, 2015).
The relations between the economy, the energy sector and the environment are described in
two broad classes of models called top-down and bottom-up respectively. Usually to assess
long term climate policies, a top-down macro-economic model and a bottom-up technology-
energy-environment model are coupled to a hybrid top-down/ bottom-up model producing
a macro-economic scenario with detailed technology description (Drouet, et al., 2005). The
top-down models describes the whole economy and emphasize the possibilities to substitute
different production factors in order to optimize social welfare. The production functions
describe the interplay of factors of production and intermediate products, and changes in their
combinations through the elasticities of substitution. The bottom-up models include interaction
among the numerous individual energy technologies that make up the energy system of an
economy, from primary energy sources, via conversion and distribution processes to final
energy use (Helgesen & Tomasgard, 2018).
It is important to analyze the issues in a modelling framework that determine prices in the
system. This is possible only if price is endogenously determined in the model through sectoral
demand/supply equation. In that case, economic equilibrium (where demand and supply in
the economy meet) would result in determination of price and output in the economy. In an
economic model, demand and supply equations for all the sectors of the economy including
energy sector are explicitly built in and hence price and As the above discussion suggest, the
duality of energy and economic system is captured in an economic model. The Computable
General Equilibrium Model (CGE) is a class of economic model that use actual economic data
to estimate how an economy might react to changes in policy, technology or other external
factors. In such model, sectoral growth as well as market driven prices are endogenously
determined through optimizing behavior of agents (typically consumers, producers) of the
economy. For this reason, the impact on the economy due to policy can be analyzed in CGE 90
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
model. Since, energy related sectors are a part of the overall economy, effects of shocks
on same can also be analyzed. If price in the energy sector between different sources vary,
consumer of energy would substitute away from high energy source to low one and as well
as make innovation in the medium to long term to reduce energy demand. If the consumer
(producer) income (revenue) do not change, the economic agent can reduce the demand.
Furthermore, an economic model typically integrates trade with rest of world. So, it is capable
to capture the impact of trade in energy sectors on the economy as well as the price effects
of energy sector from the global market to domestic economy and their effects on the energy
system.
As an improvement to the existing studies available in Indian landscape of deep decarbonization
and Net Zero, the current study emphasizes on establishing a structured mechanism to
endogenize energy demand in the system model framework linked with macroeconomic growth
factors. The uniqueness of the study is thus on integrating macroeconomic impacts on sectoral
energy demand and subsequent assessment energy supply mix in a least cost manner. In this
structure of analysis, the additional advantage will be to capture the cross sectoral linkages of
economic activities and substitution impacts of fuel and technology changes over the model
horizon. The study proposes to derive the sectoral energy demand through macroeconomic
general equilibrium model which will provide robust demand pattern of energy through sectoral
output growths. General equilibrium approach-based energy demand assessment considering
intra and inter sectoral impacts of other commodities (transformation and substitution). While
projecting the future energy demand for each of the economic sectors, this approach considers
the recursive dynamic approach. CGE based energy demand estimate are more inclusive and
reactive to other economic performances. The improvements we envisage in this study are
as follows:
Obtaining much deeper understanding of the socio-economic impacts of deep
decarbonization or Net Zero condition
Understanding of the investment demand for various new and upcoming low carbon/
carbon neutral technologies like CCS, Green Hydrogen etc.
Obtaining wider policy options for deep decarbonization at national level
Assessment of potentiality of implementing Article 6 in achieving NDC/ Net Zero
conditions
Stronger methodology for generating long term demand scenarios
Section 2 describes the modeling structure of our CGE model, along with the working of
recursive dynamic model. Section 4 shows our results from integrated modelling framework
while section 5 provides concluding remarks. 91
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
A.1.2 NCAER’s CGE Model of India
Below, we describe the structure of our CGE model.
The India Energy Model is patterned after the ORANI-G Model, which was developed by
Dixon et al (2012). The multi-household structure of the model is adapted from the work of
Corong and Horridge (2012).
Given that the focus of the model is to analyze issues relating to low carbon pathway, the
model has incorporated in detail both primary and commercial energy sectors. The sectors
of our model is shown in Table 2-1. As this table shows, all major sources of electricity
productions in India are modelled as separate sectors. Similarly, energy intensive sectors like
cement, aluminum, iron and steel figures as independent sectors. ic vehicles in the policy
declaration, there is a switch towards rail transport by electrical transmission and increased use
of waterways for cargo movement in order to reduce logistics cost. Hence, we have included
a disaggregated transport sector in our model. In all, we have 56 sectors in our model.
Table A2-1: Sectors of India model
1.Agriculture21.Solar electricity
2.Livestock22.Wind electricity
3.Forestry23.Hydro electricity
4.Fishing24. Gas electricity
5.Coal25. Coal electricity
6.Natural Gas26. Rest of electricity
7.Crude Petroleum27. Electricity distribution
8.Mining (others)28. Railway Transport
9.Textiles29.Land Transport
10.Paper products30.Water transport
11.Petroleum Products31.Air transport
12.Cement32.Other transport supporting activities
13.Ferrous Metals33.Trade
14.Aluminum34.Storage Warehouse
15.Other Non-Ferrous Metals 35.Communication
16.Fertilizers36.Hotels & Restaurants
17.Other Chemicals37.Finance & Insurance Services
18.Other Manufactured products 38.Water Distribution
19.Construction39.Dwelling
20.Nuclear electricity40.Other Services 92
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
There are four factors of production (land, capital, unskilled labor and skilled labor), three types
of domestic institutions (households, enterprises and government), and an external sector. In
a country like India where there are significant variations in income across household classes
and across location (rural, urban), any discussion on policy interventions always focuses on
whether the same change is inclusive across income classes or not. The same debate recurs
in the case of adoption of low carbon pathway for India. For this reason, our CGE model of
India incorporates 5 income quantile classes each for rural or urban households.
Our model economy assumes that perfect competition prevails across all sectors of the
economy and thereby each producer, firm, industry is a price taker. Demand and supply
equations for private-sector agents are derived from the solutions to the optimization problems
(cost minimization, utility maximization, etc.) which are assumed to underlie the behavior
of the agents in conventional neoclassical microeconomics. The agents are assumed to be
price-takers, with producers operating in competitive markets which prevent the earning of
pure profits. Given a production technology, the producers try to minimize their costs so
as to optimize their returns. Consumers try to optimize by price minimization and utility
maximization. The production technology assumes constant returns to scale, though we may
introduce increasing returns to scale in some of the sectors of our model at a later stage. The
endowments are assumed to be fixed within a period, so over period due to influx of foreign
capital, and population growth respectively, the supply of land is assumed to be fixed.
A.1.2.1 Production Structure
Each producing sector has a nested production function, and the structure of nesting being
the same across sectors. The producer’s input and output decisions are governed by costs
minimization while deciding on the optimal mix of inputs and profit maximization while
choosing the optimal mix of products to be produced. A series of nests as depicted in Figure
A2-1 represents the producer’s behavioral parameters.
At Stage 1, input of aggregated labor composite by skilled and unskilled occupation type
is combined using constant elasticity of substitution (CES) for each industry. At stage 2, all
the primary factor inputs of capital, land and composite labor are combined to form a CES
primary factor aggregate. All intermediate inputs from domestic and imported commodities are
combined using another Armington-CES function, which represents imperfect substitutability
between domestic and foreign commodity inputs. Stage 3 depicts Leontief production function
using intermediate commodity inputs, primary factors and other costs such as stamp duties
etc. Stage 4 and 5 represent the output supply decisions of the firm, in which stage 4 is for
multi-products firms to decide on optimal mix of products to produce through a Constant
Elasticity of Transformation (CET) function and stage 5 depicts the firm’s decision of supply
of products to the domestic and export markets through Armington-CET function. In our 93
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
model, we have assumed that electricity distribution sector facilitates electricity to all the
agents of the economy.
Good 1Up to
Local Market Export Market Local Market Export Market
Labor occupation
type skilled
Labor occupation
type upskilled
Primary FactorsOther costs
Land Labor Capital
Local Market
Get
Export Market Local Market Export Market
Good 1
Output/Activity Level
Leantel
Get
Good 2Up to
STAGE 5
STAGE 4
STAGE 3
STAGE 2
STAGE 1
Oth
Functional
Form
KEY
Input/Output
Good G
CesCes
Ces
Get
Figure A2-1: Production Structure of Industries
This sector buys electricity produced by all modes and distribute them to the various agents
depending on their needs. The production structure for the distribution industry is illustrated
in Figure A2-2. The input structure for the distribution industry is similar to other industries
in that the distribution industry choose a combination of composite intermediate inputs
and the decision to create a composite electricity commodity is facilitated via a number of
nests. Equations in each nest solves a specific optimisation problem. At the top level, the
composite electricity commodity is created via a combination of electricity generated from
nuclear, renewable sources (green) and from fossil fuels. The composite renewable electricity
commodity is created via the combination of solar, wind and hydro while electricity from
fossil fuels is created via a combination of natural gas, coal and other fossil fuels. 94
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
In the bottom nests, the fuel sources are sources domestically or imported. In describing the
input decisions by the electricity distribution industry, we begin by the topmost input-demand
nest.
Industry Output
Leontief
Intermediate
Composite
Good 1
Domestic
good 1
Imported
good 1
Intermediate
Composite
Good 1
Primary factor
composite
CES
Domestic
good
Imported
good
Domestic
good 1
Imported
good 1
Nuclear
Labour
type 1
Labour
type 2
Capital Land Labour
Nuclear
GreenFossil
WindHydro
Domestic
good
Imported
good
Other
Domestic
good
Imported
good
Natural gas
Domestic
good
Imported
good
Coal
Electricity
Composite
Up to
CES
CES
CESCES
CESCESCES
CES
CES
CES
Domestic
good
Imported
good
Domestic
good
Imported
good
Domestic
good
Imported
good
Figure A2-2: Production structure of the Electricity Distribution industry 95
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
A.1.2.2 Investment Demands
The investor combines commodities to produce new units of capital. Figure A2-3 shows two
stage nested structure to produce new units of investment/ capital goods as illustrated in stage
1 where optimal demand for source specific capital inputs is determined by imposing imperfect
substitutability between domestic and imported capital
STAGE 2 STAGE 1
New Capital
for Industry I
Leontief
Domestic
good 1
Imported
good 1
CES
Good 1
Domestic
good G
Imported
good G
CES
Good G
……… Up to ………
Figure A2-3: Structure of Investment Demand
A.1.2.3 Household Demands
At stage 1, a nested CES Armington function is employed for the imperfectibly substitutable
domestic and imported goods governed by utility maximization and cost minimization of the
economy-wide household.
Multiple categories of households, of five rural and five urban classes, have been prepared to
showcase their varied consumption pattern. Stage 2 denotes the optimal consumption of various
goods as per the Klein-Rubin function, which requires each household to first buy subsistence
consumption regardless of its price and later allocate budget for luxury goods. A small value of
the parameter indicates a subsistence commodity, while a large value corresponds to a luxury.
Given consumption prices, each household chooses the optimal consumption of commodities
for utility maximization. 96
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STAGE 2 STAGE 1
New Capital
for Industry I
Leontief
Domestic
good 1
Imported
good 1
CES
Good 1
Domestic
good G
Imported
good G
CES
Good G
……… Up to ………
Figure A2-4: Structure of Consumer Demand
A.1.2.4 Trade Demands
Imperfect substitution between domestically produced and imported goods is allowed in CGE
models. In other words, producers/consumers are free to sell or buy goods from the domestic
or foreign market based on relative prices. The Armington function is used to capture the
substitution possibilities between domestically produced and imported goods. The import
demand function, derived from the Armington function, specifies the value of imports based
on the ratio of domestic and import prices. sIn our model, we have followed two approaches
to model export functions. The principal sectoral exports are modelled individually and
foreign demand responds to sectoral foreign/domestic prices. However, as exports have a
weak relationship with prices in case of service exports, they are modelled collectively. The
collective exports on the other hand all move together in collective group by taking average
price of the collective group and via a constant elasticity of demand curve.
A.1.2.5 Government Demands
Government expenditure is on the consumption of goods and services, transfers to households
and enterprises, and subsidies. Government income is from taxes (direct and indirect), capital,
public and private enterprises, and rest of the world. Direct tax implies income tax, while
indirect taxes include excise duty, import and export tariffs, sales, stamp, service, and other
indirect taxes. hold consumption requires more government services Government savings
which is the difference between government expenditure and income is determined residually
in the model. 97
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A.1.2.6 Inventory Demands
Demand for Inventories is assumed to follow domestic production. The change in the volume
of each source specific commodity going to inventories is a fixed share (measured at current
prices) of the change in domestic production of that commodity.
A.1.2.7 Margin Demands
Margin commodities are required to facilitate the transfer of each source specific commodity
to each user. If the margin technology terms is held constant, each user’s effective demand
for margin commodities is proportional to the commodity flows with which the margins are
associated.
A.1.2.8 Total Demand for Commodities
The ordinary change in supply of domestically produced commodities is equal to the ordinary
change in the demand by all agents in the economy. Similarly the ordinary change in supply of
imported commodities is equal to the ordinary change in the demand for imported commodities
by all agents in the economy.
A.1.2.9 Purchasers’ Prices
Purchaser’s prices are calculated as a sum of basic prices of commodities, commodity taxes
and margin costs. Owing to different sales tax rates and different margin costs, purchaser prices
for producers, investors, households, exporters, government are different. The purchaser’s
prices are calculated by summing the basic prices, commodity taxes and margins. The base
prices are the value received by the producers and the amount paid by the importers including
the import duties.
A.1.2.10 Gross Domestic Product
The income-side of GDP comprise of economy-wide factor payments of land, capital and labor,
aggregate economy wide indirect taxes, value of other costs, production taxes or subsidies.
The expenditure side of GDP comprise of summation of quantity and price indices of
aggregate real household consumption, investment, aggregate exports, aggregate value of
public consumption expenditure and inventories. In the case of inventories the price index
is computed using the basic prices of source specific commodities. The GDP in income and
expenditure forms must be equal. There is a separate check in the model to ascertain that.
A.1.2.11 Dynamics
The model is multi-periods in nature, where the unit of period is one year. It is a recursively
dynamic (RD) model and is solved as a sequence of static single-year CGE models, after 98
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
updating sectoral capital stocks, available labor supply each year and other plausible policy
shocks over the year. The logic for using a recursive dynamic model is that India government
has set policy target for short, medium and long term for low carbon pathway. To some extent,
RD version of model can attempt to simulate these changes. The sectoral capital stocks are
exogenously given at the beginning of a particular period. Between two periods, there will be
additions to capital stocks in each sector because of the investment undertaken in that sector
in the previous period. More precisely, the sectoral capital stocks for any year t are arrived
at by adding the investments by sectors of destination, net of depreciation, in year t-1 to the
sectoral capital stocks at the beginning of the year t-1. Labor supply is updated each year by
adding the new entrants to the labor force, which is governed by population growth. Apart
from the above variables, dynamic version of the model needs assumption regarding changes
in foreign prices for future years, sectoral productivity growths of endowments, technology
and preferences (tastes). These may be shocked depending on the policy interventions.
Our CGE model has been calibrated to the benchmark equilibrium data set of the Indian
economy for the (financial) year 2024-25, which has been a practically normal year for India.
The core data base of the model comes from the Supply Use table for India for the year 2018-
19 and the social Accounting Matrix (SAM) with 10 household class (5 rural, 5 urban) for
the year 2021-22, which we prepared ourselves for this study (2014). The model also requires
other parameters and elasticities which are drawn from literature surveys with focus on India.
Most of the parameters, elasticities, are for the paper are drawn from Ojha, Pohit and Pal (2009).
The sectoral productivity numbers are collated from various Indian studies and India KLEMS
database.
A.1.3 Policy analysis with a dynamic model
The ORANI-India model is a versatile and flexible comprehensive analytical framework that
explicitly traces each variable through time at annual intervals. As illustrated in Figure 3-1,
policy analysis with a dynamic CGE model requires two simulations. The first simulation is
the baseline forecast or business-as-usual simulation. This simulation models the growth of
the economy over time in the absence of the policy change under consideration. The second
simulation is the policy simulation. n generates a second forecast that incorporates all the
exogenous features of the baseline forecast, plus policy-related shocks reflecting the details
of the policy under consideration. The impacts of a policy are typically reported through
percentage deviations away from the baseline forecast. 99
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Baseline
B
C
A
202020242070
Policy
Deviation
Figure A3-1: Policy analysis with a dynamic model
The CPS simulation is the control projection against which policy scenarios are compared
(See Figure A3-1). In building the baseline for this study, the simulation period was divided
into two parts. The first, covering the years 2019 to 2022, should be viewed as the period
where the database is updated to the most recent year. The second part, covering 2025 to
2070, incorporates forecasts period.
To accommodate the extraneous information supplied to the model, numerous naturally
endogenous variables in the model are made exogenous. To allow the naturally endogenous
variables to be exogenously determined, an equal number of naturally exogenous variables
are made endogenous. For example, real GDP is a naturally endogenous variable in the model
while the economy-wide technology variable is naturally exogenous. To accommodate the
exogenous settings of real GDP, the economy-wide technology variable is set endogenously
and allowed to adjust as to accommodate change in real GDP.
Assumption for the CPS and NZ
Table A3-1: The Aspirational GDP growth rate (%) for the model until 2070 is summarised below
Year
2026-
2030
2030-
2035
2035-
2040
2040-
2045
2045-
2050
2050-
2055
2055-
2060
2060-
2065
2065-
2070
Growth
Rate
7.6 7.4 6.9 6.8 6.1 4.9 4.0 3.2 2.4
Achievement of Female Labour Force Participation (FLFP) rate of 70% by 2047
(Target embedded in the Viksit Bharat Vision document) and saturate thereof. 70%
is close to 50th percentile of FLFP seen in High Income (HI) economies. In-case of 100
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Male Labour Force Participation Rate (MLFP), 77.5% reported in 2024 is already
close to 50th percentile seen in High Income economies. Therefore, MLFP is assumed
to be constant.
We have assumed an inflation of 4% inflation till 2047 and 3% after 2047
We have assumed that exchange rate would depreciate by 1.5% till 2047, after 1%
thereafter.
Population trajectory follows UN population after 2035 and India projection till
2035.
Urbanisation is expected to reach 65% by 2070.
Due to the compactness of urban agglomerations, the urban population have reduced
demand for transport by 15%
The share of rail rises to 40% in 2070 in freight movement.
The share nuclear electricity increases from 2% (2025) to 12% in 2070.
We have assumed the adoption of carbon emission capture technology in emission-
intensive sectors, like cement, aluminum, small iron and steel, and all types of fossil
fuel electricity. The adoption starts in 2035, reaching 3-5% by 2050 and 95% of
required 1255 MT capacity by 2070.
The use of fuels (coal, crude oil, natural gas, refined petroleum) in current production
becomes more efficient over time with advancements in the energy-saving technologies
in use. An improvement of 1% per annum.
The use of refined petroleum by households becomes more efficient by 0.50% per
annum with energy-saving apparatus and increasing consciousness.
Efficiency of carbon sequestration increased by 5% per annum with the increasing
popularity of urban forestry, vertical and roof gardening, municipal and panchayat
proactiveness, community forestry and farming in rural areas, etc.
Green hydrogen rises by 10 times between 2030 and 2070.
However, as our model is sequentially solved and output and prices are endogenously
determined, we are not in a position to hit the exact targets that are specified. We can only
attempt to arrive close to it. 101
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Annex A.2: MANAGE Methodology
A.2.1 Production structure
The MANAGE-WB model is a recursive-dynamic, single-country Computable General
Equilibrium (CGE) framework designed by the World Bank to analyze the macroeconomic
implications of policy changes
16
. It is built on a neoclassical growth foundation, capturing
economic growth through the core drivers of capital accumulation, labor stock, and
productivity growth. The model simulates the behavior of key economic agents—including
firms, households, and the government—and captures the complex interplay between different
sectors of the economy through market-clearing mechanisms. Its structure is particularly well-
suited for analyzing the energy transition, as it allows for detailed substitution between capital,
labor, and different energy sources.
Production in each sector follows a nested structure based on constant elasticity of substitution
(CES) functions, enabling the model to capture varying degrees of substitutability among
inputs such as capital, labor, energy, and intermediate inputs. This nesting framework is further
adapted to reflect decision-making in the energy sector.
At the top of the production nest, output is formed by combining value added and
intermediate inputs, with intermediate inputs treated as complements. To account for the
role of energy, the model broadens value added inputs to explicitly integrate energy demand
nest, characterized by an additive CES function. This specification allows for more flexible
substitution patterns among energy sources while maintaining constraints on overall energy-
capital-labor substitution. The model allows for substitution between an energy bundle and a
combined capital-and-skilled-labor bundle, capturing how firms can reduce energy use either
through capital investment in efficient technologies or by employing skilled labor for better
energy management. Within this energy nest, production processes draw on electricity (both
generation and distribution), refined petroleum products, coal, gas, green hydrogen (GH), and
biomass.
The nesting structure varies across sectors to reflect heterogeneous production technologies.
Energy-intensive industries such as iron and steel, cement, and chemicals have different
substitution elasticities compared to service sectors, capturing their limited flexibility in
replacing energy with other inputs. Hence, the model allows for customized nesting patterns
and elasticity values for each industry and activity.
16 Here is the correct link to the latest documentation. https://documents.worldbank.org/en/publication/documents-reports/
documentdetail/099543511132534267 102
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
A.2.2. Production Structure in MANAGE
Output
by vintage (XPυ)
Value added
bundle (VA)
Armington
demand (XA
i
)
Unskilled labor
bundle (LAB1)
Energy bundle
(NRG)
Skilled labor
bundle (LAB2)
Armington
demand (XA
e)
Labor
demand (L
d
ul
)
Labor
demand (L
d
sl
)
Land (LAND)
K+SK+E
bundle (KSE)
Capital (K)
Intermediate
demand bundle excl.
NRG (ND)
Capital skilled labor
bundle (KSK)
s
p
s
u
s
k
s
e
s
ks
s
ul
s
n
s
sl
A.2.3. Household and Government Behavior
Household Income and Consumption Households receive income from multiple sources:
factor payments (wages, capital returns, and land rents), transfers from other institutions, and
debt service payments from the government. The model distinguishes between 10 household
categories, differentiated by location (urban/rural) and income quintile, allowing for detailed
distributional analysis. Each household type has specific shares in total factor income, reflecting
differences in asset ownership and labor market participation across income groups. After
paying personal income taxes and making transfers to other institutions, households determine
their disposable income, which forms the basis for consumption and savings decisions.
Household consumption follows a Constant Difference in Elasticity (CDE) utility function,
which provides flexibility in capturing non-homothetic preferences and allows calibration to
observed income and price elasticities across different commodity groups.
Household Savings Behavior Household savings decisions respond endogenously to relative
returns through a Constant Elasticity of Transformation (CET) function. Households adjust
their savings rate based on the composite returns to savings relative to consumption prices.
When interest rates rise or inflation erodes the real value of consumption, the relative return
to savings increases, inducing households to save more. There is a transformation elasticity 103
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
parameter that governs this responsiveness: higher elasticity means households more readily
shift between consumption and savings in response to changes in interest rates, inflation,
or investment returns. This specification ensures macroeconomic consistency as household
savings adjust to clear the market for loanable funds, equilibrating savings supply with demand
from government and private investment.
Government Revenue and Expenditure The government sector operates through a
comprehensive fiscal framework encompassing multiple revenue streams and expenditure
categories. Revenue sources include factor taxes, production taxes and subsidies, commodity
taxes (both domestic and import), trade taxes, direct taxes on households and enterprises,
and carbon taxes on emissions. On the expenditure side, the government provides transfers
to households, finances public consumption, undertakes public investment, and services debt
obligations.
Fiscal Balance and Closure Rules Government fiscal behavior is governed by targeting
specific fiscal balance ratios as a share of GDP, with government consumption adjusting
endogenously to meet these targets. When the government balance is negative, new borrowing
equals the deficit; when positive, the government provides additional savings to finance
private investment. Real public investment is fixed as a share of GDP following targeted
growth paths, while tax revenues can adjust through a general tax shifter that scales all tax
rates proportionally. The framework monitors debt dynamics separately for domestic and
foreign borrowing, ensuring that government financing needs are met through an appropriate
combination of expenditure adjustment and new borrowing that equilibrates with available
domestic and foreign savings.
A.2.4. Trade
Import Demand Structure The model employs the Armington assumption, treating
domestically produced and imported goods as imperfect substitutes within a CES framework.
All agents (households, firms, government) are assumed to share identical preferences between
domestic and imported varieties of each good, allowing aggregation to the national level. The
Armington elasticity of substitution determines how readily agents switch between domestic
and imported goods in response to relative price changes. High default Armington elasticities
suggest domestic and foreign suppliers are easily substitutable. These elasticities can be
adjusted to reflect sector-specific characteristics, allowing for heterogeneous substitution
patterns across the economy based on empirical evidence or policy analysis needs.
Import prices faced by agents are converted to domestic currency via the exchange rate, then
augmented by import tariffs, trade and transport margins, and value-added taxes. For key
energy commodities, world prices follow exogenous trajectories based on international market
projections provided by the energy model. 104
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Export Supply Mechanism Domestic producers allocate output between domestic and export
markets through a CET function, maximizing revenue given relative prices. The transformation
elasticity governs how readily producers can shift sales between domestic and export markets.
As with import elasticities, these transformation parameters can be calibrated to capture sector-
specific realities and structural changes over time. Export prices are determined by world
prices adjusted for exchange rates, with domestic producers receiving the world price less
any export taxes and trade margins.
Balance of Payments Closure The nominal exchange rate serves as the numerarire, anchoring
domestic prices and inflation. With domestic prices fixed, the exchange rate must adjust
endogenously to maintain external balance through the balance of payments identity, where
the current account deficit (imports minus exports plus net transfers) equals capital inflows
(foreign savings). Foreign savings are fixed as a share of GDP, following projected current
account trajectories. Under this closure, when foreign savings are fixed, any increase in
import demand or decrease in export competitiveness triggers real exchange rate depreciation,
restoring equilibrium through relative price adjustments.
A.2.5. Investment
Savings-Investment Balance Total investment in the economy is determined by the availability
of loanable funds through the savings-investment identity. This macroeconomic balance
ensures that all investment is financed, with the allocation between government bonds and
private capital determined through a market mechanism where savers seek the highest returns.
Investment influences GDP through its effects on the capital stock and productivity–productive
investments increase the capital available for production, enhancing output and long-term
growth. On the other hand, unproductive investment for instance, an incremental cost of
capital goods with lower GHG emissions than the least-cost option does not contribute to the
economy’s productive capacity and divert resources from more productive uses, potentially
slowing economic growth in the short run.
Foreign versus Domestic Investment Foreign investment introduces additional capital that
complements domestic savings, thereby increasing total resources available for productive
sectors. Unlike domestic investment, which competes with government borrowing for
limited domestic savings, foreign investment helps avoid crowding-out effects where private
investment is reduced due to government financing needs. This additional capital from abroad
allows the economy to maintain higher levels of productive investment even when domestic
resources are constrained by government deficits or large-scale transition investments. The
availability of external capital thus helps mitigate potential negative impacts on GDP that
might arise from crowding out within the domestic economy. 105
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A.2.6. Labor
Labor Market Dynamics and Demographics Labor force growth is driven by demographic
changes in the working-age population, which enter exogenously based on population
projections. Labor supply also responds endogenously to real wages, which are determined
by market-clearing mechanisms featuring an upward-sloping supply schedule. This allows the
model to capture discouraged worker effects.
Labor Supply and Structural Transformation The model distinguishes between four labor
categories based on skill level (skilled/unskilled) and employment type (formal/informal),
capturing the heterogeneity of the labor market. The flexible nesting structure allows different
degrees of substitutability between labor types, with skilled and unskilled workers typically
being imperfect substitutes within the same formality category.
Labor allocation across sectors follows a CET function, with transformation elasticities
determining the degree of intersectoral mobility. Finite positive values allow gradual
reallocation in response to wage differentials–higher elasticities indicate more flexible labor
markets. This mechanism works in conjunction with the labor mobility constraints and wage
differentials to determine the actual pace and pattern of sectoral reallocation. The model
ensures labor market equilibrium by equating sector-specific labor demand with available
labor supply across all sectors.
A.2.7. Emissions
Emissions are calculated through three primary channels: (i) consumption of emission source
commodities by Armington agents for both intermediate and final demand, including energy-
related emissions from fossil fuel use; (ii) factor-based emissions from production inputs
such as livestock or land use; and (iii) output-based emissions from production processes.
Consumption-based emissions follow trajectories directly linked to energy use patterns, with
emission coefficients improve over time to reflect technological progress and efficiency
gains. The provided emission trajectories undergo validation against energy models to derive
appropriate improvement rates for emission coefficients, ensuring internal consistency between
projected energy consumption and corresponding emissions throughout the modeling period.
A.2.8. Key assumptions
The methodological framework incorporates several structural assumptions. The GDP deflator
serves as the numeraire, anchoring domestic prices and inflation. Since domestic prices are
fixed by this numeraire choice, the exchange rate must adjust endogenously to maintain
external balance. This endogenous adjustment of the exchange rate ensures equilibrium in the
external sector by aligning domestic relative prices with international prices. 106
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Meanwhile, land supply for agriculture is treated as fixed. However, as India’s economy
develops, the model assumes that there is an improvement in land productivity, resulting from
enhanced fertilizers and better crop varieties over time, mirroring productivity gains observed
in other rapidly developing economies.
A.2.9. Social Accounting Matrix (SAM)
The model is tailored to India’s economic structure by calibrating it to India Social Accounting
Matrix (SAM), which was built on 2019 Supply and Use Tables (SUT) from the Ministry of
Statistics and Programme Implementation (MoSPI)
17
. The SAM includes current, fiscal, and
debt accounts, populated with data from the National Account Statistics (NAS) published by
MoSPI, and cross-verified against the Macro Poverty Outlook (MPO) Databank
18
. Subsequently,
the SAM was macro-updated to 2022 using key macro economic indicators from the NAS.
In the original SUT, all electricity generation is aggregated into a single sector. However,
to accurately capture the energy transition, this sector is disaggregated into seven distinct
sectors—solar, wind, nuclear, gas, coal, hydro, and other. The cost structures for these segments
are derived from the GTAP 11 database, while the electricity mixes are informed by NITI’s
energy model.
Beyond the standard set of activities presented in the Supply and Use Tables (SUT), we
include two emerging sectors with significant projected growth: modern biomass and green
hydrogen (GH). Although modern biomass does not appear explicitly in the original SUT, the
chemical sector (producing organic chemicals) offers a suitable proxy, given the similarity in
feedstock-based transformations and chemical processing.
To capture the emerging role of green hydrogen (GH) in India’s energy mix, we introduce to
the SAM a dedicated GH sector, which was absent in the original SUT. Although currently
nascent, GH is projected to become a significant energy carrier, according to the energy
demand projections provided. We assume that the cost structure of PEM electrolysis for GH
production is assumed to follow that of the US, based on data from the H2A Hydrogen Analysis
models developed by the National Renewable Energy Laboratory (NREL), with electricity
costs for operating the electrolyzer and capital expenditures as the primary cost drivers.
The resulting SAM, with dimensions 251×251, features 74 activities and 148 commodities,
including 7 distinct power sectors (coal, gas, solar, wind, hydro, nuclear, and other). It
also identifies 3 primary factors of production (labor, capital, and land) and 4 labor types,
differentiated by skill level and formal/informal status. On the household side, 10 household
17 https://mospi.gov.in/sites/default/files/reports_and_publication/statistical_publication/National_Accounts/
Note_on_Supply_and_Use_Tables_for_the_year_2019-20.pdf
18 https://www.worldbank.org/en/publication/macro-poverty-outlook 107
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
categories are distinguished (urban and rural across income quintiles), while 7 separate tax
and subsidy items are captured, covering production taxes, commodity taxes, direct taxes,
subsidies, and tariffs. Finally, 3 investment accounts—public GFCF, private GFCF, and stock
changes—are included, along with 1 debt account to track financing of the government’s
fiscal deficit. 108Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex B
Figures and Tables
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
2030 2035 2040 2045 2050 2060 2070
Agriculture
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
2030 2035 2040 2045 2050 2060 2070
Manufacturing
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
2030 2035 2040 2045 2050 2060 2070
Service
Figure B1: Deviation of sub-sector shares in NZfor from CPS
(in percentage points) (MANAGE). 109
Annex B Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Figure B2: Impact of NZ transition on fossil fuels output (% deviation from CPS) (MANAGE). 110
Annex B Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Exports on GDP (% deviation from CPS)
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
2030 2040 2050 2060 2070
NZdom Nzfor+
Impo rts on G DP (% deviation from CPS)
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
2030 2040 2050 2060
NZdom Nzfor+
Figure B3: Exports and imports as a percentage of GDP (% deviation from CPS).
-1.600
-1.400
-1.200
-1.000
-0.800
-0.600
-0.400
-0.200
0.000
0.200
2030203520402045205020602070
Agriculture (NZdom)
-1.6
-1.4
-1.2
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
2030203520402045205020602070
Agriculture (NZfor+)
-25
-15
-5
5
15
2030203520402045205020602070
Manufacturing (NZdom)
-25
-15
-5
5
15
2030203520402045205020602070
Manufacturing (NZfor+)
-6
-4
-2
0
2
4
2030203520402045205020602070
Service (NZdom)
-6
-4
-2
0
2
4
6
2030203520402045205020602070
Service (NZfor+) 111
Annex B Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
-1.600
-1.400
-1.200
-1.000
-0.800
-0.600
-0.400
-0.200
0.000
0.200
2030203520402045205020602070
Agriculture (NZdom)
-1.6
-1.4
-1.2
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
2030203520402045205020602070
Agriculture (NZfor+)
-25
-15
-5
5
15
2030203520402045205020602070
Manufacturing (NZdom)
-25
-15
-5
5
15
2030203520402045205020602070
Manufacturing (NZfor+)
-6
-4
-2
0
2
4
2030203520402045205020602070
Service (NZdom)
-6
-4
-2
0
2
4
6
2030203520402045205020602070
Service (NZfor+)
Figure B4: %Change of export revenue by sector in NZ scenarios compared to the CPS.
(MANAGE)
-6.00%
-5.00%
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
Percent age
Year
CAD -NZ (% of GDP )
Y2024-30
Y2031-35
Y2036-40
Y2041-45
Y2046-50
Y2051-55
Y2056-60
Y2061-65
Y2066-70
Figure B5: Current Account Deficit (NCAER) 112
Annex B Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
NZdom
NZforSub
Figure B6. Sectoral employment deviation from CPS (million people) (MANAGE) 113
Annex B Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0
0.05
0.1
0.15
0.2
0.25
Proportions
Secto rs
Export
Y2025 Y2045 Y2070
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Mining CrudeP et FerrosM et ONonF erMet OthC hemicals OthrMfg
Proportions
Secto rs
Imports
Y2025 Y2045 Y2070
Figure B7: %Change of export and import expenditure by sector in NZ scenarios
compared to the CPS (NCAER)
Y2024-30
Y2031-35
Y2036-40
Y2024-30
Y2041-45
Y2046-50
Y2051-55
Y2056-60
Y2061-65
Y2066-70
Y2024-30
Y2031-35
Y2036-40
Y2024-30
Y2041-45
Y2046-50
Y2051-55
Y2056-60
Y2061-65
Y2066-70
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
Percent age
Year
A. Path of Electricity Prices, Green
(Deviation from CPS)
0
0.5
1
1.5
2
2.5
3
Percent age
Year
B. Path of Electricity Prices, Fossil
(Deviation from CPS)
Figure B8: Path of electricity prices (NCAER) 114
Annex B Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
CPS
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Share
Year
Agriculture IndustryServices
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Share
Year
NZ
AgricultureIndustryServices
Figure B9: Sectoral shares under CPS and NZ (NCAER)
-8.00%
-7.00%
-6.00%
-5.00%
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
20302040205020602070
Percentage
Year
Fiscal Deficit (% of GDP)
CPS NZ
Figure B10: Fiscal deficit (% of GDP) (NCAER) 115Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex C
Assumptions on Price Series,
Consumption and, Import Trends
of Fossil Fuels in the CPS and Net
Zero Scenarios
Annex C.1
a. Starting-year Fuel Prices (2011 INR per BTU)
FuelPrice
Coal0.00010824
Petrol0.0018037
Diesel0.00143806
Crude oil0.00060852
Gas0.00051556
b. Assumed Fuel-Price Escalation Rates (based on Annual Energy Outlook 2023
1
)
Price escalation trend for fossil fuels
Year Coal Petrol Diesel Oil Gas
2023 1.000 1.000 1.000 1.000 1.000
2025 1.008 0.998 1.024 1.011 0.965
2030 1.027 1.068 1.094 1.081 1.078
2035 1.038 1.132 1.151 1.142 1.139
2040 1.053 1.180 1.191 1.186 1.145
2045 1.072 1.241 1.250 1.246 1.131
2050 1.091 1.301 1.288 1.295 1.191
2055 1.104 1.362 1.352 1.357 1.228
2060 1.120 1.423 1.405 1.414 1.261
2065 1.136 1.483 1.458 1.470 1.295
2070 1.152 1.543 1.511 1.527 1.328
1 Annual Energy Outlook 2023–U.S. Energy Information Administration (EIA) 116
Annex C Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
c. Consumption Trend of Fossil-Fuels (TIMES model, figures in MToE)
Year
Oil products (petrol + diesel)
consumption
Coal consumption
CPS NZ CPS NZ
2022 219 219 437 437
2030 319 304 641 602
2035 382 329 790 633
2040 441 361 940 652
2045 468 344 981 632
2050 480 293 979 532
2055 476 271 965 442
2060 495 289 927 161
2065 475 288 848 100
2070 451 296 711 61
d. Import Trends of Fossil-Fuels in the CPS and Net Zero Scenarios (TIMES model,
oil and gas figures in MToE; coal in million tons)
Year
Oil Imports Gas imports Coking coal imports
CPS NZ CPS NZ CPS NZ
2022 227 222 30 30 54 54
2030 274 261 39 36 75 81
2035 328 283 61 44 95 92
2040 379 310 82 58 115 101
2045 402 295 100 70 148 101
2050 413 251 117 69 137 91
2055 409 233 117 50 169 75
2060 426 248 115 19 198 57
2065 408 247 110 0 198 38
2070 387 254 90 0 195 24 117
Annex C Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex C.2: Capacity and Price Assumptions for Nuclear Fuel Use
a. Total Installed Nuclear Capacity 2022-2070 (in GW)
Year CPS NZ
2022 7 7
2030 16 29
2035 23 50
2040 34 71
2045 45 92
2050 56 113
2055 67 133
2060 78 154
2065 89 175
2070 100 196
b. Assumptions on Price Estimation and Projections based on Kryzia and Gawlik
2
Uranium price trend
(study)
Scaled actual uranium prices
(per kg, in 2011 INR terms)
202091150
202590163
203091164
203597175
2040108195
2045118213
2050130235
2055130236
2060137249
2065144261
2070151273
The scaling of actual uranium prices was carried out in line with the price projections suggested
by the above study
2 Forecasting the price of uranium based on the costs of uranium deposits exploitation 118
Annex C Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex C.3: Critical-Minerals Related Assumptions
a. Elements Identified as “Critical Minerals” by the Indian government
3
and considered
in this analysis
Antimony Gallium Lithium Phosphorous Strontium
Beryllium Germanium Molybdenum Potash Tantalum
Bismuth Graphite Niobium REE Tellurium
Cobalt Hafnium Nickel Rhenium Tin
Copper Indium PGE Silicon Titanium
Tungsten Vanadium Zirconium Selenium Cadmium
Colour Key
Blue for battery
Yellow for PVs
Green for both
b. Total Installed solar PV capacity (Utility and Distributed) in Gigawatts for the CPS
and Net Zero Scenarios (TIMES)
Year CPS NZ
2022 105 105
2030 250 325
2035 400 650
2040 700 1140
2045 950 1800
2050 1300 2600
2055 1700 3500
2060 2150 4400
2065 2550 5250
2070 2850 5800
c. Li-ion Battery Storage Capacity in Gigawatt for the CPS and Net Zero Scenarios
(TIMES)
Year CPS NZ
2022 00
2030 180 200
2035 340 760
3 Press Release:Press Information Bureau 119
Annex C Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Year CPS NZ
2040 820 1740
2045 1400 3280
2050 2180 5360
2055 3160 8040
2060 4060 9880
2065 5040 10400
2070 5700 12080
d. EV Critical-Mineral Use Coefficients
4
and Starting-Year Prices
5
For EVs ton/GWh Price/ton (USD 2022)Price/ton (lakh 2011 INR)
Nickel483164036
Cobalt1334762118
Lithium10082323
Copper33394764
e. Annex B.3.5 Solar Critical Minerals-Use Coefficients
6
and Prices
7
For photovoltaicsTons per MW
Price per ton
(2022 USD)
Price per ton
(lakh 2011 INR)
Copper3.2 9476 3.6
Silicon
(polycrystalline)
33663 1.4
f. Solar Cell Cost Assumption
8
and Conversion
0.04 dollars per watt
40 dollars per kilowatt
40,000 dollars per megawatt
0.33 Cr per MW (2022 INR)
0.17 Cr per MW (2011 INR)
4 Based on The key minerals in an electric vehicle–Mining Doc
5 Based on averaged annual prices listed from Daily Metal Price: Copper Price (USD / Pound) Chart for the Last Month
6 Based on ETC-Materials-Report_highres-1.pdf
7 Based on averaged annual prices listed from Daily Metal Price: Copper Price (USD / Pound) Chart for the Last Month
8 Based on Solar price trend–EnergyTrend 120
Annex C Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
g. Annex B.3.7 Li-ion Battery Cell Cost Assumption
9
For this analysis, the cost of batteries is fixed at USD 68 per kWh (or 2,573 INR per kWh in
constant 2011 prices). No decline in lithium-ion battery prices is assumed over the modelled
timespan.
9 Based on NEP 2023–Generation 121Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex D.1 Assumptions on Price Series, Consumption and, Import
Trends of Fossil Fuels in the CPS and Net Zero Scenarios
Starting-year Fuel Prices (2011 INR per BTU) from relevant sources (Ministry of Coal, 2019),
(Our World In Data, 2024), (MoPNG, 2020)FuelPrice
Coal0.00010824
Petrol0.0018037
Diesel0.00143806
Crude oil0.00060852
Gas0.00051556
Fuel tax rates expressed as average share of price that is tax
Taxed fuel(present, dimensionless)
Coal (incl GST @5%, coal cess and royalty) 0.233
Petrol (incl. Excise duty, Sales Tax)0.491
Diesel (incl. Excise duty, Sales Tax)0.373
Assumed Fuel-Price Escalation Rates based on Annual Energy Outlook 2023 (EIA, 2023))
Price escalation trend for fossil fuels
Year Coal Petrol Diesel Oil Gas
2022 1.000 1.000 1.000 1.000 1.000
2025 1.008 0.998 1.024 1.011 0.965
2030 1.027 1.068 1.094 1.081 1.078
2035 1.038 1.132 1.151 1.142 1.139
2040 1.053 1.180 1.191 1.186 1.145
2045 1.072 1.241 1.250 1.246 1.131
2050 1.091 1.301 1.288 1.295 1.191
2055 1.104 1.362 1.352 1.357 1.228
Annex D 122
Annex D Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Price escalation trend for fossil fuels
Year Coal Petrol Diesel Oil Gas
2060 1.120 1.423 1.405 1.414 1.261
2065 1.136 1.483 1.458 1.470 1.295
2070 1.152 1.543 1.511 1.527 1.328
Consumption Trend of Fossil-Fuels (TIMES model, figures in MToE)
Year
Oil products (petrol + diesel)
consumption
Coal consumption
CPS NZCPSNZ
2022 238238415415
2025 263266526528
2030 304297620605
2035 350328763719
2040 385335951823
2045 408325 1077 856
2050 412284 1127 804
2055 415263 1038 653
2060 414231949478
2065 405207831312
2070 39619671983
Import Trends of Fossil-Fuels in the CPS and Net Zero Scenarios (TIMES model, oil and gas
figures in MToE; coal in million tons)
Year
Oil Imports Gas imports Coking coal imports
CPS NZ CPS NZ CPS NZ
2022 208 208 28 28 38 38
2030 222 224 30 29 39 39
2035 259 252 35 43 43 43
2040 301 279 50 54 58 50
2045 332 281 66 68 80 56
2050 350 267 82 77 108 58
2055 348 221 92 74 133 56
2060 345 194 93 42 142 50
2065 339 156 90 25 145 41
2070 323 125 85 7 141 30 123
Annex D Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex D.2: Capacity and Price Assumptions for Nuclear Fuel Use
a. Total Installed Nuclear Capacity 2022-2070 (in GW)
Year CPS NZ
2022 7 7
2030 16 29
2035 23 50
2040 34 71
2045 45 92
2050 56 113
2055 67 133
2060 78 154
2065 89 175
2070 100 196
b. Assumptions on Price Estimation and Projections based on Kryzia and Gawlik
(Dominik Kryzia, 2016)
Uranium price trend
(study)
Scaled actual uranium prices
(per kg, in 2011 INR terms)
202091150
202590163
203091164
203597175
2040108195
2045118213
2050130235
2055130236
2060137249
2065144261
2070151273
The scaling of actual uranium prices was carried out in line with the price projections suggested
by the above study 124
Annex D Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex D.3: Critical-Minerals Related Assumptions
a. Elements Identified as “Critical Minerals” by the Indian government (PIB, 2023)
and considered in this analysis
Antimony Gallium Lithium Phosphorous Strontium
Beryllium Germanium Molybdenum Potash Tantalum
Bismuth Graphite Niobium REE Tellurium
Cobalt Hafnium Nickel Rhenium Tin
Copper Indium PGE Silicon Titanium
Tungsten Vanadium Zirconium Selenium Cadmium
Colour Key
Blue for battery
Yellow for PVs
Green for both
b. Annual Solar Capacity Additions (Utility and Distributed) in Gigawatts for the CPS
and Net Zero Scenarios (TIMES)
Year CPS NZ
2022 105 105
2030 218 239
2035 236 406
2040 251 419
2045 354 636
2050 499 741
2055 618 1042
2060 618 1042
2065 825 1548
2070 825 1548 125
Annex D Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
c. Li-ion Battery Storage Capacity in Gigawatt for the CPS and Net Zero Scenarios
(TIMES)
Year CPS NZ
2022 0 0
2030 168 792
2035 360 552
2040 342 1134
2045 1260 2934
2050 1650 3594
2055 2184 3468
2060 2460 4926
2065 2808 5676
2070 2322 9222
d. Battery Storage Critical-Mineral Start-Year Prices based on Ministry of Commerce
and Industry Estimates (Ministry of Commerce and Industry, 2025). Prices remain
fixed for the modelled timespan
For EVs Price/kg (2011 INR)
Copper406
Cobalt1946
Nickel1582
Lithium559
e. Solar Critical Minerals Prices (Ministry of Commerce and Industry, 2025). Prices
are assumed to remain constant through the modelled timespan
For photovoltaics Price per kg (2011 INR)
Copper406
Silicon (polycrystalline)663
f. Solar Cell Cost Assumption (Energy Trend, 2024) and Conversion. No change in
prices assumed for the solar cells in the modelled timespan
0.04dollars per watt
40 dollars per kilowatt
40,000 dollars per megawatt
0.33 Cr per MW (2022 INR)
0.17 Cr per MW (2011 INR) 126
Annex D Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
g. Li-ion Battery Cell Cost Assumption (BloombergNEF, 2024)
For this analysis, the cost of batteries is fixed at 50 lakh per MWh in constant 2011 prices
based on price conversion of final figures in the Bloomberg source. No decline in lithium-ion
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MACROECONOMIC
IMPLICATIONS
SCENARIOS TOWARDS VIKSIT BHARAT AND NET ZERO
VOL. 11
SOCIAL IMPLICATIONS
OF TRANSITION
SCENARIOS TOWARDS VIKSIT BHARAT AND NET ZERO
MACROECONOMIC
IMPLICATIONS
SCENARIOS TOWARDS VIKSIT BHARAT AND NET ZERO
VOL. 11
SOCIAL IMPLICATIONS
OF TRANSITION
SCENARIOS TOWARDS VIKSIT BHARAT AND NET ZERO Copyright © NITI Aayog, 2026
NITI Aayog
Government of India,
Sansad Marg, New Delhi–110001, India
Suggested Citation
NITI Aayog. (2026). Scenarios Towards Viksit Bharat and Net Zero - Macroeconomic
Implications (Vol. 2)
Available at: https://niti.gov.in/publications/division-reports
Disclaimer
1.This document is not a statement of policy by the National Institution for
Transforming India (hereinafter referred to as NITI Aayog). It has been prepared
by the Green Transition, Energy, Climate, and Environment Division of NITI Aayog
under various Inter-Ministerial Working Groups (IMWGs) constituted to develop
Net-Zero pathways for India.
2.Unless otherwise stated, NITI Aayog, in this regard, has not made any representation
or warranty, express or implied, as to the completeness or reliability of the
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care has been taken by the author(s) in the preparation of this publication, the
content is based on independently procured information and analysis available at
the time of writing and may not reflect the most current policy developments or
datasets.
3.The assertions, interpretations, and conclusions expressed in this report are those
of the author(s) and do not necessarily reflect the views of NITI Aayog or the
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conduct their analysis before forming conclusions or taking any policy, academic,
or commercial decisions. SCENARIOS TOWARDS VIKSIT BHARAT
AND NET ZERO
MACROECONOMIC
IMPLICATIONS
(VOL. 2) xiScenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Authors and
Acknowledgement
Chairperson
Dr. Arvind Virmani
Member, NITI Aayog
Leadership
Sh. Suman Bery
Vice Chairman, NITI Aayog
Sh. B.V.R. Subrahmanyam
CEO, NITI Aayog
Dr. V. Anantha Nageswaran
Chief Economic Advisor, Govt. of India
Dr. Anshu Bharadwaj
Programme Director, Green Transition,
Energy & Climate Change Division,
NITI Aayog
Core Modelling Team
A. Macro-economic Modeling
Mr. Venugopal Mothkoor
Energy and Climate Modelling Specialist,
NITI Aayog
Dr. Stephane Hallegatte
Chief Climate Economist, World Bank
Dr. Lulit Mitik Beyene
Senior Economist, World Bank
Dr. Mei Mei Lam
Economist, World Bank
Dr. Sanjib Pohit
Professor, NCAER
B. Energy Modeling
Dr. Anjali Jain
Consultant G-II, NITI Aayog
Mr. Nitin Bajpai
Consultant, NITI Aayog
Authors
NITI Aayog
Mr. Venugopal Mothkoor
Energy and Climate Modelling Specialist,
NITI Aayog
Ms. Divya Midha
Consultant, NITI Aayog
World Bank
Dr. Stephane Hallegatte
Chief Climate Economist, World Bank
Dr Lulit Mitik Beyene
Senior Economist, World Bank
Dr Mei Mei Lam
Economist, World Bank xii
Authors and Acknowledgement Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
WRI India
Ms. Ulka Kelkar
Executive Director, WRI India
Mr. Subrata Chakrabarty
Associate Director, WRI India
Mr. Varun Agarwal
Program Manager, WRI India
Mr. Devadathan Biju
Program Associate, WRI India
NCAER
Dr. Sanjib Pohit
Professor, NCAER
Dr. Suvajit Banerjee
Fellow, NCAER
Mr. Devender Pratap
Senior Fellow, NCAER
Dr. Chetana Chaudhuri
Fellow, NCAER
Peer Reviewers
Dr. V. Anantha Nageswaran
Chief Economic Advisor, Govt of India
Ms. Chandni Raina
Advisor, Climate Change & Finance Unit,
DEA
Ms. Aditi Pathak
Joint Director, Climate Change & Finance
Unit, DEA
Ms. Gurvinder Kaur
Joint Director, Climate Change & Finance
Unit, DEA
Ms. Ritika Bansal
Deputy Director, Climate Change & Finance
Unit, DEA
Mr. Shard Sapra
Scientist-F, MoEF&CC
Ms. Shweta Kumar
Director, MoEF&CC
Dr. Steven Pennings
Senior Economist, World Bank
Mr. Aurélien Kruse
Lead Country Economist, India
Working Group Coordinators
Dr. Ritu Mathur
Senior Fellow and Director, TERI
Mr. Venugopal Mothkoor
Energy and Climate Modelling Specialist,
NITI Aayog
Ms. Divya Midha
Consultant, NITI Aayog
Ms. Srishti Dewan
YP, NITI Aayog
Mr. Kanishk Jain
Former YP, NITI Aayog
Working Group Members
Sh. Ajay Seth
Former Secretary, DEA,Govt of India;
Chairperson, IRDAI
Dr. V. Anantha Nageswaran
Chief Economic Advisor, Govt of India xiii
Authors and Acknowledgement Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Sh. Sudeep Jain
Former Additional Secretary, MNRE
Ms. Chandni Raina
Advisor (CCFU), Dept of Economic Affairs,
Govt of India
Sh. Nilesh Sah
Joint Secretary, MoEF&CC
Mr. D.K.Ojha
DDG, MoPNG
Ms. Rekha Misra
Advisor (Dept of Economic and Policy
Research), RBI
Mr. Karam Chand
Director, MoPower
Dr. Shikha Anand
Director, MoLabour & Employment
Dr. Lei Lei Song
Director, ADB
Dr. Kirit Parikh
Chairman, IRADe
Dr Jyothi Parikh
Executive Director, IRADe
Dr V.K.Sharma
Professor, IGIDR
Dr Navroz Dubash
Professor, Princeton University & Senior
Fellow, Sustainable Futures Collaborative
Mr. R.R. Rashmi
Distinguished Fellow, TERI
Dr Amrita Goldar
Senior Fellow, ICRIER
Dr. Purnamita Dasgupta
Professor, IEG
Ms. Ulka Kelkar
Executive Director, WRI India
Dr. Sanjib Pohit
Professor, NCAER
Dr. Janak Raj
Senior Fellow, CSEP
Mr. Rajat Gupta
Senior Partner, Mc Kinsey
Dr. Amit Garg
Professor, IIM Ahmedabad
Dr. Vaibhav Chaturvedi
Fellow, CEEW
Dr. Pravakar Sahoo
Senior Lead, NITI Aayog
Technical Editors
Ms. Rishu Nigam
Communication Specialist (Independent)
Ms. Srishti Dewan
YP, NITI Aayog Communication and Research &
Networking Division, NITI
Ms. Anna Roy
Programme Director, Research & Networking
Sh. Yugal Kishore Joshi
Lead, Communication
Ms. Keerti Tiwari
Director, Communication
Dr. Banusri Velpandian
Senior Specialist, Research and Networking
Ms. Sonia Sachdeva Sharma
Consultant, Communication
Sh. Sanchit Jindal
Assistant Section Officer, Research and
Networking
Sh. Souvik Chongder
Young Professional, Communication
NITI Design Team
NITI Maps & Charts Team xvScenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Contents
List of Figures xvii
List of Tables xix
List of Abbreviations xxi
Executive Summary xxv
1. Introduction.....................................................................................................................................1
2. Macroeconomic Landscape of Indian Economy..........................................................................7
2.1 India’s Growth and Global Standing 8
2.2 Structural Transformation: India in Global Context 10
2.3 Infrastructure-Led Growth Strategy 12
2.4 Integrated Strategy: Infrastructure and Fiscal Management 17
3. Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways..............21
3.1 Methodology and assumptions 23
3.2 Results 26
3.2.1 Impact on GDP 26
3.2.2 Impact on GDP components 29
3.2.3 Impact on Sectoral output and shares 32
3.2.4 Impact on Investment 36
3.2.5 Impact on Trade 40
3.2.6 Impact on Household income and consumption 46
3.2.7 Impact on Electricity Prices 49
3.2.8 Impact on labour market 50
4. Implications of the Net Zero Transition for Government Revenue and the Import bill........57
4.1 Revenue Implications of the Net Zero Transition at the National level 58
4.1.1 Context: Revenue Dependence on Fossil Fuels 58
4.1.2 Comparison of Fossil-Fuel Revenues in the Current Policy Scenario and
Net Zero Scenario 59
4.2 Impact of the Net Zero Transition on Imports: Fuels and Critical Minerals 60 xvi
Contents Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
4.2.1 Context: India’s Present Fuel Imports 60
4.2.2 Comparison of Fuel Imports in the Current Policy Scenario and Net Zero
Scenario 62
4.2.3 India’s Dependence on the Import of Critical Minerals and Components
for Energy-Transition Technologies 63
4.2.4 Comparison of the Critical-Minerals and Component Imports in the
Current Policy Scenario and Net Zero Scenario 64
4.2.5 Implications for the Overall Import Bill (Fuels and Critical Minerals) 65
5. India’s Net Zero Pathway: Challenges and Suggestions...........................................................67
5.1 Theme-1: Building a Resilient, Low-Carbon and Globally Competitive Economy 68
5.2 Theme-2: Mobilising Capital for the Net Zero Transition 74
5.3 Theme-3: Reforming Regulatory and Fiscal Systems for Green Growth 77
5.4 Theme-4: Advancing Green Jobs, Skills, and Innovation. 82
Annexures..............................................................................................................................................87
References. ...........................................................................................................................................127 xviiScenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
List of Figures
Figure 2.1Country-wise contribution to global GDP growth9
Figure 2.2Sectoral share in Gross Value Added for India (2014-2024) 9
Figure 2.3Effective Capital Expenditure (% of GDP)13
Figure 2.4General Government Debt (% of GDP)15
Figure 2.5Deficit Trends as % of GDP, 2016–202616
Figure 2.6Total Debt as % of GDP for key economies (2023)17
Figure 3.1Impact of the Net Zero transition on GDP in various scenarios 27
Figure 3.2Net Zero Scenario GDP outcomes across financing channels (deviation
from the Current Policy Scenario in %) – (MANAGE model)
28
Figure 3.3GDP components (at constant 2012 prices) in the Current Policy Scenario
(MANAGE).
30
Figure 3.4GDP components (% deviation from CPS) (MANAGE)31
Figure 3.5GVA sectoral composition in Current Policy Scenario (constant 2012
prices, MANAGE model)
32
Figure 3.6Sectoral investment in Current Policy Scenario and Net Zero Scenarios (%
deviation from Current Policy Scenario) (MANAGE model)
37
Figure 3.7Industry sub-sectoral investment in Current Policy Scenario and Net Zero
Scenario (% Deviation from CPS) (MANAGE model).
39
Figure 3.8Exports and imports by sector in Current Policy Scenario, 2035–2070
(MANAGE model)
41
Figure 3.9Balance of trade and current account deficit in the Current Policy Scenario
(MANAGE model).
42
Figure 3.10Exports and imports as a percentage of GDP (MANAGE model). 43
Figure 3.11Impact of Net Zero Scenarios on India’s export revenue and import
expenditure relative to Current Policy Scenario, 2030–2070 (MANAGE
model)
44
Figure 3.12Declining fuel imports (NCAER)44
Figure 3.13Current Account Balance and Trade Balance in Net Zero Scenarios46
Figure 3.14Impact of the Net Zero transition on real household consumption (%
deviation from Current Policy Scenario, MANAGE model)
47 xviii
List of Figures Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Figure 3.15Electricity price trajectories under Current Policy Scenario and Net Zero
Scenario
49
Figure 3.16Labor market in the Current Policy Scenario and Net Zero Scenario.50
Figure 3.17Direct and indirect jobs in energy sectors in Current Policy Scenario and
Net Zero Scenario (jobs in Millions deviation from CPS)
51
Figure 3.18Real wages in Net Zero Scenarios (% deviation from CPS) (MANAGE).53
Figure 4.1Fossil fuel revenue as a % share of the total central government revenue58
Figure 4.2Fossil fuel revenue as a % share of national GDP58
Figure 4.3Projected total fossil fuel revenue (as % of GDP)60
Figure 4.4Breakdown of projected fossil-fuel revenue (as % share of GDP) by fuel in
Current Policy Scenario and Net Zero Scenario
60
Figure 4.5Oil Import Bill (billion INR, 2011-12 prices) 61
Figure 4.6Oil Imports as a share of total imports (in value terms) 61
Figure 4.7Fuel import bill as a % share of GDP62
Figure 4.8Breakdown of fuel import bill by fuel as a % share of GDP 63
Figure 4.9Import bills of critical minerals and cell technologies as a % share of GDP64
Figure 4.10Contribution of critical minerals to the import bill, by mineral in Million
2011-12 INR
65
Figure 4.11Savings in import bill in Net Zero Scenario compared to Current Policy
Scenario as a % of GDP (Billion 2011-12 INR)
66
Figure 4.12Commodity-wise change in imports in Net Zero Scenario compared to
Current Policy Scenario in years 2050 and 2070 (Billion 2011-12 INR)
66
Figure 5.1R&D as a % of GDP for various countries83 xixScenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
List of Tables
Table 3.1 Summary of Net Zero Scenarios using World Bank and NCAER
models
26
Table 3.2 Sectoral value added (% deviation from Current Policy Scenario,
MANAGE model)
33
Table 3.3 Impact of Net Zero on sectoral output (% deviation from Current
Policy Scenario, MANAGE model)
35
Table 3.4 Sectoral employment (% deviation from Current Policy Scenario,
MANAGE model).
52
Table 3.5 Sectoral real wages (deviation from CPS)54
Table 3.6 Impact of alternate Net Zero scenarios in comparison to Current
Policy Scenario on different economic variables
56 xxiScenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
List of Abbreviations
AIArtificial Intelligence
APMC Agricultural Produce Marketing Committee
APV Agrivoltaics
ASSET Accelerating Sustainable State Energy Transition
BCM Billion cubic meters
BIS Bureau of Indian Standards
BOT Balance of Trade
BSE Bombay Stock Exchange
CAB Current Account Balance
CACP Commission for Agricultural Costs and Prices
CAD Current Account Deficit
CBAM Carbon Border Adjustment Mechanism
CCUS Carbon Capture, Utilization, and Storage
CEA Central Electricity Authority
CGE Computable General Equilibrium
CPS Current Policy Scenario
DBT Direct Benefit Transfer
DFC Dedicated Freight Corridor
DISCOM Distribution Company
DoT Department of Telecommunications
DRC Democratic Republic of Congo
ECSBC Energy Conservation & Sustainable Building Code
ENS Eco-Niwas Samhita
EVElectric Vehicle
FAME Faster Adoption and Manufacturing of Electric Vehicles
FAR Floor Area Ratio xxii
List of Abbreviations Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
FDFiscal Deficit
FDI Foreign Direct Investment
FTAs Free Trade Agreements
FYFiscal Year
GDP Gross Domestic Product
GHG Greenhouse Gas
GSDP Gross State Domestic Product
GST Goods and Services Tax
GVC Global Value Chain
GWGigawatt
IBC Insolvency and Bankruptcy Code
ICED India Climate & Energy Dashboard
IEA International Energy Agency
IISD International Institute for Sustainable Development
IMF International Monetary Fund
IMWG Inter-Ministerial Working Group
INR Indian Rupee
IRENA International Renewable Energy Agency
JAM Jan Dhan–Aadhaar–Mobile
LPG Liquefied Petroleum Gas
LTGM Long-Term Growth Model
MHFW Ministry of Health and Family Welfare
MOAFW Ministry of Agriculture and Farmers Welfare
MoHUA Ministry of Housing and Urban Affairs
MoRTH Ministry of Road Transport & Highways
MOSPI Ministry of Statistics and Programme Implementation
MSP Minimum Support Price
MTMillion ton
Mtoe Million tons of oil equivalent
MWMegawatt
NDC Nationally Determined Contribution
NEER Nominal Effective Exchange Rate
NMP National Monetisation Pipeline xxiii
List of Abbreviations Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
NPCI National Payments Corporation of India
NSQF National Skill Qualification Framework
NZS Net Zero Scenario
NZdom Net Zero Domestic Financing
NZdom+ Net Zero Domestic Financing with Productive Investment
NZdomSub Net Zero Domestic Financing with Subsidy
NZfor Net Zero Foreign Financing
NZfor+ Net Zero Foreign Financing with Productive Investment
NZforRD Net Zero Foreign Financing with Revenue Redistribution
NZforSub Net Zero Foreign Financing with Subsidy
PGE Platinum-Group Elements
PIB Press Information Bureau
PLI Production Linked Incentive
PM-eBus Sewa Prime Minister e-Bus Service Sewa
PM-KUSUM Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan
PPAC Petroleum Planning and Analysis Cell
PSU Public Sector Undertaking
PVPhotovoltaic
R&D Research & Development
RDSS Revamped Distribution Sector Scheme
RERenewable Energy
REE Rare Earth Elements
REER Real Effective Exchange Rate
RERA Real Estate (Regulation and Development) Act
SAF Sustainable Aviation Fuel
SPCB State Pollution Control Board
T&D Transmission and Distribution
TFP Total Factor Productivity
TIMES The Integrated MARKAL-EFOM System
TWTerawatt
TWh Terawatt-hour
UDAN Ude Desh ka Aam Nagrik
ULB Urban Local Body xxiv
List of Abbreviations Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
UN DESA United Nations Department of Economic and Social Affairs
UNCTAD United Nations Conference on Trade and Development
UNESCO United Nations Educational, Scientific and Cultural Organization
USD United States Dollar
UTUnion Territory
WHO World Health Organization
WTO World Trade Organization xxvScenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Executive Summary
India’s Economic Transformation: Foundations of a Resilient and Reform-Driven
Growth Story to become Viksit Bharat@2047: India’s economy has undergone a remarkable
transformation, crossing a GDP of USD 4.18 trillion, to become the world’s fourth-largest
economy driven by macroeconomic stability, institutional reforms, and the rise of digital
public infrastructure. Structural reforms such as Goods and Services Tax (GST), Insolvency
and Bankruptcy Code (IBC), Real Estate Regulatory Authority (RERA), Aadhaar, and Unified
Payments Interface (UPI) have strengthened transparency, formalisation, and private-sector
participation, positioning India as the world’s fastest-growing major economy. Between 2015
and 2025, the country contributed nearly 15% of global GDP growth, supported by strong
domestic demand and sustained policy reform.
Growth remains service-led accounting for 55% of GVA, while employing 30% of the
workforce, compared to agriculture’s 15% GVA share and 46% employment, underscoring the
opportunity to pursue more job-rich growth through manufacturing and industrial development.
Public capital expenditure has emerged as a key growth driver, tripling over the last decade to
over 4.3% of GDP by FY25-26. Energy and electricity consumption have grown, with non-
fossil sources now comprising half of installed power capacity. Fiscal prudence, stable debt
levels, and targeted infrastructure investments have built a foundation for the next phase of
low carbon, inclusive, and broad-based growth.
Balancing Growth and Green Ambition: Climate change poses a direct macroeconomic
risk, threatening agricultural productivity, physical infrastructure, and public health systems.
India’s dependence on imported fossil fuels further aggravates these risks and heightens
macroeconomic uncertainty. These challenges are compounded by a constrained global carbon
budget and evolving trade dynamics including the growing use of carbon-related trade measures
which intensify the headwinds facing developing economies.
Navigating this complex landscape requires aligning India’s aspiration of becoming Viksit
Bharat with a sustained and credible pathway towards achieving Net Zero by 2070. With
per-capita emissions of around three tonnes of CO₂ well below the global average, India is
charting a development pathway that integrates climate ambition with its national priorities,
building on its progress in renewable power, infrastructure development, and energy efficiency
through strategic investments. xxvi
Executive Summary Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
As India advances towards balancing growth and low-carbon transition, it is essential to
understand the macroeconomic implications. A rigorous, economy-wide assessment has
therefore been undertaken to examine the interactions between climate action, growth,
investment, trade, fiscal balances, and employment, and to identify potential trade-offs
and synergies across sectors through a Computable General Equilibrium (CGE) modelling
framework. The implications are examined through multiple Net Zero Scenarios differing by
financing sources, redistributive mechanisms, and productivity co-benefits.
Key modelling insights
Net Zero transition has limited impact on long-term GDP growth but demands high investment.
India’s GDP is projected to stay broadly resilient even in Net Zero (NZ) scenarios, reaching
USD 30 trillion by 2047- aligned to the Viksit Bharat goal. While the transition demands
massive capital mobilisation, scenarios that rely on higher international finance mobilisation
limit GDP deviation from Current Policy Scenario to about -0.5% in a scenario. This highlights
the importance of financing: mobilizing external capital such as FDI reduces pressure on
domestic savings and avoids crowding out private investment.
Growth Structure Shifts from Consumption-Led to Investment-Driven: In Current Policy
Scenario, Private consumption's share in GDP is expected to decrease from 58% in 2025 to
52% in 2070, while investment share changes from 32% in 2025 to around 36% by 2050
before stabilising to 34% by 2070, as the economy matures. In Net Zero Scenarios, financing
the investment from domestic sources tightens liquidity and crowds out consumption, whereas
dominant foreign financing scenarios sustain both investment and demand, signalling a long-
term structural rebalancing toward capital-intensive growth.
Industry Expands driven by clean energy and Fossil Manufacturing Declines: The Net Zero
transition accelerates structural change, boosting industry’s GVA share to 33% by 2050 and
stabilising thereafter, driven by clean energy and manufacturing. Fossil-based manufacturing
is lower by 5.6% compared to Current Policy Scenario under domestic financing; and higher
by 2.5% compared to Current Policy Scenario under dominant foreign financing pathways
by mid-century. Manufacturing remains central as India scales domestic clean-tech capacity.
Investment-Intensive Growth Pathways : India’s growth trajectory is capital-intensive across
all scenarios, with total investment quintupling by 2070 under Current Policy Scenario (~INR
4,200 lakh cr over 2065-70) and rising even further under Net Zero, highlighting the scale of
finance that must be mobilised. The Net Zero pathway drives a sharp reallocation of capital
to support rapid scale-up of renewables.
Trade Becomes More Resilient with Lower Fossil Fuel Dependence: Imports and exports
grow in absolute terms as India moves to high-income status, but remain broadly stable at 23– xxvii
Executive Summary Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
26% of GDP. Under Net Zero pathways, exports are lower relative to Current Policy Scenario
by 6% in scenarios that rely on higher foreign finance and over 9% under domestically
financed pathways by 2050. Imports are lower by 1.6% compared to Current Policy Scenario
in dominant foreign financed scenarios, reflecting reduced fossil fuel dependence. Net Zero
scenarios that rely on higher foreign finance consistently show larger Current Account Deficits
(peaking at around 3.2% of GDP in 2045) compared to domestically-financed Net Zero
scenarios (stabilizing at 2.3-2.5%).
Household Consumption Faces Modest Pressure, mitigated by Policy Support: Without
complementary policies, household consumption falls slightly under Net Zero Scenario,
particularly for lower income groups, due to higher energy prices and investment crowding.
Foreign-financed and redistributive policies such as targeted transfers and RE subsidies help
preserve consumption and can keep the lowest 40% of population at Current Policy Scenario
levels thereby preventing negative impacts on inequality.
Fossil-Fuel Revenue Losses Offset by Import Savings and Green Transition: Fossil-fuel
revenues fall from 2.3% of GDP at present to 0.2% in Net Zero Scenario by 2070, while the
fuel import bill drops from 4% to 0.2% of GDP under the Net Zero Scenario by 2070. Although
critical mineral imports rise, total import savings reach 0.5% of GDP by 2070, strengthening
fiscal and external resilience.
Job Creation Shifts to Renewables, Construction, and Transport: The Net Zero transition
reallocates labour from fossil fuels toward renewable electricity, clean-tech manufacturing, and
infrastructure-intensive sectors such as construction, transport, and trade. Overall employment
effects remain modest, with employment rates deviating by less than ±1 % vs the Current
Policy Scenario by mid-century. Net Zero pathways show the shift from agriculture to services
while strengthening manufacturing and raising demand for skilled labour. Wage impacts are
limited in the near term but diverge over time, with dominant foreign-financed pathways
supporting higher real wages, especially in manufacturing.
Policy Suggestions
I. Reaffirm India’s Civilisational Model of Sustainable Development
India’s development model has long been grounded in balance with nature and resource
efficiency. Civilisational practices such as climate-responsive architecture, sustainable diets,
shared living arrangements, and frugal resource use already embody low-carbon aspects.
Institutionalising these principles through Mission LiFE, circular economy practices, and
energy-efficient design can scale a development pathway where well-being and resilience,
rather than just conventional indicators of growth, define progress. xxviii
Executive Summary Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
II. Build Low-Carbon Competitiveness in a Fragmented Global Economy
With global trade shifting from efficiency to resilience, India must diversify exports and enable
low carbon transition in industries to stay competitive under new carbon-linked regulations
like CBAM. Aligning Monitoring, Reporting, and Verification (MRV), carbon accounting and
interoperability of sustainability certifications with key partners in future FTAs will safeguard
market access and attract investment.
III. Frontload Infrastructure Investment for Net Zero Growth
Increased upfront investment will be needed to achieving Viksit Bharat goals, especially
through a pathway consistent with Net Zero goals. India’s growth path is investment-intensive
under all scenarios: in Current Policy Scenario, investment quintuples by 2070, and under
Net Zero Scenario the scale of required capital is even higher, making India’s development a
uniformly high-investment story that hinges on mobilising unprecedented levels of finance.
Targeted public investment in electricity grids, urban infrastructure, EV charging, multimodal
logistics, etc. will be critical to crowd in private capital, ensuring that low-carbon transition
reinforces, rather than constrains, India’s growth trajectory.
A blended financing approach - combining domestic flows with patient foreign capital
through instruments like green bonds, risk guarantees, co-investment platforms, etc. - can
scale investment while avoiding crowding out of productive private investment. Building
transparent, de-risked pipelines of bankable projects will be essential to sustain investor
confidence and preserve macroeconomic and fiscal stability.
IV. Make Green Jobs a National Employment Mission
The Net Zero transition can be a net job creator if supported by international capital, targeted
reskilling, and flexible labour reforms. Expanding labour-intensive manufacturing for
renewable energy services like solar O&M, battery assembly, efficient building retrofits, etc.-
through a “Green and Digital Skills Stack,” and preparing the workforce for AI & automation
will ensure future-readiness.
V. Strengthen R&D and Innovation for Green Technologies
India must raise R&D investment to match global benchmarks - currently 0.65% of GDP, with
private industry contributing just 37% versus 68% in advanced economies. By comparison, the
US invests ~3% of GDP in R&D, South Korea ~5.2%, and Japan ~3.4%. Expanding private
R&D, fostering industrial innovation clusters, and supporting early-stage commercialisation can
accelerate adoption of technologies like storage, electric mobility, climate-smart agriculture,
Carbon Capture, Utilization, and Storage (CCUS), Small Modular Reactors (SMR), etc. xxix
Executive Summary Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
VI. Strengthening Institutions to Unlock Low-Carbon Growth
Robust, accountable institutions are critical to India’s Net Zero transition. Strengthening
core bodies - particularly DISCOMs and the Bureau of Energy Efficiency, will be critical to
drive energy transition planning at sub-national level. The regulatory burden can be reduced
by overhauling and standardising processes, and by facilitating a single-window approval
mechanism with adequate safeguards. 1
INTRODUCTION 2Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Introduction
1
India stands out as a bright spot in a turbulent global economy, growing faster
and more resiliently than most peers
From 1993 to 2025, India’s economy has grown from under USD 300 billion to nearly USD
4.13 trillion, at a compound annual growth rate (CAGR) of about 8% in nominal terms (IMF,
2025). This growth is particularly striking given that the Indian rupee depreciated by around
3% per year over the same period (Economic Survey 2024). Furthermore, India managed to
preserve macroeconomic stability without a steep rise in external borrowing; its external debt-
to-GDP ratio was just 18.7% in March 2024, among the lowest for major emerging economies
(Economic Survey 2024).
India’s growth has lifted incomes and improved the quality of life for millions
India’s per capita income rose from USD 302 in 1993 to around USD 1,554 in 2024 and an
estimated USD 2,730 in 2025 (IMF; World Bank, 2025), an eightfold increase that translated
into enhanced consumption capacity, stronger savings, and upward social mobility. The
benefits of growth have also been inclusive: between 2015 and 2022, more than 250 million
Indians exited multidimensional poverty, with the MPI headcount ratio falling from 29% to
11% (NITI Aayog 2024; UNDP, 2025). Few other emerging markets have achieved poverty
reduction on such a scale and pace.
Since 2014, India has pursued a new model of growth, focused on building public
goods and trust to unlock private potential
While the 2004–2014 period demonstrated growth, the post-2014 decade has been defined
by institutional and structural reforms that have reshaped India’s growth model. This phase
saw the country pivot from being primarily a provider of services to a builder of platforms,
enabling private enterprise to scale. Key reforms included:
Building public goods: Aadhaar for digital identity, UPI for payments, Gati Shakti
for logistics, and expanding data infrastructure.
Trust-based governance: The Goods and Services Tax (GST) created a unified
domestic market, the Insolvency and Bankruptcy Code (IBC) transformed corporate 3
Introduction Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
resolution, the Real Estate (Regulation and Development) Act (RERA) brought
transparency to real estate. In parallel, welfare delivery was digitised, making public
services faster, more transparent, and more accessible.
8Private sector as partner: Recognising private enterprise as a co-partner in
development, not merely a revenue source
8Boosting agricultural productivity and rural incomes: Through infrastructure,
irrigation and e-markets.
Together, these shifts positioned India’s growth on stronger institutional foundations,
underpinned by digital innovation, productivity gains, and partnership between State and
private actors.
Climate change has become a direct macroeconomic risk for India
Sustaining India’s growth is no longer just about fiscal prudence or trade liberalisation. Climate
change has emerged as a direct macroeconomic risk. For India, it is not a distant possibility
but a present reality: extreme weather events, rising sea levels, droughts, and floods already
affect agricultural productivity, food and water security, public health, and infrastructure. Air
pollution, land degradation, water scarcity and quality compound these risks, reducing growth
potential, straining fiscal balances, and deepening poverty and inequality.
Historical emissions and trade barriers magnify India’s vulnerability
The developed economies relied on fossil fuels for two centuries, but now press developing
nations to decarbonise rapidly through untested pathways. These same countries maintain
higher per-capita emissions and, in some cases, continue investing in fossil fuel extraction and
use, as seen in the recent U.S. oil approvals
1
. Global climate policymaking largely minimizes
the concept of historical responsibility, ignoring the cumulative emissions debt owed to the
Global South. India, home to 18% of the world’s population, has contributed just 4% of
cumulative emissions since 1850, yet bears disproportionate climate impacts.
Carbon tariffs and energy imports reduce India’s competitiveness
Between 2000 and 2024, average tariff rates declined significantly, India’s from 48.9% to
17.3%, China’s from 16.4% to 8.3% (WTO 2024). At the same time, non-tariff measures
(NTMs), especially climate-related ones, surged. Over 26,000 trade and investment restrictions
were imposed globally between 2020 and 2024 (Global Trade Alert 2024). For example, the
EU’s Carbon Border Adjustment Mechanism (CBAM) and Deforestation Regulation (EUDR)
could affect nearly USD 9.5 billion of Indian exports, around 12.9% of India’s total shipments
1 U.S. oil approvals: Recent U.S. oil approvals refer to government decisions allowing new or expanded oil drilling and
infrastructure, reflecting a short-term focus on energy security and price stability, even in the light of long-term climate concerns. 4
Introduction Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
to the EU (Economic Survey 2024–25). These measures, while framed as environmental
safeguards, act as protectionist tools that hinder export-led growth in emerging economies.
Energy dependence adds another layer of vulnerability. While the country has made strong
progress in energy efficiency and diversification of supply sources, a significant share of its
energy needs is still met through imports, exposing the economy to fluctuations in global fuel
prices and supply disruptions.
India’s aspirations are shifting, from poverty alleviation to developed-nation status
Unlike China, which rose during a wave of globalisation, India’s rise is unfolding amid
“slowbalisation”, characterised by fragmented supply chains, shifting tariffs, and rising
geopolitical risks. In this uncertain environment, India’s aspirations are evolving. Under the
banner of ‘Viksit Bharat @2047’, the nation seeks to enhance its goal from poverty alleviation
to full-fledged developed-country status by its centenary of independence. This is not just
an economic ambition but a societal one: to achieve prosperity in a democratic, federal, and
culturally diverse context while staying within ecological limits.
8India is embarking on a development journey with no historical precedent, seeking to
become a developed, high-income economy by 2047 (Viksit Bharat), the centenary
of its independence, while also achieving Net Zero emissions by 2070.
8Unlike past industrial revolutions that relied heavily on fossil fuels, India aims to
lift hundreds of millions into higher-income and better-quality livelihoods while
simultaneously bending its emissions trajectory downward.
8With per-capita emissions of about 3 tonnes of CO₂, less than half the world average
and a fraction of advanced-economy levels, and a cumulative share of roughly four
percent of global emissions since 1850, the transition reflects both constrained carbon
space and extraordinary ambition.
8Unlike fossil-fuel-led industrialisation elsewhere, India’s energy transition is bounded
by acute land and water scarcity. Limited per-capita land availability (0.23 ha) and
widespread water stress mean clean energy expansion directly competes with food
security, livelihoods, and ecosystems, a constraint not faced by early industrialisers.
8 India’s Net Zero pathway requires large-scale investment in public goods and frontier
technologies, including resilient grids, water systems, CCUS, green hydrogen,
offshore wind, SMRs, and long-duration storage, many of which remain commercially
unviable without international finance and risk-sharing, reinforcing climate action
as a global public good under Common But Differentiated Responsibilities and
Respective Capabilities (CBDR–RC). 5
Introduction Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
There are concerns that large-scale investments toward Net Zero could divert resources
from development needs such as health, education, and social infrastructure. However, the
analysis indicates that climate action need not come at the expense of development priorities.
Investments in clean energy, resilient infrastructure, and low-carbon technologies can generate
quality jobs, enhance energy security, and improve public welfare, thereby reinforcing rather
than competing with the country’s broader development objectives.
Toward a Green, Inclusive, and Developed India
Achieving the Viksit Bharat vision will require sustained high real GDP growth (INR terms)
of 7-8% annually over the next two decades. But this trajectory is complicated by external
shocks, global climate commitments, and fast-evolving technologies. India’s development
pathway must therefore reconcile two imperatives: sustaining growth and delivering on Net
Zero commitments.
To steer this path, NITI Aayog set up an Inter-Ministerial Working Group (IMWG) to analyse
the macroeconomic implications of India’s Net Zero transition. Its mandate is to model how
India can simultaneously achieve high growth, create jobs, maintain fiscal stability, and
safeguard trade competitiveness, while advancing towards Net Zero. The IMWG’s scope of
work includes:
Examine different GDP growth trajectories and structure of the economy consistent
with India’s Viksit Bharat and other developmental goals.
Explore the impact of Net Zero Scenarios on GDP, employment, income distribution,
Current Account Deficit, Tax revenues, Trade aspects etc using various analytical
tools.
Examine the impact of various GDP scenarios and population projections on total
energy demand.
Examine the institutional/regulatory frameworks at national and state level required
to drive the transition in a coordinated manner.
By integrating fiscal, trade, energy, and employment considerations into a unified framework,
the IMWG’s work will help shape India’s macroeconomic roadmap. It will provide policymakers
with the evidence base to ensure that India’s journey to Net Zero is not only environmentally
responsible, but also economically resilient and socially inclusive. 2
MACROECONOMIC
LANDSCAPE OF
INDIAN ECONOMY 8Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
2
Macroeconomic Landscape of
Indian Economy
This chapter examines the macroeconomic landscape of India’s development from 2015 to
2025, focusing on growth trends, sectoral composition, labour productivity, public investment,
and fiscal health. It also highlights the growing role of energy transition in shaping these
dynamics. The chapter also underscores the structural reforms and infrastructure push that
have underpinned India’s emergence as a global economic engine.
2.1 India’s Growth and Global Standing
India, with an average annual real GDP growth rate of approximately 7.8% between 2015
and 2025 in nominal terms
2
, contributed around 15% to global GDP growth during this
period, positioning it firmly among the top three engines of global economic expansion
alongside China and the United States (IMF 2025; World Economics 2024). This performance
stands out not just for its scale but also for its resilience, achieved in a decade marked
by geopolitical conflicts, pandemic-related disruptions, and volatile commodity markets. In
contrast, many advanced and emerging economies experienced slower, more uneven recoveries.
India’s sustained expansion thus became a key pillar of global economic resilience and
recovery. Notably, this period also marked the beginning of India’s energy transition, a shift
toward renewable energy and sustainable infrastructure that is reshaping key macroeconomic
parameters.
India’s economic ascent has fundamentally reshaped its global standing. As of April 2025,
India, with a GDP of USD 4.18 trillion, had surpassed Japan to become the world’s fourth-
largest economy (IMF’s World Economic Outlook Report of April 2025). On a purchasing
power parity (PPP) basis, it ranks third globally, behind only China and the United States (IMF
WEO 2025). These milestones reflect India’s expanding domestic market, deepening industrial
base, and a structural shift toward innovation and productivity-led growth (see figure 2.1).
2 10-year Compound Annual Growth Rate (CAGR) of real GDP over FY15–FY25 being 6% and average growth rate excluding
COVID years of FY21 and FY22 being 7.1% between FY15–FY25 9
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
China India USA UK France
Share of 10-year growth (2015-2025)
0%
5%
10%
15%
20%
25%
30%
35%
Figure 2.1: Country-wise contribution to global GDP growth
Source: World Economics 2024
Services-Led Growth
India’s economy remained service-led from FY2014-15 to FY2023-24. In FY2014–15, the
services sector accounted for 52.4% of India’s Gross Value Added (GVA), surpassing both
agriculture (16.5%) and industry (31.1%). Almost a decade later, services remain dominant,
contributing 54.9% of GVA by FY2024–25, while agriculture’s share fell only modestly to
14.4% and industry remained stable (MoSPI, 2025). This reaffirms services-led growth (see
figure 2.2).
AgricultureIndustryServices
% Share in GVA (Constant prices)
2014-152023-24
0%
10%
20%
30%
40%
50%
60%
Figure 2.2: Sectoral share in Gross Value Added for India (2014-2024)
Source: National Accounts 2025 (MoSPI) 10
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Uneven Productivity Across Sectors
India’s labour market reveals persistent productivity divergence with wide sectoral output
divides. As reported by Periodic Labour Force Survey (PLFS) 2023-24, agriculture employed
46.1% of the workforce but produced only 14.7% of Gross Value Added (GVA). Services
generated 54.6% of GVA with just 29.7% of employment, while industry accounted for 30.8%
of GVA with 24.1% of jobs (MoSPI 2025). This imbalance means nearly half the workforce
remains concentrated in a low-productivity agricultural sector, producing only one-seventh
of national output.
Services Far Outpace Agriculture
The productivity differential across sectors is wide and persistent. In 2014–15, agriculture
accounted for nearly half of employment but less than 18% of GVA (World Bank; RBI, 2025).
By 2023, although agricultural productivity had improved, with GVA per worker rising to
about USD 2,029, output per worker in industry and services was much higher, estimated
at USD 6,100-8,961. This suggests that a single worker in services produces three to four
times the output of a farm worker, an imbalance that continues to shape India’s dual economy
(World Bank, 2025).
Low Female Labour Force Participation
Only 35 percent of women participated in India’s labour force in 2023-24, a level lower than
in many emerging economies (PLFS 2023-24). The recent increase in female labor force
participation was driven by gains in rural areas, with only modest progress in urban areas.
Women in urban areas are less likely to participate in the labour force than women in rural
areas across all age groups and levels of education.
2.2 Structural Transformation: India in Global Context
In the international context, India’s employment pattern stands out, reflecting a structural
transformation in progress. While India’s service sector is globally competitive - particularly
in export-oriented business and IT services - it has limited capacity to absorb surplus rural
labour at scale. A few international perspectives are given below:
China underwent dramatic labour reallocation within a generation. In 2005, it
employed 44.8% of its workforce in agriculture which contributed about 11.5%
of GDP, similar to India’s 2023 profile. By 2023, only 22.3% of Chinese workers
remained in agriculture, contributing only 6.9% of GVA. Over the same period,
industry grew to employ 32% of the workforce and generate 36% of GDP, while
services accounted for over half of both output and employment (World Bank 2024;
Our World in Data 2024). 11
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Indonesia followed a similar trajectory: from 44% of employment in agriculture in
2005, it declined to about 29% by 2023, with agriculture contributing just 12.5% to
GDP. Services employed around 49% of Indonesian workers and generate over 40%
of GDP, demonstrating an effective transition into labour-intensive manufacturing
and services (World Bank 2024).
Brazil represents a largely transformed middle-income economy. In 2023, agriculture
employed just 8% of the workforce and contributed around 6% to GDP. Over 70% of
Brazil's employment was in services, and nearly 20% in industry (World Bank 2024).
The United States and Germany exemplify advanced economies, where agriculture
employed less than 2% of the workforce and contributed under 1% to GDP. In both
countries, services generated over 70–80% of GDP and employment (BLS 2024;
Eurostat 2024).
Comparatively, India’s sectoral transition is still a work in progress. It continues to show a
significantly higher farm employment share than that of some middle-income countries. While
its service sector is globally competitive and output-dominant, it has limited capacity to absorb
surplus rural labour. Meanwhile, manufacturing’s share of GVA (about 18% as of 2023-24) is
below that of China (~25%) and Vietnam (~24%). This is a key reason India’s productivity
growth has yet to match that of its Asian peers.
Interstate Divergence
There is also a large productivity and income gap across states. In 2023, states such as
Maharashtra, Gujarat, Karnataka, Tamil Nadu, and Delhi accounted for 26% of India’s
population and contributed ~44% of its GDP (UIDAI, 2023; RBI, 2023). In contrast, states
such as Uttar Pradesh, Bihar, Madhya Pradesh, and Rajasthan accounted for 38% of India’s
population but only 19% of GDP. As with many developing economies, India exhibits regional
differences in development levels; sustained convergence across states would further strengthen
overall national growth.
Macroeconomic Implications
This productivity divergence has critical macroeconomic implications. The limited reallocation
of labour from agriculture to high-productivity sectors such as manufacturing and modern
services dampens aggregate productivity gains and household income growth. While services
have expanded its share in output, its employment intensity remains modest. At the same
time, industrial employment has been static, reducing the sector’s historical role as a conduit
for rural-to-urban mobility and formal job creation. There is a need for more job-intensive
manufacturing growth. 12
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Structural Reforms and Growth Enablers
The last decade has seen India initiate a series of bold structural reforms aimed at accelerating
sectoral transformation and boosting competitiveness. The implementation of the Goods and
Services Tax (GST) unified India’s domestic market and reduced transaction costs. The Make
in India initiative, combined with the Production Linked Incentive (PLI) scheme, sought to
expand domestic manufacturing across critical sectors like electronics, pharmaceuticals, and
solar modules, offering fiscal incentives tied to output. The Skill India mission was launched
to upskill the workforce and better align labour supply with emerging sectoral demand, while
Digital India expanded digital infrastructure and service delivery across rural and urban
India alike. Together, these reforms laid the foundation for deeper industrialisation, broader
formalisation, and smoother labour mobility. The impact of these structural efforts is visible
in the rapid growth seen in FY25 and H1FY26. India remains the world's fastest growing
large economy by all estimates of World Bank, IMF, etc, not only now but for the next few
years even in turbulent times. This is a result of the decisive policy shift toward enabling
productivity-led, employment-generating growth across sectors.
2.3 Infrastructure-Led Growth Strategy
Infrastructure has emerged as the cornerstone of India’s growth strategy over the past
decade, fueling connectivity, productivity, and inclusion across sectors. Recognising the
high multiplier effect of capital expenditure on output, employment, and private investment,
the Government of India substantially increased public infrastructure investment. This push
proved critical when the private sector was deleveraging or facing uncertainty, most notably
during the pandemic.
Between FY2016–17 and FY2025–26, public capital expenditure more than tripled, rising
from INR 4.5 lakh crore (2.9% of GDP) to INR 15.5 lakh crore (4.3% of GDP), highlighting
a deliberate shift towards infrastructure-led growth (Union Budget 2025) (See Fig 2.3).
Complementing this spending thrust, institutional reforms like the creation of the Infrastructure
Finance Secretariat aimed to crowd in private capital and improve project execution. 13
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Efective Central Government Capital Expenditure (% of GDP)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Figure 2.3: Effective Capital Expenditure (% of GDP)
Source: Union Budget 2025, Budget at a Glance
Infrastructure Outcomes: Capacity Creation Across Sectors
This surge in capex translated into tangible capacity creation across physical, digital, and
social infrastructure:
Power generation: Installed electricity capacity rose from 303 GW (2014–15) to
467.9 GW (2024–25), enhancing grid reliability and access (CEA 2025).
Renewables boom: Renewable capacity jumped ~ 6.5 times, from 33 GW (2014–15)
to ~ 220 GW (MNRE 2025).
Roads and highways:
National highways expanded by over 60% from 91,287 km to 1,46,204 km
State highways rose from about 1,00,000 km to 1,79,535 km
India’s total road network reached over 6.3 million km, second only to the US
(MoRTH 2025).
Railways: Track length increased from 1,26,366 km to 1,32,310 km, with 97% of
broad-gauge routes electrified. Introduction of 136 Vande Bharat trainsets enhanced
intercity mobility (Indian Railways 2025).
Airports: Operational airports rose from 132 to 149, with Ude Desh ka Aam Nagrik
(UDAN) scheme, expanding regional air connectivity (MoCA 2025).
Ports: Major port capacity expanded from 1,359 MTPA to about 1,800 MTPA,
supporting India’s rising trade throughput (MoPSW 2024). 14
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Urban mobility: Metro rail network expanded from about 250 km in 5 cities to
over 930 km in 21 cities, with over 1,500 km under construction (MoHUA 2025).
Digital infrastructure:
BharatNet connected 210,000 gram panchayats with 1.5 million km fibre (DoT
2025).
Broadband subscribers grew from 61 million to more than 900 million (TRAI
2025).
UPI adoption surged from 0 in 2014 to more than 14.3 billion transactions per
month in 2025, worth over INR 250 lakh crore annually (NPCI 2025).
Financial inclusion and logistics:
Jan Dhan accounts increased from fewer than 15 crore to more than 52 crore.
FASTag adoption rose to over 7 crore users, covering 97% of NH tolling.
1,400 km of Dedicated Freight Corridors (DFCs) became operational,
significantly reducing freight transit times.
Strategic and Inclusive Infrastructure Build-out
India’s infrastructure build-out is not merely quantitative, it is also strategic, inclusive, and
digitally integrated. These developments have reduced logistics costs, improved access to
markets and services, and facilitated business operations. The synergy of transport, energy,
and digital connectivity has laid the groundwork for productivity-driven growth, particularly
in Tier 2–3 cities and rural areas.
Climate-oriented public investments (e.g., in solar parks, grid upgrades for renewables)
have expanded, dovetailing with the broader infrastructure push. Investments in non-fossil
energy are not only an environmental milestone but also a macroeconomic one, as the
transition strengthens energy security and creates new growth industries, such as solar panel
manufacturing and battery storage, contributing to sustainable development. India now ranks
3rd worldwide in solar capacity and 4th in wind capacity, demonstrating global leadership in
the clean energy economy.
Fiscal Strategy and Debt Prudence
What makes India’s fiscal strategy stand out is its combination of infrastructure ambition with
debt prudence. While many advanced and emerging economies saw steep rises in general
government debt post-2008 and again after the pandemic, India’s General Government debt-
to-GDP ratio remained stable, from 82.4% in 2005 to 81.3% in 2024 (IMF Debt Database). 15
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
In contrast, Japan’s debt rose from 174.6% to 236.7%, the U.S. from 65.6% to 120.8%, China
by over 200%, and the U.K. by more than 145% over similar periods (See Fig 2.4).
India’s moderation stems from sustained growth, a favourable growth-interest rate differential
(Economic Survey 2022–23), and the predominance of rupee-denominated domestic liabilities.
External public debt is just 2.8% of GDP, while the weighted average residual maturity of
dated securities is nearly 12 years, limiting rollover and currency risks.
Japan UK France USA BrazilChina IndiaGermany
General Government Debt (as % of GDP)
2005 2015 2023
0%
50%
100%
150%
200%
250%
300%
Figure 2.4: General Government Debt (% of GDP)
Source: IMF, Global Debt Database
Fiscal Consolidation and Quality of Spending
India’s fiscal consolidation is not just numerical, it is structurally sound and quality-enhancing.
After peaking at 9.2% of GDP in FY2020–21 during the pandemic, India’s fiscal deficit has
declined steadily to 5.8% in FY2023–24, with a glide path to 4.4% by FY2025–26. More
importantly, this consolidation reflects a qualitative shift, away from revenue expenditure
toward asset-creating capital outlays. The revenue deficit dropped from 7.3% to 2.9%, while
the effective revenue deficit, which excludes capital grants, fell from 5.9% to just 1.1% of
GDP, signalling a deeper structural correction (see figure 2.5).
By contrast, the combined gross fiscal deficit of the Centre & states increased from 2.3% in
FY2018-19 to 3.2% in FY2023-24, reflecting higher spending by the state governments (RBI
2025). 16
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Deficit trends (% of GDP)
Fiscal deficit Revenue deficit Effective revenue deficit
Figure 2.5: Deficit Trends as % of GDP, 2016–2026
Source: Union Budget 2025
Inflation Management and Monetary Stability
Throughout this period, India benefited from a favourable growth-inflation dynamic. Inflation
averaged between 4–6%, barring temporary supply-side shocks, while the Reserve Bank
of India (RBI) maintained a prudent monetary stance to ensure a growth-friendly interest
rate environment. Despite global monetary tightening cycles, domestic inflation remained
contained due to proactive food price management, energy subsidies during global spikes, and
the moderating impact of renewables in the energy mix. This monetary stability, coupled with
high nominal GDP growth, sustained a favourable growth-interest rate differential, reinforcing
debt sustainability.
Revenue Mobilization and Tax Reform
Robust tax revenue growth has been central to this fiscal turnaround. India’s gross tax revenue-
to-GDP ratio increased from 11.1% in FY2016–17 to about 12% in FY2024–25. In absolute
terms, gross tax collections more than doubled, from INR 16.5 lakh crore in FY2014–15
to over INR 36.5 lakh crore in FY2024–25 (Revised Estimates, RE). This growth reflects
post-GST formalisation, better compliance, and digital enforcement mechanisms. Notably,
the share of direct taxes rose from about 51% to 56% of gross tax revenue, indicating a more
progressive tax structure and expanding formal incomes.
Debt Sustainability and Investment Protection
India’s fiscal consolidation did not compromise investment or stability. Compared to global
benchmarks, India’s overall debt burden remains moderate. Total debt-to-GDP stood at about 17
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
171% in 2024, well below the levels seen in China, France, the UK, and the US (IMF Debt
Database). Government debt, at 83% of GDP, mirrors China’s, but what distinguishes India
is its low private debt, at only 98.4% of GDP versus over 150% in most advanced economies
(See Fig 2.6). This conservative leveraging by households and firms adds a vital cushion to
financial stability, especially in uncertain global conditions.
0%
50%
100%
150%
200%
250%
300%
350%
Brazil China France Germany India*IndonesiaUnited
Kingdom
United
States
Govt Debt Private Debt
Total Debt (as % of GDP)-2023
Figure 2.6: Total Debt as % of GDP for key economies (2023)
Source: IMF Global Debt Database
2.4 Integrated Strategy: Infrastructure and Fiscal Management
India’s strategy of combining an aggressive infrastructure push with disciplined fiscal
management has proved effective. Public investment was deployed as a counter-cyclical
tool, not a structural imbalance. Institutional reforms, such as the Fiscal Responsibility and
Budget Management (FRBM) Act, GST-led revenue buoyancy, and real-time digital budget
management, enabled high-impact spending without compromising debt sustainability.
External Debt and Sustainability
India’s external debt is low, long-term, and well-covered. As of FY2023–24, India’s total
external debt stood at just 18.7% of GDP, among the lowest in its peer group. Short-term
debt comprised only 18.5% of total external debt, and the short-term debt-to-forex reserves
ratio was just 19%. Importantly, foreign exchange reserves cover 97% of total external debt,
underlining external sustainability. Most borrowings are long-term and concessional in nature,
limiting rollover and currency risks. 18
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Investment-Led Growth Anchored in Structural Rebalancing
India’s strong external macroeconomic position is underpinned by a balanced investment-
savings framework that enabled high growth without jeopardising external sustainability.
India’s growth momentum during FY2015–24 was supported by a healthy investment rate
averaging at about 32% of GDP, (MosPI 2025). The quality and composition of investment
improved, reflecting India’s pivot toward infrastructure, energy transition, and digital
connectivity. Significant potential remains, especially compared with China, which recorded
an investment rate of 41.5% of GDP over the last two decades (World Development Indicators,
World Bank).
Domestic Savings and Composition Shifts
On the savings side, gross domestic savings averaged around 31% of GDP in FY2015–25.
The composition of savings has improved significantly:
Net Household financial savings rose from INR 6.4 lakh crore (current prices) in 2011-
12 to INR 15.5 lakh crore, enabled by financial inclusion (Jan Dhan), digital access
(UPI), and mutual fund/SIP expansion (MoSPI, 2024). According to the Economic
Survey 2022–23, digitalization and formalization improved the efficiency of financial
intermediation, channeling household savings into productive investments. This
qualitative improvement in savings means a larger portion of savings is available
to fund infrastructure and industry, rather than sitting idle in unproductive assets.
Corporate savings improved as deleveraging reduced interest outflows and rising
profitability boosted retained earnings (Economic Survey 2023–24).
Government dissaving narrowed with the fiscal consolidation path reducing revenue
deficits, from 7.3% in FY2020–21 to 2.54% in FY2023–24 (Union Budget 2024–25).
External Balance and Current Account
This internal balance meant that India’s investment needs were largely financed domestically,
with only a modest reliance on foreign borrowings. As a result, the current account deficit
(CAD) averaged a sustainable 1.1% of GDP over FY2015 -24, much lower than the 2.5–3%
range seen during earlier high-growth periods (RBI BoP Data; Ministry of Finance CAD
analysis 2024). In FY2023–24, CAD fell below 1%, reflecting stronger net exports of services,
remittances of over USD 125 billion, and improved terms of trade.
Energy Dependence and Transition
Even so, India remains exposed to global energy price fluctuations, it imports 85% of its oil
and 50% of its gas, which adds pressure to the trade deficit and inflation (IEEFA 2024). This 19
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
made the macroeconomy vulnerable to oil price shocks in the 2010s. The past decade’s pivot
to renewable energy has gradually mitigated this risk. By mid-2025, non-fossil sources already
accounted for roughly half of India’s installed power capacity. In the long run, a greener energy
mix should improve the current account and cushion the economy from commodity shocks.
FDI as a Growth Driver
India has established itself as a top global investment destination. Between FY2015–16 and
FY2024–25, the country received USD 748.8 billion in cumulative gross FDI inflows, more
than double the USD 308.4 billion during FY2005–06 to FY2014–15 (DPIIT; Economic
Survey). FDI inflows averaged about 2.5% of GDP during FY2015–25, up from about 2.2%
in the previous decade. The peak inflow was USD 83.6 billion in FY2021–22 (PIB, 2022),
while the average annual inflow over the past decade stood at about USD 68 billion, well
above peer economies like Brazil and Indonesia. This sustained performance, even amid
global volatility, reflects India’s macroeconomic stability, improving ease of doing business,
and strong long-term growth prospects.
Foreign Exchange Reserves and Rupee Stability
India’s foreign exchange reserves have more than doubled, from about USD 304 billion in
FY2013–14 to over USD 646 billion by FY2023–24, making them among the largest globally
(Economic Survey 2023-24). This buffer enabled smooth external adjustment even in periods
of global volatility. As India reduces energy import dependence via domestic renewables,
pressure on reserves and exchange rate volatility may ease further.
Over the past decade, the Indian rupee exhibited far lower volatility compared to the previous
one. In FY2023–24, the rupee’s coefficient of variation was just 0.58, reflecting macroeconomic
credibility and improved external positioning. Despite bouts of global dollar strength, the
NEER (Nominal Effective Exchange Rate) remained broadly stable, while the REER (Real
Effective Exchange Rate) appreciated modestly, indicating that India retained competitiveness
without excessive depreciation.
Capital Markets and Financial Deepening
India’s financial markets have transformed over the past decade, emerging as some of the best-
performing and most resilient globally. The BSE market capitalization surged to over 136%
as share of GDP by December 2024, crossing USD 5 trillion for the first time. The Nifty 50
delivered a 10-year CAGR of 8.8% in USD terms, outperforming most emerging markets and
rivaling global benchmarks like the Dow Jones (Economic survey 2024-25). This performance
reflects robust corporate profitability, policy reforms, expanding investor participation, and
world-class digital financial infrastructure. 20
Macroeconomic Landscape of Indian Economy Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Equity market participation broadened significantly through UPI, Jan Dhan, and mutual fund
SIPs, enabling financial intermediation to play a stronger role in channeling household savings
into productive investments
Conclusion: Resilience and Opportunity
Over the past decade, India has shifted from being seen as a structurally constrained economy
to one that is far more stable and reform-oriented. Strong public investment, prudent
fiscal and monetary management, and rising private capital inflows have together opened
space for a new phase of productivity-driven and more inclusive growth. India’s decision to
lean into the energy transition, supported by deeper financial markets and a sizable domestic
savings pool, has also turned climate policy into a macroeconomic opportunity rather than
just a cost. Taken together, these factors mean that India is now in a position to aim for high
growth that is not only more durable, but also more fiscally responsible, competitive in global
markets, and less burdensome on the environment. 3
MACROECONOMIC
MODELLING:
APPROACH AND
RESULTS FOR INDIA’S
NET ZERO PATHWAYS 22Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
3
Macroeconomic Modelling:
Approach and Results for
India’s Net Zero Pathways
This chapter outlines the macroeconomic modelling framework used to assess India’s Net
Zero transition. It explains the approach, assumptions, and scenario design, and presents the
results on GDP, investment, trade, fiscal balances, labour markets, and sectoral shifts under
different financing and policy pathways.
Achieving India’s development objectives, including a high-income status by 2047 with energy
security while reducing emissions to Net Zero by 2070 will require a profound transformation
of the economy. The structural changes needed to boost economic growth and achieve low-
carbon transition will reshape not only the energy system, but also patterns of production,
consumption, trade, and investment, generating both opportunities and adjustment costs. A
holistic assessment of these impacts is essential for informing policy choices that balance
growth, equity, and sustainability.
Given the complexity of these interactions, this chapter applies Computable General Equilibrium
(CGE) models, which capture the behaviour of households, firms, and government, and links
them through markets for goods, services, factors (labour and capital), and energy. By reflecting
how resources are reallocated across the economy, driven by substitution possibilities between
capital, labour, and diverse energy sources, CGE models provide a robust framework for
analysing the macroeconomic dimensions of India’s development and Net Zero transition.
This chapter assesses the macroeconomic, sectoral, and employment implications of India’s
development pathways using two CGE modelling frameworks: the NCAER model and the
World Bank’s MANAGE model. The models simulate different development and financing
scenarios and trace their effects on GDP growth, employment, income distribution, external
balances, trade flows, and fiscal outcomes. By integrating sectoral activity, factor markets, and
energy use within a consistent economy-wide framework, the models provide a comprehensive
assessment of India’s development pathways.
A first projection, referred to as the Reform Scenario, is developed using the Long-Term
Growth Model (LTGM)
3
, a supply-side growth projection tool that links GDP growth to Total
3 Long Term Growth Model (LTGM) is an Excel-based tool to analyze long-term growth scenarios building on the celebrated
Solow-Swan Growth Model. 23
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Factor Productivity (TFP), the human capital index, labour force participation, the incremental
capital-output ratio (ICOR), and investment rates. The Reform Scenario is calibrated to align
with India’s aspiration of achieving a USD 30 trillion economy by 2047, underpinned by
ambitious assumptions of higher female labour force participation, substantial improvements
in human capital, sustained investment, and accelerated Total factor productivity (TFP)
4
.
The GDP trajectory produced through this LTGM exercise provides the macroeconomic
baseline against which the impacts of the Net Zero energy transition are assessed using the
CGE models.
Practically, the real GDP growth rates from the LTGM are used as an input for the energy
system model to estimate energy mix and investment needs in Current Policy Scenario and
Net Zero Scenario. Then, the inputs from LTGM and energy models are combined to create
long-term growth scenarios in CGE framework. The implications for GDP growth, income
and consumption, structural change and employment, and other macroeconomic aggregates
such as public debt and the current account deficit are analyzed in the following sections.
3.1 Methodology and assumptions
Energy Model Scenario definition
Starting from the real GDP growth rates generated using Long-Term Growth Model (LTGM),
the study developed two energy scenarios using The Integrated MARKAL-EFOM System
(TIMES) and India Energy Security Scenarios (IESS) which are discussed below:
Current Policy Scenario (CPS): The Current Policy Scenario represents a level
of effort that is realistically achievable based on historical trends and continuation
of current policies (as of 2023), thereby projecting ongoing trends in low-carbon
technology deployment.
Net Zero Scenario (NZS): The Net Zero Scenario reflects an ambitious pathway
aligned with India’s commitment to achieve Net Zero GHG emissions by 2070.
It incorporates both existing and additional policy measures to accelerate demand
electrification, enhance circularity, improve energy efficiency, promote the rapid
development of low-carbon technologies/fuels and encourage behavioural shifts.
These scenarios provide inputs to the CGE models, especially:
Additional investments required to provide the same energy services with lower
emissions.
Changes in the energy and power mix, and in energy expenditures and imports.
4 The trajectory rests on sustaining an investment rate near 34% of GDP through 2047, increase in female labour-force participation
toward high-income benchmarks (about 70%), and human-capital convergence toward developed-economy levels. Total factor
productivity (TFP) growth is assumed at 2.18% per year to 2035 (versus about 1.88% in 2010–2019), moderating to 1.88% by
2047. 24
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
The details of the scenarios and methodology are available in the Scenarios towards Viksit
Bharat and Net Zero: Sectoral Insights (Vol.3-8), Financing Needs (Vol. 9) and Study report
on Scenarios towards Viksit Bharat and Net Zero: An overview (Vol. 1) reports.
Investment and Financing
The Scenarios towards Viksit Bharat and Net Zero: Financing Needs (Vol. 9) report estimates
investment requirements under the Current Policy Scenario and the Net Zero Scenario. The
report projects cumulative investment needs of USD 14.7 trillion under the Current Policy
Scenario and USD 22.7 trillion under the Net Zero Scenario by 2070, indicating that the
Net Zero Scenario is more capital-intensive. The macroeconomic implications of this higher
investment requirement are analysed separately in this report.
Macroeconomic model scenario definition
The MANAGE model
5
(World Bank) explores seven macroeconomic Net Zero Scenarios
each combining different sources of financing and complementary policies (See Table 3.1
for summary) while the NCAER model explores only one Net Zero Scenario. Both models
(MANAGE and NCAER) have Current Policy Scenario which aligns with Energy Model-
Current Policy Scenario (described earlier). The macro-economic scenarios are summarised
below:
8Current Policy Scenario: Current Policy Scenario incorporates long-term
macroeconomic assumptions and energy projections, serving as reference cases in
both MANAGE and NCAER model.
8Net Zero Scenario: Net Zero Scenario quantifies the macroeconomic impacts of
India’s pathway consistent with achieving Net Zero emissions by 2070, while keeping
all other growth assumptions unchanged.
MANAGE model Net Zero Scenarios
Net Zero Scenario-1 (NZdom) & Scenario-2 (NZfor)
The two scenarios represent the transition being financed through domestic savings (NZdom)
or through foreign capital inflows (NZfor), without additional subsidies or redistribution
mechanisms.
6
The two scenarios represent two extreme cases in which funding is either
completely through domestic or foreign sources. These are theoretical constructs assumed
for the purpose of modelling. Reality will be somewhere between these two extremes.
5 MANAGE-World Bank is a Computable General Equilibrium (CGE) model developed by a network of CGE modelers to support
World Bank teams and clients in conducting macroeconomic analyses across a broad range of topics. It is a single-country, open-
economy CGE model featuring multiple sectors, institutions, and factors of production.
6 These scenarios are conservative as they assume there are no co-benefits from using low-carbon technologies, beyond energy
savings and reduced GHG emissions; they ignore benefits from lower air pollution, lower dependency to energy import and
associated volatility, or lower congestion in urban areas, all of which could further enhance economic and welfare outcomes. 25
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Policy variants of Scenario-1 and Scenario-2 with Subsidies: Scenario-3
(NZdomSub) and Scenario-4(NZforSub)
The scenarios NZdomSub and NZforSub represent the same scenarios as NZdom and NZfor,
but adding renewable energy (RE) subsidy financing through domestic and foreign sources,
respectively. These subsidies improve the affordability of electricity for consumers and
industrial users in the Net Zero Scenario by offsetting the electricity price increases associated
with the transition. Under these scenarios, electricity prices in the Net Zero Scenarios were
assumed to remain at the levels of Current Policy Scenario.
Scenario-5 with Revenue redistribution (NZforRD)
The scenario NZforRD introduces a redistribution mechanism designed to ensure that the
poorest households are protected during the transition to a Net Zero economy. In this scenario,
financial transfers maintain the income and consumption levels of the bottom 40% of
households, ensuring they are not worse off compared to Current Policy Scenario. It promotes
social equity, helping ensure the Net Zero transition is fair and inclusive. While additional
investments are financed domestically, the transfers are financed through an expansion of the
fiscal deficit, supported by additional external borrowing.
Variants of Net Zero Scenario-1 and Scenario-2 with productive investment:
Scenario-6 (NZdom+) and Scenario-7(NZfor+)
More efficient and low-carbon technologies also tend to be more productive and deliver
co-benefits such as improved air quality (with health and labor productivity gains), greater
production reliability (with competitiveness gains), and reduced congestion (leading to higher
productivity in cities). However, the extent of these benefits is uncertain and not quantified in
the energy scenario. To capture these potential benefits and the uncertainty surrounding them,
scenarios are differentiated by whether the additional investments in the Net Zero Scenario
also generate such co-benefits, represented as additional output. In scenarios marked with a ‘+’
(e.g., NZdom+), co-benefits are included by asssuming that additional investments in the Net
Zero Scenario are productive: they contribute to the capital stock and have a positive output
effect (only the positive spin-offs on output are captured and not the actual co-benefits). In
contrast, in scenarios without co-benefits (e.g., NZdom), additional investments reduce GHG
emissions but do not contribute to capital formation in the model and do not generate economic
value
7
. As the reality is somewhere between these two extremes, these two types of scenarios
provide the upper and lower bounds of the potential impact of the transition towards Net Zero
emissions on GDP and economic growth.
7 The reduction in emissions and air pollution is likely to have long-term growth benefits by reducing the negative impact of air
pollution on labor productivity. Although the MANAGE-WB model can incorporate such mechanisms, the growth benefits of
lower air pollution are not included in the current analysis. 26
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Table 3.1: Summary of Net Zero Scenarios using World Bank and NCAER models
Benefits from incremental
investment in the Net Zero
Scenarios
Main source of
financing
Complementary measures
to facilitate the transition
Emission
reduction only
Output effect Domestic Foreign
RE
subsidy
Redistribution
NZdom✔ ✔
NZdom+✔ ✔ ✔
NZfor✔
✔
NZfor+✔ ✔ ✔
NZforSub✔ ✔ ✔
NZdomSub✔ ✔ ✔
NZforRD✔✔ ✔ ✔
NCAER✔
3.2 Results
3.2.1 Impact on GDP: Net Zero transition has limited impact on long-
term GDP growth but demands high investment.
In the Current Policy Scenario (CPS), India’s GDP is projected to grow at an average annual
rate of 7.4% during 2026–30, reflecting strong momentum. Growth moderates slightly to
~7% between 2030 and 2045, remaining robust enough to support India’s goal of attaining
developed-economy status by 2047. Beyond that, growth eases to about 5% in 2046–60 and
to 2.8% in 2060–70. Across both models (NCAER and MANAGE), the impact of the Net
Zero pathway on GDP growth is marginal. The economy remains resilient in all scenarios,
reaching roughly USD 6.8 trillion by 2030 and achieving high-income status in 2047 even
under Net Zero. Even with higher penetration of low-carbon technologies under the Net
Zero Scenario, the impact on real GDP growth remains limited. Real GDP growth rates
are endogenously determined and differ only marginally from the Current Policy Scenario,
irrespective of financing assumptions. This finding holds even when accounting for financing
uncertainties and the inclusion or exclusion of co-benefits from the low-carbon transition. (See
Figure 3.1). By 2047, India reaches USD 30–31 trillion across all scenarios (NCAER and
MANAGE), meeting the “Viksit Bharat” target. 27
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Y2030Y2047
Trillion USD
Trillion INR
Year
Nominal GDP
CPS NZS 0% 1% 2% 3% 4% 5% 6% 7% 8% Y2026-30 Y2031-35 Y2036-40 y2041-45 Y2046-50 Y2051-55 Y2056-60 Y2061-65 Y066-70 Year CPS NZS
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Real GDP growth rates (MANAGE)
CPSNZdom+NZdom
NZfor+NZforNZforSub
NZdomSubNZforRD
0
500
1000
1500
2000
2500
3000
3500
4000
2022
2028
2034
2040
2046
2052
2058
2064
2070
Real GDP levels
CPSNZdom+NZdom
NZfor+NZforNZforSub
NZdomSubNZforRD
0
5
10
15
20
25
30
35
(A)(B)
(C)(D)Real GDP Growth Rate (NCAER)
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.1: Impact of the Net Zero transition on GDP in various scenarios
(A) Real GDP levels (trillion INR) — MANAGE model
(B) Real GDP growth rates (%) — MANAGE model
(C) Real GDP growth rates (%) — NCAER model
(D) Nominal GDP — NCAER model 28
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
The incremental investment requirements of Net Zero affect GDP outcomes differently under
varying assumptions (See Figure 3.2). When additional investments are productive because
of co-benefits, they expand the capital stock, reduce emissions, and enhance output, leading
to positive growth effects, especially in foreign-financed pathways. By contrast, if these
investments are treated as unproductive (serving only emission reduction without any co-
benefit), GDP temporarily dips below Current Policy Scenario before recovering. The size
of this dip depends on the financing mix: under domestically financed Net Zero (NZdom),
GDP is lower than the Current Policy Scenario projections by up to 4.5% around 2046-50 at
its lowest point, while under foreign-financed Net Zero Scenario (NZfor), the decline from
Current Policy Scenario is limited to about 0.5%. This highlights the importance of financing
structure: mobilizing external capital such as FDI prevents pressure on domestic savings,
avoids crowding out private investment, and enlarges the transition budget. However, Foreign
financed scenario combined with renewable energy subsidies, can lead to overall positive
impact on GDP throughout in comparison to Current Policy Scenario, even if incremental
investment is treated as unproductive.
2022
2028
2034
2040
2046
2052
2058
2064
2070
All scenarios
NZdom+NZdomNzfor+
NzforNZforSubNZdomSub
NZforRD
-4.5%
-3.5%
-2.5%
-1.5%
-0.5%
0.5%
1.5%
2.5%
% deviation from CP
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.2: Net Zero Scenario GDP outcomes across financing channels
(deviation from the Current Policy Scenario in %) – (MANAGE model)
Caveat: These results exclude both negative externalities and positive co-benefits of climate
change. The negative impacts include reduced labour productivity or agricultural losses from
rising temperatures whereas the positive co-benefits include improvements in air quality and
health outcomes, which the model does not capture. The analysis also excludes the costs of 29
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
climate adaptation, and therefore reflects transition-related mitigation economic effects rather
than the full welfare impacts of climate change and climate action.
While there are concerns that large-scale investments toward Net Zero could divert resources
from pressing development needs such as health, education, and social infrastructure, the
analysis indicates that climate action need not come at the expense of development priorities.
Investments in clean energy, resilient infrastructure, and green technologies can generate
quality jobs, enhance energy security, and improve public welfare, thereby reinforcing rather
than competing with the country’s broader development objectives.
Key Messages
GDP resilience with high investment needs: Across all Net Zero Scenarios, GDP
growth is projected to remain broadly resilient. However, each pathway demands
very high investment and substantial capital mobilisation, particularly to scale up
nascent and emerging technologies.
Difference from Current Policy Scenario: Net Zero Scenario growth rates diverge
slightly from Current Policy Scenario, with GDP reaching USD 30–31 trillion by
2047 in all scenarios, meeting the Viksit Bharat target. Under the assumption of total
absence of co-benefit, GDP is lower by 0.5–4.5% below Current Policy Scenario
around 2046–50 before recovering.
Role of financing design: Foreign financing helps sustain growth by avoiding
domestic crowding-out, and when combined with RE subsidies, Net Zero Scenarios
even outperform Current Policy Scenario across the entire transition, even without
co-benefits. However, the foreign financing implications on Current Account Deficit
are discussed subsequently.
3.2.2 Impact on GDP components: In the Net Zero transition, domestic
financing reduces investment and consumption, while foreign financing
and productive investment support stronger outcomes.
In the Current Policy Scenario, GDP composition (Consumption, Investment and Net Exports)
evolves significantly between 2022 and 2070. The share of private consumption declines from
about 58% in 2025 to 52% by 2070, while the share of investment rises to sustain growth. This
trend is counterbalanced by increases in other components: the share of public consumption
increases from about 9% in 2025 to 14% in 2070, while the total investment (public+private)
share climbs from roughly 32% in 2025 to a peak of 36% by 2050, reflecting capital deepening,
before easing to 34% by 2070 as the economy matures (See Figure 3.3). 30
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
60%
50%
40%
30%
20%
10%
0%
2022 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070
GDP components (at constant 2012 prices)
Private consumption Public consumption Private investment
Public investment Net exports
Figure 3.3: GDP components (at constant 2012 prices) in the Current Policy Scenario (MANAGE).
Financing choices drive different macro outcomes. An increase in government borrowing
raises the demand for funds in the economy, reducing their availability for private firms. This
higher demand puts upward pressure on interest rates, which can crowd out private investment
and consumption. By contrast, external financing relaxes the domestic savings constraint, eases
interest-rate pressures, and supports higher investment with smaller consumption trade-offs.
Domestic financing, whether public or private, will either require an increase in savings to
finance new investment by forgoing consumption, or a shift of investment away from other
sectors towards Net Zero transition sectors. Foreign financing puts less pressure on the domestic
market but increased foreign capital inflows contributing to exchange rate appreciation and
impacts Current Account Deficit. Further, foreign exchange flows are also impacted by skewed
credit rating methodologies, which often penalise countries on narrow parameters, overlooking
strong fundamentals and a consistent record of external debt servicing.
Hence, scenarios relying on domestic financing (NZdom, NZdom+, NZdomsub) generally
exert pressure on investment compared to Current Policy Scenario (See Figure 3.4). This
effect is most pronounced between 2040 and 2050, when investment under NZdom falls about
5% below Current Policy Scenario. By contrast, scenarios with external financing (NZfor,
NZfor+, NZforSub, NZforRD) show an increase in investment. The main driver is the higher
real interest rate under domestic borrowing, which constrains access to affordable capital and
reduces investment.
In domestically financed net zero scenarios, relative to Current Policy Scenario, consumption
is lower driven by higher interest rates nudging household to save more. In the productive
investment cases (NZdom+, NZfor+), however, higher household incomes outweigh the drag
from higher interest rates, producing a net increase in consumption. 31
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Depending on the scenario, exports are lower by 2% (NZfor+) to 9% (NZdom) relative to
Current Policy Scenario, with the largest variation during 2040-2050 period, though pressures
ease in later years. These scenarios represent extreme scenarios with others falling within this
range. In case of imports, during 2040-50, imports are higher by 4% (NZfor+) compared to
lower by 7% (NZdom) relative to Current Policy Scenario. A detailed analysis of these trade
dynamics follows in the next section.-10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 2030 2035 2040 2045 2050 2060 2070 -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 2030 2035 2040 2045 2050 2060 2070 -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 2030 2035 2040 2045 2050 2060 2070 -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 2030 2035 2040 2045 2050 2060 2070 NZdom+ NZdom NZfor+ NZfor NZforSub NZdomSub NZforRD
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.4: GDP components (% deviation from CPS) (MANAGE) 32
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Key Messages
Shift in composition: In Current Policy Scenario, the share of private consumption
in GDP steadily declines (from 58% in 2025 to 52% by 2070), while public spending
and investment gain importance.
Role of financing: Under Net Zero Scenarios, outcomes differ across financing
pathways. Domestic financing lowers investment and consumption compared to
Current Policy Scenario due to higher interest rates, while foreign financing boosts
investment by easing pressure on domestic savings.
Rebalancing under Net Zero: Across all pathways, GDP components shift from
private consumption toward higher investment shares, underscoring the scale of
capital mobilisation required for achieving the 2047 high-income objective and the
low carbon transition.
3.2.3 Impact on Sectoral output and shares: Net Zero accelerates India’s
structural shift, expanding industry, especially clean energy and
construction, while agriculture and fossil-based manufacturing shares
decline.
Under Current Policy Scenario, the share of agriculture in GVA gradually declines, reflecting
the ongoing structural shift. Industry’s
8
share increases to about 33% by 2050 from 30.2%
in 2022 before stabilizing, while services remain the dominant sector, expanding to around
55% by 2050 and continuing to grow as India progresses toward a more advanced economy
(Figure 3.5).
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2022 20252030 20352040 2045 2050 20552060 20652070
Sectoral composition of value added
(at constant 2012 prices)
Agriculture Industry Services
Figure 3.5: GVA sectoral composition in Current Policy Scenario
(constant 2012 prices, MANAGE model)
8 Construction is included in Industry 33
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
The Net Zero transition has a marginal impact on the overall economic structure (captured
through sectoral GVA), with outcomes primarily driven by financing mechanisms. Two
opposing forces operate simultaneously: higher electricity prices in Net Zero Scenario relative
to Current Policy Scenario increases production costs, while stronger demand for electricity
and low-carbon technologies boosts industrial activity. Financing mechanism and productivity
of incremental finance also impact industrial outputs.
In domestically financed Net Zero Scenario (NZdom), higher interest rates amplify cost
pressures, resulting in 5.6% lower industrial output in 2045 relative to the Current Policy
Scenario (CPS). In contrast, foreign-financed NZ scenario (NZfor, NZfor+) benefit from
lower interest rates, but outcomes differ depending on the productivity of incremental finance:
industrial output is lower by 1.1% under NZfor relative to Current Policy Scenario, while it
is 2.3% higher under NZfor+ relative to Current Policy Scenario by mid-century.
Compared to industry, shifts in services and agriculture are more modest in Net Zero Scenarios
compared to Current Policy Scenario reflecting offsetting sub-sectoral dynamics. Within
services, some activities contract relative to Current Policy Scenario due to higher electricity
prices, most notably the “other services” sub-sector, but these declines are partially offset by
growth in air transport and abatement-related services. The agricultural sector shows a similar
pattern of internal adjustment: fisheries expand moderately, benefiting from lower petroleum
costs, while forestry faces pressure from rising land prices driven by increased demand for
land for biofuel production (Annex Figure B1).
Across all sectors, transition costs peak during 2040–2050 and are followed by recovery by
2060–2070, with foreign-financed scenarios consistently outperforming domestic-financed
ones. (See Table 3.2).
Table 3.2: Sectoral value added (% deviation from Current Policy Scenario, MANAGE model)
9
2030 2035 2040 2045 2050 2060 2070
Agriculture
NZdom+ 0.23 0.06 -0.47 -0.83 -0.94 -0.22 -0.57
NZdom -0.56 -1.59 -2.76 -3.50 -3.74 -2.62 -2.36
Nzfor+ 0.99 1.81 2.11 2.30 2.48 3.03 2.12
Nzfor 0.20 0.18 -0.13 -0.25 -0.15 0.80 0.46
NZforSub 0.16 0.35 0.55 1.01 1.48 2.01 1.04
NZdomSub -0.61 -1.42 -2.06 -2.19 -2.05 -1.44 -1.85
NZforRD -0.37 -0.89 -1.71 -2.32 -2.62 -1.84 -1.75
9 Colours represent the direction and magnitude of deviation relative to the Current Policy Scenario (CPS). Greener shades indicate
positive deviations, yellow denotes values close to CPS, and orange to red shades indicate negative deviations, with darker
colours reflecting larger absolute changes. 34
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
2030 2035 2040 2045 2050 2060 2070
Industry
NZdom+ 0.60 -0.09 -1.30 -1.96 -1.97 0.15 0.51
NZdom -0.64 -2.52 -4.49 -5.56 -5.64 -2.85 -1.72
Nzfor+ 2.06 2.71 2.42 2.32 2.52 4.09 3.69
Nzfor 0.82 0.31 -0.68 -1.10 -0.90 1.36 1.66
NZforSub 0.66 0.87 1.11 1.79 2.43 3.53 2.93
NZdomSub -0.84 -1.96 -2.70 -2.65 -2.29 -0.75 -0.57
NZforRD -0.25 -1.58 -3.34 -4.46 -4.75 -2.31 -1.39
Services
NZdom+ 0.12 -0.39 -1.23 -1.77 -1.87 -0.87 -1.18
NZdom -0.92 -2.42 -3.87 -4.76 -4.93 -3.27 -2.82
Nzfor+ 1.12 1.69 1.64 1.62 1.71 2.16 1.09
Nzfor 0.08 -0.30 -0.92 -1.23 -1.14 -0.02 -0.39
NZforSub 0.02 -0.08 -0.11 0.31 0.93 1.47 0.32
NZdomSub -0.99 -2.20 -3.05 -3.21 -2.89 -1.84 -2.18
NZforRD -0.69 -1.66 -2.85 -3.70 -4.01 -2.72 -2.45
The most pronounced sectoral impacts are observed in industry subsectors. By 2045, the share
of fossil fuel-based manufacturing, such as petroleum, is lower by about 1.1% compared
to Current Policy Scenario. Conversely, this decline is offset by growth in the construction
sector and in green energy industries, including electricity generation, distribution, and green
hydrogen, which together expand by around 1.5% in NZfor compared to Current Policy
Scenario (Annex Figure B1).
These patterns in GVA are mirrored in sectoral output dynamics. Under the domestically
financed Net Zero Scenario (NZdom), industrial output is lower by 6.4% and services output
is lower by 4.6% in 2045 relative to Current Policy Scenario. In contrast, the foreign-financed
Net Zero Scenario (NZfor+) supports sustained sectoral expansion, leading to 2.1% increase in
industrial output in 2045, relative to Current Policy Scenario, underscoring the role of financing
conditions in shaping transition outcomes (Table 3.3). 35
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Table 3.3: Impact of Net Zero on sectoral output (% deviation from
Current Policy Scenario, MANAGE model)
10
2025 2030 2035 2040 2045 2050 2060 2070
Agriculture
Nzdom+ 0.07% 0.22% 0.10%-0.33%-0.63%-0.74%-0.16%-0.45%
NZdom 0.07%-0.49%-1.35%-2.34%-2.94%-3.15%-2.26%-2.05%
Nzfor+ 0.07% 0.85% 1.57% 1.82% 1.98% 2.13% 2.61% 1.89%
Nzfor 0.07% 0.14% 0.13%-0.12%-0.21%-0.13%0.67% 0.41%
NZforSub 0.07% 0.10% 0.28% 0.45% 0.82% 1.21% 1.67% 0.91%
NZdomSub 0.07%-0.54%-1.21%-1.74%-1.85%-1.76%-1.27%-1.60%
NZforRD 0.07%-0.34%-0.76%-1.43%-1.92%-2.18%-1.58%-1.51%
Industry
Nzdom+ 0.12% 0.66%-0.37%-1.75%-2.63%-2.73%-0.58%-0.34%
NZdom 0.12%-0.68%-2.95%-5.11%-6.36%-6.47%-3.51%-2.45%
Nzfor+ 0.12% 2.43% 2.82% 2.40% 2.08% 2.13% 3.58% 2.99%
Nzfor 0.12% 1.10% 0.27%-0.85%-1.46%-1.34%0.92% 1.08%
NZforSub 0.12% 0.94% 0.85% 0.94% 1.41% 1.90% 2.90% 2.17%
NZdomSub 0.12%-0.87%-2.38%-3.29%-3.45%-3.18%-1.59%-1.48%
NZforRD 0.12%-0.17%-1.86%-3.83%-5.16%-5.53%-2.93%-2.09%
Service
Nzdom+ 0.11% 0.16%-0.42%-1.27%-1.66%-1.55%-0.38%-1.23%
NZdom 0.11%-0.87%-2.39%-3.85%-4.61%-4.58%-2.70%-2.71%
Nzfor+ 0.11% 1.06% 1.53% 1.42% 1.55% 1.90% 2.42% 0.74%
Nzfor 0.11% 0.04%-0.41%-1.07%-1.25%-0.94%0.33%-0.58%
NZforSub 0.11%-0.03%-0.14%-0.08%0.73% 1.87% 2.30% 0.20%
NZdomSub 0.11%-0.95%-2.13%-2.85%-2.65%-1.88%-0.84%-2.00%
NZforRD 0.11%-0.67%-1.70%-2.91%-3.63%-3.73%-2.22%-2.42%
Fossil share energy mix is lower in Net Zero Scenario at 58% (Compared to 75% in Current
Policy Scenario) in 2050 and 14% in 2070 (Compared to 54% in Current Policy Scenario)
(refer Pathways to Net Zero - Towards Viksit Bharat and Net Zero: An Overview - Vol. 1).
This result is also reinforced in CGE model results wherein the fossil output in Net Zero
Scenario is lower relative to Current Policy Scenario: Coal output is lower by 94%, gas by
10 Colours represent the direction and magnitude of deviation relative to the Current Policy Scenario (CPS). Greener shades indicate
positive deviations, yellow denotes values close to Current Policy Scenario, and orange to red shades indicate negative deviations,
with darker colours reflecting larger absolute changes. 36
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
60%, petroleum by 23-24% in 2070 compared to compared to Current Policy Scenario. On
the other hand, green hydrogen, biogas and electricity see substantial increase in Net Zero
Scenario compared to Current Policy Scenario (See Annex Figure B2)
11
.
Key Messages
Current Policy Scenario: Agriculture’s share declines steadily, industry rises
modestly, and services remain the dominant driver of output.
Net Zero Scenario: The transition to Net Zero has marginal impact on economic
structure with differential impacts depending on source of financing and productivity
of incremental finance, while fossil fuel–based manufacturing declines.
3.2.4 Impact on Investment: The Net Zero transition requires a major
reallocation of investment: renewables and green hydrogen expand
rapidly, while fossil fuel sectors have reduced shares compared to
Current Policy Scenario; manufacturing remains central across all
scenarios.
Under Current Policy Scenario, investment requirements rise steadily over time, driven
primarily by the service sector, followed by industry and agriculture. By 2066–2070, cumulative
five-year investment reaches nearly INR 4200 lakh crore, ~5 times higher compared to the
2031–2035 period. This long-term increase reflects both capital replacement and expansion
to support growth as well as the structural transformation of the economy (Figure 3.6).
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Sectoral investment
(A)
Agriculture Industry Service
INR lakh crore
0
-1%
-2%
-3%
-4%
-5%
-6%
-7%
-8%
-9%
-10%
NZdom
7%
6%
5%
4%
3%
2%
1%
0
NZfor+
(B)(C)
Agriculture Industry Service
% deviation from CPS
% deviation from CPS
11 There is still use of fossil fuels in 2070 in the Net Zero Scenario as these scenarios are gross positive emissions, largely
compensated by negative emissions from CCS and land-use. 37
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Sectoral investment
(A)
Agriculture Industry Service
INR lakh crore
0
-1%
-2%
-3%
-4%
-5%
-6%
-7%
-8%
-9%
-10%
NZdom
7%
6%
5%
4%
3%
2%
1%
0
NZfor+
(B)(C)
Agriculture Industry Service
% deviation from CPS% deviation from CPS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.6: Sectoral investment in Current Policy Scenario and Net Zero Scenarios
(% deviation from Current Policy Scenario) (MANAGE model)
(A) Sectoral investment in Current Policy Scenario.
(B, C) Net Zero Scenario investment (% deviation from Current Policy Scenario)
Industry remains the most resilient and largest beneficiary of capital allocation in the Net
Zero transition. Under NZdom, capital allocation to all three sectors is lower relative to
Current Policy Scenario due to crowding-out effects; however, industry experiences the
smallest reduction in 2035-50 (compared to Current Policy Scenario), highlighting its central
role in supporting the transition through technology deployment, equipment production, and
electrification. In NZfor+, where all additional investment is productive and foreign financed,
industry becomes the largest beneficiary of crowding-in, attracting the highest capital inflows
during the transition. Agriculture also sees investment growth in this scenario, driven by the
expansion of biomass based activities.
Investment patterns during the transition period indicate a rapid scale-up of investments in the
renewable energy sector, alongside significantly lower investments in fossil fuels relative to
the Current Policy Scenario. Compared to the Current Policy Scenario, electricity generation
and distribution attract higher levels of investment under both domestic and foreign financing
scenarios through 2070.
Under the domestic Net Zero scenario (NZdom), mining sector investment declines by INR
27 lakh crore during 2026–2050 but more than doubles to INR 52 lakh crore in the post-
2050 period relative to the Current Policy Scenario. In contrast, under the Net Zero foreign
financing scenario (NZfor+), the decline in mining investment is smaller, as the availability
of foreign capital helps avoid crowding-out effects. Similarly, investment in the construction
sector is lower under the Net Zero domestic financing scenario compared to the Current
Policy Scenario. However, under the Net Zero foreign financing scenario, construction sector
investment exceeds the Current Policy Scenario, reflecting the mitigation of crowding-out
through increased access to foreign finance. (Figure 3.7). 38
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
(A)
Sectoral investment CPS (Industry)Sectoral investment CPS (Industry)
0
200
400
600
800
1000
1200
ConstructionMachinery and equipment
(including electrical)
Others (Non-ferrous metal,
Chemical, textiles, Petroleum)
Cement and non-metallic metalsIron and SteelMining Electricity
INR lakh crore
0
200
400
600
800
1000
1200
ConstructionMachinery and equipment
(including electrical)
Others (Non-ferrous metal,
Chemical, textiles, Petroleum)
Cement and non-metallic metalsIron and SteelMining Electricity
INR lakh crore 39
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
-250
-200
-150
-100
-50
0
50
100
2025-50
2050-70
(B)(C)
Electricity
Mining
Iron and Steel
Cement and non-metallic metalsOthers (Non-ferrous metal, Chemical, textiles)
Machinery and equipment (including electrical)
Construction
-60
-40
-20
0
20
40
60
80
100
120
140
2025-502050-70
Deviation from CPS
(INR lakh crore)
Deviation from CPS
(INR lakh crore)
NZdomNZfor+
Figure 3.7: Industry sub-sectoral investment in Current Policy Scenario and Net Zero Scenario (% Deviation from CPS) (MANAGE model).
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario 40
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
(A) Sectoral investment in Current Policy Scenario.
(B) Net Zero investment (NZdom) (% deviation from Current Policy Scenario)
(C) Net Zero investment (NZfor+) (% deviation from Current Policy Scenario)
According to NITI Aayog’s investment requirements and financing gap model, India’s Net
Zero pathway is increasingly driven by emerging and hard-to-abate technologies, with total
investment needs rising from USD 8 trillion till 2050 to USD 22.7 trillion till 2070. By 2070,
transmission and distribution (T&D) infrastructure accounts for roughly 18% of required
investments, while grid storage, battery storage, and charging infrastructure together make up
about 39%. This shift highlights the growing importance of system reliability, grid flexibility,
and deep electrification in the later decades of India’s transition.
Key Messages
High investment trajectory: India’s growth path is investment-intensive under all
scenarios: in Current Policy Scenario, investment quintuples by 2070, and under Net
Zero Scenario the scale of required capital is even higher, making India’s development
a uniformly high-investment story that hinges on mobilising unprecedented levels
of finance.
Sectoral shifts under Net Zero Scenario: Without co-benefits, investment under
Net Zero Scenario falls below Current Policy Scenario across most sectors, though
industry is least affected till 2050. In productive scenario with higher foreign-
financing (NZfor+), industry and agriculture both exceed Current Policy Scenario
levels, with industry attracting the largest capital inflows.
Clean energy surge: Net Zero drives massive investment in emerging sectors, green
hydrogen is higher by +160% to +500% versus Current Policy Scenario across
successive decades, electricity investment more than doubles during 2046–60, while
petroleum investment is lower compared to Current Policy Scenario (about –40% in
NZfor+ by 2046–50 comapred to Current Policy Scenario).
3.2.5 Impact on Trade: Trade patterns shift decisively under Net Zero,
exports dip modestly, but import savings and structural change drive
a more resilient external sector.
India’s move to high-income status in Current Policy Scenario is marked by rises in exports
and imports. Under the Current Policy Scenario, India’s imports and exports in value terms,
rise to INR 840 trillion by 2050 and further to INR 3,200 trillion by 2070, while imports
increase to INR 1,080 trillion by 2050 and INR 3,920 trillion by 2070 (Figure 3.8). 41
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Services Transport-Road, Rail,
Water and Air
Trade ConstructionOther industryElectrical equipment, electronics,
machinery and equipment
Ferrous metalsGreen HydrogenFossil Energy-Coal, Oil and GasAgriculture & Allied
0
500
1000
1500
2000
2500
3000
3500
4000
4500
20352045205020602070
0
500
1000
1500
2000
2500
3000
3500
20352045205020602070
INR Trillion
INR Trillion
Import by ValueExport by Value
(A) (B)
Figure 3.8: Exports and imports by sector in Current Policy Scenario, 2035–2070 (MANAGE model)
(A) Sectoral Imports by value (INR trillion)
(B) Sectoral Exports by value (INR trillion) 42
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
With respect to sectoral break-up, in Current Policy Scenario, exports are driven by services
and industry. On the import side, agriculture (driven by livestock imports) increase notably
(Figure 3.8). These trade dynamics are simulated under the assumption of unchanged trade
rules and tariff regimes; any future changes in trade policy could affect the magnitude and
composition of the results.
In Current Policy Scenario, the Current Account Deficit (CAD) is assumed to grow to 2.3% of
GDP by 2030 and remain at that level thereafter, with the exchange rate adjusting endogenously
to maintain this deficit (See Figure 3.9). The adjustment is shaped by an appreciating real
exchange rate of 0.9 percent on average annually. Over time, the trade deficit–to–GDP ratio
narrows as GDP expands faster than net exports, leading to a decline in the ratio. Offsetting
adjustments in the income and transfer accounts ensure that the overall current account deficit
remains at its targeted level (Figure 3.9).-3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 Curent nAcoDtfii(runtshta fG 0 0.5 1 1.5 2 2.5 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070
Current Account Deficit (share of GDP)
Figure 3.9: Balance of trade and current account deficit in the Current Policy Scenario
(MANAGE model).
Across all scenarios, imports and exports increase rapidly in absolute terms. As a share of GDP,
however, they remain broadly stable overtime in Current Policy Scenario, with only marginal
differences under the Net Zero Scenarios (Figure 3.10). Under Current Policy Scenario, export-
to-GDP ratio rises slightly from 23% in 2030 to 24% in 2050, while the Import to GDP remain
largely stable at 26% over the same period. 43
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
30%
25%
20%
15%
10%
5%
0
35%
30%
25%
20%
15%
10%
5%
0
20222025203020352040204520502055206020652070
Exports (% of GDP)
CPS NZdom NZfor+CPS NZdom NZfor+
20222025203020352040204520502055206020652070
Imports (% of GDP)
Figure 3.10: Exports and imports as a percentage of GDP (MANAGE model).
Under the Net Zero Scenarios, India’s imports are generally lower than Current Policy
Scenario, with most scenarios showing reductions of 2-8%, driven primarily by declining
fossil fuel dependence (Figure 3.11). Domestically financed scenarios show lower imports as
compared to Current policy Scenario, whereas foreign financed variants impact vary depending
on the productivity of incremental finance. NZfor shows -1.6% by 2050 and recovers slightlyto
+0.7% by 2070 compared to Current Policy Scenario, whereas in NZfor+, imports show +2.4%
by 2050 and +3.0% by 2070 compared to Current Policy Scenario (See Figure 3.11).
i. Fossil fuel-related imports is lower compared to Current Policy Scenario, with
reduced imports of oil, coal, ferrous metals, other chemicals and manufactured
products (Figure 3.12), reflecting the fundamental shift away from carbon-intensive
energy sources.
ii. However, livestock imports is higher across scenarios compared to Current Policy
Scenario as consumption increases with changing dietary patterns. Competition
among cropland, grazing, and forests, plus limits on land conversion and rising
demand for biomass, drives up land prices, making domestic livestock production
costlier and imports more economically viable.
iii. Similarly, business services imports are higher compared to Current Policy Scenario
as higher electricity prices under the Net Zero transition erode the competitiveness
of domestic service-sector, prompting a shift toward more cost-effective foreign
providers. 44
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Export expenditure
(% Deviation from CPS)
Import expenditure
(% Deviation from CPS)
-10%
-8%
-6%
-4%
-2%
0%
2%
2030 203520402045205020602070
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
2030 203520402045205020602070
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.11: Impact of Net Zero Scenarios on India’s export revenue and import expenditure
relative to Current Policy Scenario, 2030–2070 (MANAGE model)
Similarly, under Net Zero Scenarios, exports are lower across all scenarios relative to
Current Policy Scenario, though impacts vary significantly by financing channel and
policy design. The domestic financing scenarios show the most impacts, with NZdom showing
-9.5% by 2050 and recovering to -5% by 2070 compared to Current Policy Scenario, though
this is offset by significant falling fossil fuel imports, implying lower overall trade exposure
rather than diminished competitiveness. In contrast, foreign financed variants impact vary
depending on the productivity of incremental finance. NZfor shows -6.2% by 2050 and
recovers to -3% by 2070 compared to Current Policy Scenario, whereas in NZfor+, exports
show -1.7% by 2050 and -0.4% by 2070 compared to Current Policy Scenario, as foreign
capital inflows prevent domestic resource crowding out (Figure 3.11). In parallel, falling fossil
fuel imports reduce overall trade exposure, underscoring a structural realignment of trade flows
rather than a deterioration in performance.
0%
1%
2%
3%
4%
2022 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070
CPS NZS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.12: Declining fuel imports (NCAER)
Total fuel import bill (as % of GDP) 45
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
i. The overall decline in exports is driven mainly by falling fossil fuel products, partially
offest by gains in textiles, cement, and ferrous metals.
ii. Exports of fossil fuels, including petroleum, coal, and related chemical products are
projected to fall as domestic supply adjusts. In the model, this outcome reflects world
prices treated as exogenous, since the demand and price response from the rest of
the world is not modeled. Accordingly, the drop in demand from other countries is
attributed to the effect of India’s climate policies on supply and domestic prices.
iii. The business services sector has lower export competitiveness, primarily due to
higher electricity prices during the Net Zero transition, which raise operational costs.
In contrast, notable export gains are expected in industrial goods such as textiles,
cement, and ferrous metals, supported by declining domestic coal prices during the
transition (Annex Figure B4). This cost advantage reduces production expenses and
enhances the global competitiveness of these industries.
The Trade Deficit widens slightly under Net Zero Scenario compared to Current Policy
Scenario, but is projected to improve steadily across all pathways. In the near term (2030),
the Trade Deficit grows to between 3.5%–4.5% of GDP across different scenarios, with
foreign-financed pathways showing the largest deficits. This gradually moderates, narrowing
to to 2.5-3.3% of GDP by 2050, and further improving to 1.7-2.3% by 2070 (Figure 3.13).
The Current Account Deficit (CAD) is slightly higher under Net Zero Scenario compared
to Current Policy Scenario, with -1% variation in mid-2050s to -.5% in 2070. Foreign-
financed scenarios consistently show larger Current Account Deficits (peaking at around 3.2%
of GDP in 2045) compared to domestically-financed pathways (stabilizing at 2.3-2.5%). This
reflects the role of additional capital inflows, which enable higher investment levels but also
necessitate larger external deficits to sustain balance-of-payments equilibrium (Figure 3.13).-5.0 -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 2025 2030 2040 2050 2070 NZdom+ NZdom NZfor+ NZfor NZforSub NZdomSub NZforRD
[B]
[A]-3.5 -3 -2.5 -2 -1.5 -1 -0.5 0 2025 2030 2040 2050 2070 [B]]ABA [B]A]] 46
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications -5.0 -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 2025 2030 2040 2050 2070 NZdom+ NZdom NZfor+ NZfor NZforSub NZdomSub NZforRD
[B]
[A]-3.5 -3 -2.5 -2 -1.5 -1 -0.5 0 2025 2030 2040 2050 2070 [B]]ABA [B]A]]
Figure 3.13: Current Account Balance and Trade Balance in Net Zero Scenarios
(A) Current account deficit (% of GDP, MANAGE model).
(B) Balance of Trade (% of GDP, MANAGE model).
Key Messages
Imports and exports as a share of GDP, remain broadly stable across scenarios, till
2050 but increase in absolute terms in Current Policy Scenario.
Under the Net Zero Scenario (NZS), trade outcomes differ by financing mode.
In NZdom, imports show -8.5% by 2050 and -4.5% by 2070 in NZdom, whereas in
NZfor+, imports show +2.4% by 2050 and 3% by 2070 compared to Current Policy
Scenario. Similarly, exports show -9.5% by 2050 and -5.0% by 2070 in NZdom,
whereas in NZfor+ exports show -1.7% by 2050 and -0.4% by 2070 compared to
Current Policy Scenario.
Trade balance: The Trade Deficit widens in the near term (3.5-4.5% of GDP by
2030) but improves steadily to 1.5–2.5% by 2070 in Current Policy Scenario. While
in Net Zero Scenario, Trade Deficit widens under foreign financed scenarios by
0.5-1% compared to Current Policy Scenario, while it remains same under domestic
financing scenarios. Current Account Deficit follows a similar pattern, with higher
deficits in foreign-financed pathways.
3.2.6 Impact on Household income and consumption: Net Zero puts
marginal pressure on household consumption, with poorer groups
most affected unless cushioned by redistributive policies.
The financing mechanism also shapes outcomes. Domestic financing raises capital costs,
crowds out private investment, dampens output and labor demand, and reduces household 47
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
incomes, effects that fall more heavily on poorer households whose consumption is concentrated
in necessities. By contrast, foreign financing eases these pressures: external capital inflows
prevent crowding out, sustain labor demand and incomes, and moderate consumption losses,
especially in rural areas (Figure 3.14).
Redistributive policies can offset these adverse effects. Targeted transfers financed through
higher public debt maintain the consumption of the bottom 40 percent at Current Policy
Scenario levels, demonstrating that redistribution can mitigate short-term distributional impacts
of Net Zero. Similarly, electricity subsidies funded by phasing out fossil fuel subsidies reduce
household electricity costs, cushioning welfare losses.
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZDom
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZDom
Urban householdsRural households
Urban Quintile 1 (poorest) Urban Quintile 2
Urban Quintile 3Urban Quintile 4
Urban Quintile 5 (richest)
Rural Quintile 1 (poorest) Rural Quintile 2
Rural Quintile 3Rural Quintile 4
Rural Quintile 5 (richest)
2070
2030
2040
2045
2050
2060
2065
2070
2030
2040
2045
2050
2060
2065% Deviation from CPS
% Deviation from CPS
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
1.50%
NZDomSub
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZDomSub
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
1.50%
2.50%
NZFo r
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
1.50%
2.50%
NZFor
-4.50%
-2.50%
-0.50%
1.50%
3.50%
5.50%
NZForSub
-4.50%
-2.50%
-0.50%
1.50%
3.50%
5.50%
NZFo rSub
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZForRD
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZForRD
Urban Quintile 1 (poorest) Urban Quintile 2
Urban Quintile 3Urban Quintile 4
Urban Quintile 5 (richest)
RuralQuintile 1 (poorest) RuralQuintile 2
RuralQuintile 3RuralQuintile 4
RuralQuintile 5 (richest)
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.14: Impact of the Net Zero transition on real household consumption
(% deviation from Current Policy Scenario, MANAGE model) 48
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
1.50%
NZDomSub
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZDomSub
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
1.50%
2.50%
NZFo r
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
1.50%
2.50%
NZFor
-4.50%
-2.50%
-0.50%
1.50%
3.50%
5.50%
NZForSub
-4.50%
-2.50%
-0.50%
1.50%
3.50%
5.50%
NZFo rSub
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZForRD
-4.50%
-3.50%
-2.50%
-1.50%
-0.50%
0.50%
NZForRD
Urban Quintile 1 (poorest) Urban Quintile 2
Urban Quintile 3Urban Quintile 4
Urban Quintile 5 (richest)
RuralQuintile 1 (poorest) RuralQuintile 2
RuralQuintile 3RuralQuintile 4
RuralQuintile 5 (richest)
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
% Deviation from CPS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.14: Impact of the Net Zero transition on real household consumption
(% deviation from Current Policy Scenario, MANAGE model)
Key Messages
Urban-Rural Impacts are different: Urban–rural income gaps remain unchanged
across scenarios, with poorer households more vulnerable to consumption losses.
Financing matters: Domestic financing deepens household budget pressures, while
foreign financing cushions impacts by sustaining incomes and demand.
Policies can protect: Targeted transfers and electricity subsidies offset losses, keeping
the bottom 40 percent at Current Policy Scenario levels. 49
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
3.2.7 Impact on Electricity Prices
The Current Policy Scenario and Net Zero Scenario show distinct electricity price trajectories
(Figure 3.15). In the Current Policy Scenario, slower pace of demand electrification (increases
from 21% in 2025 to 40% by 2070 in Current Policy Scenario vs 60% in Net Zero Scenario)
and resultingly lower investment needs in Current Policy Scenario, leads to electricity prices
largely remaining stable till 2040 and declining thereafter.
By contrast, the Net Zero Scenario exhibits higher electricity prices in the near to medium
term, particularly over 2030–2045, as rapid electrification of transport and industry drives
up electricity demand. Meeting this surge requires substantial upfront capital investment in
renewable generation, storage, transmission upgrades, and emerging demand-side electrification
options such as heat pumps and electric boilers, which can be several times more capital
intensive than conventional technologies. These higher upfront costs temporarily push Net
Zero Scenario electricity prices above Current Policy Scenario levels during the initial phase
of the transition.
After 2045, however, Net Zero Scenario electricity prices begin to fall, from their peaks but
continue to remain above Current Policy Scenario due to higher electrification in Net Zero.
This decline reflects economies of scale, technology learning effects, and continuing cost
reductions in low-carbon technologies. By the 2050s and beyond, electricity becomes more
affordable under Net Zero Scenario, supporting long-term competitiveness, consumer welfare,
and sustained economic growth.
Electricity price trajectories under CPS and NZS
(Index, 2025–2030 = 100)
0
20
40
60
80
100
120
140
2025-20302031-20352036-20402041-20452046-20502051-20602061-2070
CPS NZS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.15: Electricity price trajectories under Current Policy Scenario and Net Zero Scenario 50
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
3.2.8 Impact on labour market: Under Net Zero, jobs will shift from fossil
fuel sectors into renewable electricity, while construction, transport,
and trade emerge as major sources of new employment.
In all scenarios, employment shifts steadily from agriculture toward industry and
services, mirroring the structural transformation of the economy. By 2050, in the Current
Policy Scenario, the agricultural share of total jobs falls from about 46% in 2024 to 34%,
while services gains a modest share and industry continues to expand as the main source of
employment. This sectoral transition is accompanied by a rising demand for higher-skilled
labour, reflecting the growing weight of skill-intensive services and more technologically
advanced industries. At the same time, labour force participation increases, with the overall
employment rate rising from about 55% in 2025 to 64% in 2050 and 70% in 2070, reflecting
higher employment rate over time as the economy develops (Figure 3.16).
The impacts on the overall employment rate are shown to be relatively modest. Scenarios such
as NZforSub and NZfor+ result in a slight higher employment rate by +0.7-0.8% compared
to Current Policy Scenario by 2050. Conversely, the NZDom and NZforRD scenarios show a
slightly lower employment rate (-0.3 to -0.5%) compared to Current Policy Scenario by 2050.
80%
70%
60%
50%
40%
30%
20%
10%
0%
100%
80%
60%
40%
20%
0%
20252030203520402045205020602070
Employment rate in CPS
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
Employment rate
(% Deviation from CPS)
2030 2040 2045 2050
45%
40%
35%
30%
25%
20%
15%
10%
5%
0
AGRINDSER
Sectoral employment
20302040205020602070
2030 2035 2040 2045 2050 2060 2070
Share of skilled/unskilled
SkilledUnkilled
(A)(B)
(C)
(D)
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.16: Labor market in the Current Policy Scenario and Net Zero Scenario. 51
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
(A) Current Policy Scenario employment rate (MANAGE model).
(B) Deviation of employment from Current Policy Scenario in Net Zero Scenarios.
(C) Share of skilled and unskilled labour (MANAGE model)
(D) Employment in three broad sectors (%, MANAGE model).
In the Current Policy Scenario, the broad employment pattern in energy sector largely remains
stable with employment of 6 million by 2050. Coal, Oil, gas and Electricity account for the
bulk of employment. By 2070, total jobs decline to 4 million primarily due to improvements in
energy efficiency and technological progress. As the economy becomes less energy-intensive,
fewer workers are required both in direct energy production and in the upstream and downstream
sectors that supply or depend on energy, leading to a gradual contraction in employment.
However, in Net Zero Scenario, industry records higher employment than Current Policy
Scenario, for both skilled and unskilled workers, reflecting rising demand from clean technology
manufacturing and renewable energy infrastructure. With rapid expansion in clean energy, energy
sector jobs increase to 7 million by 2050 (1 million higher than Current Policy Scenario) and
4.5 million in 2070 (0.5 million higher than Current Policy Scenario). (Figure 3.17).
Coal Gas OilGreen hydrogenPetroleum, coal productsBiomass production Electricity
0.0
0.5
1.0
1.5
2.0
2.5
2030 2040 2050 2070
Direct jobs (CPS)
(A)(B)
(C)(D)
(E)(F)
0
1
2
3
4
5
6
2030 2040 2050 2070
Indirect jobs (CPS)
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
2030 2040 2050 2060 2070
Direct job change (NZdom)
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2030 2040 2050 2060 2070
Indirect job change (NZdom)
-0.4
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
2030 2040 2050 2060 2070
Direct job change (NZfor+)
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2030 2040 2050 2060 2070
Indirect job change (NZfor+)
Deviation in Million from CPSDeviation in Million from CPSDeviation in Million from CPS
Deviation in Million from CPSDeviation in Million from CPSDeviation in Million from CPS
Figure 3.17: Direct and indirect jobs in energy sectors in Current Policy Scenario and Net Zero
Scenario (jobs in Millions deviation from CPS)
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario 52
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
(A-B) Direct and indirect jobs in energy sectors under CPS (MANAGE model).
(C-D) Direct and indirect jobs change in energy sector under NZdom (compared to CPS)
(MANAGE model).
(E-F) Direct and indirect jobs change in energy sector under NZfor+ (compared to CPS)
(MANAGE model).
The impact of Net Zero transition on structure of employment varies according to source of
financing, productivity of incremental capital and role of complementary policies. By 2050, all
Net Zero Scenarios show higher employment in agriculture, ranging between +0.4% (NZfor)
and + 3.2%(NZdomsub) compared to Current Policy Scenario. In industry, the Net Zero
Scenarios range from -0.1% to -1.5% in domestic-financed scenarios compared to Current
Policy Scenario whereas in Net Zero foreign-financed scenarios, the impact ranges between
+0.7% to +2% compared to Current Policy Scenario by 2050 (See Table 3.4).
Table 3.4: Sectoral employment (% deviation from Current Policy Scenario, MANAGE model)
12
.
2030 2035 2040 2045 2050 2060 2070
Agriculture
NZdom+ 0.25 0.33 0.19 0.54 1.02 1.71 0.63
NZdom 0.06 -0.18 -0.62 -0.26 0.49 1.77 1.12
Nzfor+ -0.20 0.24 0.39 0.69 0.85 0.86 -0.83
Nzfor -0.38 -0.27 -0.35 0.03 0.43 0.92 -0.41
NZforSub -0.48 0.06 0.97 2.17 2.80 2.42 0.51
NZdomSub -0.04 0.17 0.81 2.16 3.16 3.40 2.13
NZforRD -0.15 -0.04 -0.02 0.55 1.30 2.15 1.32
Industry
NZdom+ 0.37 0.15 -0.04 0.00 -0.06 -0.10 -0.46
NZdom -0.05 -0.66 -1.05 -1.09 -1.16 -0.95 -1.05
Nzfor+ 1.50 1.77 1.86 2.04 2.04 1.75 1.08
Nzfor 1.10 0.98 0.89 1.04 1.05 1.01 0.56
NZforSub 1.14 0.87 0.61 0.65 0.75 0.83 0.36
NZdomSub 0.01 -0.78 -1.38 -1.55 -1.52 -1.19 -1.32
NZforRD 0.38 -0.12 -0.60 -0.77 -0.99 -0.81 -0.99
Services
NZdom+ -0.01 -0.05 -0.34 -0.77 -0.95 -0.41 -0.05
NZdom -0.32 -0.64 -1.13 -1.72 -1.94 -1.20 -0.63
12 Colours represent the direction and magnitude of deviation relative to the Current Policy Scenario (CPS). Greener shades indicate
positive deviations, yellow denotes values close to CPS, and orange to red shades indicate negative deviations, with darker
colours reflecting larger absolute changes. 53
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Nzfor+ 0.18 0.43 0.40 0.15 0.06 0.46 0.60
Nzfor -0.12 -0.14 -0.37 -0.73 -0.84 -0.25 0.09
NZforSub -0.16 0.02 0.11 0.05 0.06 0.32 0.38
NZdomSub -0.39 -0.48 -0.62 -0.89 -1.00 -0.64 -0.35
NZforRD -0.30 -0.46 -0.85 -1.39 -1.63 -1.02 -0.50
Total
NZdom+ 0.20 0.15 -0.05 -0.05 0.03 0.33 -0.03
NZdom -0.09 -0.47 -0.92 -0.98 -0.84 -0.22 -0.34
Nzfor+ 0.42 0.77 0.87 0.96 1.00 1.05 0.42
Nzfor 0.13 0.15 0.04 0.12 0.24 0.56 0.15
NZforSub 0.09 0.30 0.58 1.01 1.24 1.13 0.41
NZdomSub -0.13 -0.33 -0.34 0.00 0.25 0.36 -0.09
NZforRD -0.04 -0.20 -0.46 -0.49 -0.40 0.00 -0.22
The Net Zero transition impact on wages depends on source of financing. In Net Zero
Scenarios real wage deviations from Current Policy Scenario remain small in the near term
but widen after 2040. In the NZfor+, real wages are higher by up to 3% above Current Policy
Scenario by 2050. In contrast, domestically financed scenarios (e.g., NZdom) put downward
pressure on incomes, with wages being lower than Current Policy Scenario by about 5.6% in
2050 (Figure 3.18).
Industry records the strongest real wage gains in the transition. In Net Zero foreign-financed
scenarios such as NZfor+, real wages in industry are higher by 5.5% above Current Policy
Scenario by 2050, driven by demand for clean technology and renewable energy infrastructure.
(Table 3.5).
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
NZdom NZforSub NZforRD NZfor NZfor+ NZdom+ NZdomSub
Real wage (% deviation from CPS)
% Deviation from CPS
2030 2040 2045 2050
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 3.18: Real wages in Net Zero Scenarios (% deviation from CPS) (MANAGE). 54
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
The Net Zero transition drives a reallocation of jobs from fossil fuel industries to
renewable electricity, requiring complementary policies such as reskilling and relocation
support. Under Net Zero Scenario, employment is reallocated across energy sub-sectors.
Direct jobs rise in electricity by up to 1.23 million and 1.61 million cumulatively through
2050 and 2070 compared to Current Policy Scenario, supported by large-scale deployment
of renewables (solar, wind) and grid expansion, while indirect jobs along clean-tech supply
chains add up to 1.48 million and 3.30 million cumulatively through 2050 and 2070 (NZdom)
compared to Current Policy Scenario. By 2050 and 2070, the electricity sector is the largest
contributor to net job gains relative to Current Policy Scenario.
Beyond the energy sector, the Net Zero transition can deliver substantial economy-
wide job gains under supportive policies. Job creation is concentrated in construction,
road transport, and trade. Under the NZforSub, construction emerges as the single largest
contributor, adding about 4.6 million jobs by 2050 compared to Current Policy Scenario,
driven by the labour needs of utility-scale RE build-out, grid expansion, and low-carbon
infrastructure. Road transport and trade also expand, with road transport adding 880,000 jobs
by 2045, and together with trade contributing a cumulative 5.17 million jobs over 2030–2070.
This demonstrates that the Net Zero transition can be a major engine of employment outside
the energy sector when combined with targeted complementary policies (Annex Figure B6).
Table 3.5: Sectoral real wages (deviation from CPS)
13
2030 2035 2040 2045 2050 2060 2070
Agriculture
NZdom+ 0.52% 0.37% -0.85% -1.48% -1.65% -0.72% -0.79%
NZdom -0.59% -2.11% -3.68% -4.40% -4.33% -2.45% -1.80%
Nzfor+ 1.74% 2.56% 2.34% 1.89% 1.54% 1.52% 0.64%
Nzfor 0.61% 0.37% -0.37% -0.81% -0.87% 0.00% -0.25%
NZforSub 0.49% 0.83% 1.08% 1.37% 1.41% 1.19% 0.33%
NZdomSub -0.74% -1.78% -2.07% -2.07% -1.90% -1.24% -1.27%
NZforRD -0.26% -1.15% -2.44% -3.25% -3.46% -2.07% -1.63%
Industry
NZdom+ 0.73% 0.67% 0.55% 0.56% 0.55% 0.65% 0.21%
NZdom -0.36% -1.70% -2.32% -2.65% -2.75% -2.07% -1.70%
Nzfor+ 2.59% 4.07% 4.66% 5.26% 5.52% 5.17% 3.86%
Nzfor 1.48% 1.70% 1.81% 2.12% 2.36% 2.67% 2.11%
NZforSub 1.40% 2.05% 2.67% 3.60% 4.17% 3.74% 2.50%
13 Colours represent the direction and magnitude of deviation relative to the Current Policy Scenario (CPS). Greener shades indicate
positive deviations, yellow denotes values close to CPS, and orange to red shades indicate negative deviations, with darker
colours reflecting larger absolute changes. 55
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
2030 2035 2040 2045 2050 2060 2070
NZdomSub -0.45% -1.33% -1.46% -1.19% -0.99% -1.09% -1.46%
NZforRD 0.24% -0.57% -1.14% -1.61% -1.97% -1.53% -1.40%
Services
NZdom+ 0.40% -0.54% -1.47% -2.26% -2.50% -1.39% -1.83%
NZdom -0.88% -3.14% -4.64% -5.81% -6.10% -4.25% -3.79%
Nzfor+ 1.75% 2.38% 2.19% 2.05% 2.09% 2.61% 1.31%
Nzfor 0.47% -0.21% -0.90% -1.36% -1.31% 0.02% -0.47%
NZforSub 0.38% 0.26% 0.18% 0.50% 1.03% 1.50% 0.11%
NZdomSub -0.98% -2.67% -3.54% -3.94% -3.80% -2.85% -3.33%
NZforRD -0.53% -2.15% -3.50% -4.73% -5.27% -3.77% -3.54%
Key Messages:
Employment remains stable: Net Zero has only modest effects on overall jobs (–1%
to +1% relative to Current Policy Scenario), though outcomes vary by financing.
Jobs shift, wages diverge: Fossil fuel employment declines while renewables and
manufacturing expand; real wages are lower under domestic financing and are higher
with foreign capital as compared to Current Policy Scenario.
Summary of the results
Table 3.6 highlights the broad macroeconomic implications across Net Zero Scenario. Pathways
reliant on domestic financing (NZdom and NZdom+) generally see lower GDP, consumption,
and investment growth in short/medium-run compared to Current Policy Scenario. These
scenarios also show lower trade deficits but higher fiscal deficits.
By contrast, the scenarios reliant on higher foreign financing (NZfor, NZfor+) show better
macroeconomic performance compared to domestic as the external borrowing does not crowd-
out domestic investment. NZfor+ delivers the most positive outcomes, with notable gains in
GDP, household consumption, investment, and exports compared to Current Policy Scenario.
These pathways also see larger import growth and worsening trade balances. Still, fiscal
outcomes strengthen due to higher economic activity, and the employment rate improves in
these foreign-oriented scenarios.
Subsidy-based variants (NZforSub and NZdomSub) sit between domestic and foreign extremes:
These variants show higher fiscal deficit and face current account pressures. Overall, the
results show consistent inter-linkages: GDP, trade flows, fiscal balances, and employment
move together depending on whether Net Zero investment relies on reallocating domestic
resources or on expanding productive capacity through foreign inflows. 56
Macroeconomic Modelling: Approach and Results for India’s Net Zero Pathways Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Table 3.6: Impact of alternate Net Zeroscenarios in comparison to Current Policy Scenario on
different economic variables
GDP
Household
consumption
Government
consumption
InvestmentExportsImports
Fiscal
deficit
Tax
revenue
on GDP
BOTCAB
Employment
rate
NZdom+ -- - -- -- -- + + +---- -
NZdom -- -- -- -- ------+ +---- -
Nzfor+ ++ +++ ++ ++ + +++++ ------ +
Nzfor - ++ - ++ --+++ + ------ +
NZforSub + ++ + ++ -+++++ ------ +
NZdomSub -- - -- -- -----++ +---- -
NZforRD -- - -- -- -----++ +----- -
Green symbols indicate positive outcomes, red symbols indicate negative outcomes.
Ranking scale: +/–: positive or negative changes below 1%, ++/––: positive or negative changes between 1 and 2.5%;
+++/– – –: positive or negative changes between 2.5 and 5% 4
IMPLICATIONS OF THE
NET ZERO TRANSITION
FOR GOVERNMENT
REVENUE AND THE
IMPORT BILL 58Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
4
Implications of the Net Zero
Transition for Government
Revenue and the Import Bill
This chapter examines how India’s Net Zero transition will affect government revenues, the
import bill, and emerging critical-mineral dependencies, drawing on a comparative assessment
of a Net Zero 2070 scenario against a current policy scenario.
4.1 Revenue Implications of the Net Zero Transition at the
National level
4.1.1 Context: Revenue Dependence on Fossil Fuels
Fossil fuels constitute a significant share of government revenue. Central government revenue
from taxes, duties and cesses on primary fossil fuels (coal and petroleum products) ranged from
INR 2.4 trillion to INR 3.2 trillion (in constant 2011-12 prices) during fiscal years FY 2019-20
to 2023-24 (PPAC, 2025). Over this period, revenue from primary fossil fuels accounted for
20 to 33% of total central government revenue (Ministry of Finance, 2025) (Figure 4.1) and
1.5 to 2.3% of national Gross Domestic Product (GDP) in real terms (Ministry of Statistics
and Program Implementation, 2024) (Figure 4.2). Petroleum products provided the bulk of
these receipts, with coal contributing about 16% and petroleum about 84%, on average, of
total primary fossil fuel revenue.
0%
5%
10%
15%
20%
25%
30%
35%
2019 2020 2021 2022 2023
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
2019 2020 2021 2022 2023
Figure 4.1: Fossil fuel revenue as a % share
of the total central government revenue
Figure 4.2: Fossil fuel revenue as a % share
of national GDP 59
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Subsidies for primary fossil fuels are negligible compared to the revenue earned by the
government from them. Since 2010, India has steadily reduced primary fossil fuel subsidies,
with an approximately 85% decline between 2013 and 2023 (Asian Development Bank, 2024).
In 2023, subsidies to the petroleum sector were about INR 707 billion out of the total estimated
subsidies worth INR 3.2 trillion for all fossil fuels in the same year (IISD, 2023). These
amounts represented only a small fraction of government revenue from the two sectors: for
coal, subsidies equaled about 1% of revenue earned, and for petroleum about 4%, primarily
to cover under-recovery in the retail price of LPG (Powell et al., 2024).
At the state level, on average, petroleum products contribute about 7% of total state government
revenue on average, ranging from 2 to 13% across states. Coal revenues are smaller, accounting
for 3 to 16% in major coal-producing states (Upadhyay et al., 2024).
4.1.2 Comparison of Fossil-Fuel Revenues in the Current Policy
Scenario and Net Zero Scenario
As a share of GDP, fossil-fuel revenue declines from around 2.3% of GDP at present to around
0.4% of GDP by 2070 in the current policy scenario and to 0.2% of GDP in the Net Zero
Scenario (Figure 4.3). The decline in the Current Policy Scenario reflects a combination of
structural economic change and policy-driven shifts in energy use. As the economy grows and
diversifies, fossil-fuel consumption and associated tax revenues fall, while ongoing efficiency
improvements, gradual electrification of end-use sectors, and the increasing competitiveness
of renewables reduce demand for taxed fossil fuels over time. Electrification levels in the Net
Zero Scenario are significantly higher than in the Current Policy Scenario, accelerating this
revenue decline. Figure 4.4 summarizes the breakdown of projected fossil-fuel revenue by fuel
for both scenarios in 2030, 2050 and 2070. Across all years and in both scenarios, revenue
from diesel makes up the highest share of total fossil-fuel revenue, accounting for around half
of government revenue from fossil fuels. Petrol follows, contributing about one-third of total
revenue, while coal accounts for the remaining one-sixth.
14
14 Details regarding assumptions on start year fuel prices, tax rates and price escalation factors can be found in Annexure C-1. 60
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
20222025203020352040204520502055206020652070
CPS NZS
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.3: Projected total fossil fuel revenue (as % of GDP)
0.0%
0.5%
1.0%
1.5%
CPSNZSCPSNZS
20502070
Coal Petrol Diesel
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.4: Breakdown of projected fossil-fuel revenue (as % share of GDP) by
fuel in Current Policy Scenario and Net Zero Scenario
4.2 Impact of the Net Zero Transition on Imports: Fuels and
Critical Minerals
4.2.1 Context: India’s Present Fuel Imports
India’s total primary energy consumption was approximately 850 million tons of oil equivalent
(Mtoe), of which around 51% was met through imports in FY 2022-23 (Ministry of Statistics
and Program Implementation, 2024).
OiI imports: In FY-2022-23, India met 87% of its crude oil demand through imports (Ministry
of Statistics and Program Implementation, 2024). In the past five years, the average oil import 61
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
bill has been about INR 4.7 lakh crore (PPAC, Monthly Snapshot of Oil and Gas imports, 2024)
(2011 prices; Figure 4.5). Crude oil imports add significantly to national imports, contributing
on average 23% of the total import bill during this period. (MoPNG, 2024)(Figure 4.6).
Figure 4.5: Oil Import Bill (billion INR,
2011-12 prices)
Figure 4.6: Oil Imports as a share of total
imports (in value terms)
Natural gas imports: In FY 2022-23, natural gas consumption was 51.83 billion cubic meters
(BCM), of which 44% was met through imports (MoPNG, 2024). India’s gas import bill has
been relatively constant over the past five years, averaging INR 634 billion (2011-12 prices)
(PPAC, Ready Reckoner, 2024). In value terms, the gas import bill is only about one-tenth
of the oil import bill.
Coal imports: Coal imports averaged INR ₹458 billion (2011-12 prices) between 2019–20 and
2022–23, rising sharply in the last two years (Ministry of Coal, 2025). In value terms, India’s
coal import bill is roughly equal to the gas import bill (PPAC, Ready Reckoner, 2024). Coal
imports are increasing over time, driven by rising energy demand and industrial demand for
coking coal. Given the high ash content of domestic coal, coking coal demand must be met
through imports (Gupte, 2023). An Inter-Ministerial Committee (IMC) has been constituted
in the Ministry of Coal to support coal-import substitution (PIB, 2024)
Nuclear Fuels: Nuclear power generation remains limited, with 8.1 GW operating and 7.3
GW under construction (NITI Aayog, 2024). Nuclear currently generates 48 TWh per year,
just over 3% of total electricity generation and 12% of non-fossil sources (NITI Aayog,
2024), amid volatile uranium imports. The recent Government of India announcement of a
100 GW nuclear capacity target by 2047, to be achieved through a mix of conventional reactors
and small modular reactors, signals renewed ambition (Press Information Bureau, 2025). A
key challenge to this expansion is India’s limited uranium reserves, which necessitate heavy
reliance on imports. Given the scale of nuclear ambitions, accounting for uranium in the overall
fuel import bill is crucial, as reflected in this analysis.
0%
5%
10%
15%
20%
25%
30%
2019 2020 2021 2022 2023
0
1000
2000
3000
4000
5000
6000
7000
20192020 202120222023
Oil Imports (Billion INR) 62
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
With India’s aspiration of robust growth toward Viksit Bharat, energy requirements are
expected to keep increasing, exerting pressure on imports unless reliance on domestic energy
sources increases.
4.2.2 Comparison of fuel imports in the Current Policy Scenario and
Net Zero Scenario
The Net Zero transition could generate significant savings in the national fuel import bill,
considering declining trend for imports of fossil fuels (coal, oil, and gas). The Net Zero
Scenario’s fuel import bill is projected to be lower by 38% in 2050 and 47% in 2070 compared
to the Current Policy Scenario. This translates to an annual saving of INR 6.6 trillion in 2050
and INR 8.8 trillion in 2070 comparted to the Current Policy Scenario.
As a share of GDP, the total fuel import bill falls steadily in both scenarios. From around
4% of GDP at present, the total fuel import bill falls to about 0.7% of GDP by 2070 in the
Current Policy Scenario and to 0.2% of GDP in the Net Zero Scenario (Figure 4.7). Looking
at the breakdown of the fuel import bill by fuel (Figure 4.8), oil accounts for the largest share.
Majority of savings in fuel import bills in the Net Zero transition are a result of reduction in
oil imports, followed by gas and then coal. The increase in the uranium import bill associated
with nuclear expansion under the Net Zero transition is negligible compared with the savings
on fossil fuel imports.
0%
1%
2%
3%
4%
2022 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070
CPS NZS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.7: Fuel import bill as a % share of GDP 63
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0%
1%
2%
CPSCPSNZSNZS
20502070
Oil Gas Coking coal Nuclear fuel
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.8: Breakdown of fuel import bill by fuel as a % share of GDP
4.2.3 India’s Dependence on the Import of Critical Minerals and
Components for Energy-Transition Technologies
India’s clean energy shift hinges on critical minerals like lithium, cobalt, nickel, rare earths,
and copper, which are vital for EV batteries, solar PVs, and storage. Currently, India imports
over 90% of copper and is fully dependent on imports for lithium, cobalt, and nickel (PIB,
2023), posing supply risks. China refines over 60% of the world’s lithium and 85% of rare earth
elements, while the Democratic Republic of Congo (DRC) supplies over 70% of global cobalt
(Investing News Network, 2025). The Net Zero transition could reduce fossil-fuel imports but
increase dependence on critical mineral imports. The Ministry of Mines has identified key
minerals and is pursuing domestic exploration, global partnerships, and recycling (Ministry
of Mines, 2023).
Domestic solar PV manufacturing currently meets just 8% of national demand, with 92%
imported, mostly from China, requiring investment in polysilicon refining, wafer production
and module assembly (IRENA, 2017). India’s domestic battery-storage manufacturing is also
in its early stages. As India’s production-linked incentive (PLI) scheme achieves its targeted
capacity of 55 GWh of domestic battery manufacturing by 2030, it would comprise about 6%
of the overall projected battery storage requirement (Warrior et al., 2023) necessitating rapid
scale-up in cell production, raw material processing, and recycling. 64
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
4.2.4 Comparison of the Critical-Minerals and Component Imports in
the Current Policy Scenario and Net Zero Scenario
We estimate that the total import bill for solar PV and battery storage under the Net Zero
Scenario is about INR 400 billion higher in 2050 and INR 1.2 trillion higher in 2070 compared
with the Current Policy Scenario (in 2011-12 prices). Solar imports far outweigh battery-
related imports despite EV-batteries accounting for the bulk of the overall battery requirement.
As India’s economy grows, the import bill initially rises but later declines relative to GDP, as
economic expansion outpaces the increase in mineral-related imports (Figure 4.9). As capacity
additions and associated import bills stabilize for both technologies in later years, GDP growth
attenuates the effect of import bills when expressed as a share of GDP. Here it is important to
note that no price escalation has been assumed for minerals and their associated technologies.
The import bill of critical minerals and cell technologies peaks as a share of GDP at 0.13%
in 2030 under the Current Policy Scenario and 0.17% in 2035 under the Net Zero Scenario,
before stabilizing in later years.
0.00%
0.02%
0.04%
0.06%
0.08%
0.10%
0.12%
0.14%
20502070
CPS NZS
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.9: Import bills of critical minerals and cell technologies as a % share of GDP
When the total import bill is divided into critical-mineral imports and finished-component
imports, critical minerals account for about 2-3% of the total, over time and across both
scenarios. Figure-4.10 presents a further breakdown by minerals. Copper and Silicon together
constitute the overwhelming share of the import bill in any given year in both scenarios. The
relatively small contribution of critical minerals compared with finished components in the
import bill reflects the base-case assumption of domestic manufacturing shares of 8% for
Solar PV and 6% for battery components that are kept constant. 65
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0
5
10
15
20
25
30
35
40
CPSNZSCPSNZS
20502070
Copper NickelLithiumCobaltSiliconTotal
Million 2011-12 INR
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.10: Contribution of critical minerals to the import bill, by mineral in Million 2011-12 INR
Scenarios with alternative domestic-manufacturing assumptions: The analysis also tested
higher domestic-manufacturing shares for solar PV (30% & 50% by 2070) and batteries (25%
& 40% by 2070) against a base case of 8% and 6% (base scenario), respectively. Higher
domestic manufacturing shifts imports from finished products to critical minerals, lowering the
total import bills significantly for solar PV (because of small cost differences) with reductions
of 28% by 2050 and 49% by 2070 compared to base scenario. The equivalent cost reduction
is marginal for batteries. In addition to the savings in the import bill from increased domestic
manufacturing, scaling domestic PV and battery manufacturing remain crucial for job creation
and economic growth.
4.2.5 Implications for the Overall Import Bill (Fuels and Critical
Minerals)
Net savings in the overall import bill occur under the Net Zero transition when all imports
namely fuels, energy-transition technology components, and critical minerals are considered
together. Transitioning to cleaner energy technologies requires additional expenses for imports
of critical minerals, solar and battery cells, and nuclear fuel. However, the scale of this increase
is modest relative to the sharp and sustained decline in fossil-fuel imports and is more than
offset by falling imports of fossil fuels such as oil, gas, and coal, as shown in Figure 4.12.
When all imports are considered, the Net Zero Scenario results in substantial savings in the
import bill compared with the Current Policy Scenario. Figure 4.11 shows that savings appear
as early as 2035, at about 0.07% of GDP, rising to about 0.5% of GDP by 2050-70. 66
Implications of the Net Zero Transition for Government Revenue and the Import Bill Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
2030 2035 2040 2045 2050 2055 2060 2065 2070
% of GDP
Figure 4.11: Savings in import bill in Net Zero Scenario compared to Current Policy
Scenario as a % of GDP
-12000
-10000
-8000
-6000
-4000
-2000
0
2000
Oil and gas Coal Critical minerals +
Solar & battery cells
Nuclear fuel
2050 2070
Million 2011-12 INR
Note: CPS = Current Policy Scenario; NZS = Net Zero Scenario
Figure 4.12: Commodity-wise change in imports in Net Zero Scenario compared to Current Policy
Scenario in years 2050 and 2070 (Million 2011-12 INR)
Potential savings in the import bill are possible by enhancing domestic exploration of critical
minerals and establishing early-stage recycling programs. Even in the absence of domestic
availability of critical minerals, increasing domestic manufacturing can produce savings since
the import of finished components is replaced with imports of critical minerals and other
raw materials. Greater savings can be achieved through enhanced efforts for exploration of
domestic critical-mineral reserves and the development of production capacity. Implementing
recycling initiatives for degraded photovoltaic panels and battery cells can significantly reduce
dependence on imported raw materials. Recycling not only conserves resources but also
mitigates the environmental impacts of mining and processing new materials. 5
INDIA’S NET
ZERO PATHWAY:
CHALLENGES AND
SUGGESTIONS 68Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
India’s Net Zero transition will be underpinned by technology & capital, a purposeful
development model, reforming fiscal and regulatory systems, and strengthening institutions
that deliver change. This chapter distills the key challenges ahead and outlines a reform
agenda to turn them into opportunities. If executed as an integrated package, these measures
can anchor macroeconomic stability, accelerate emissions reductions, and position India as a
global exemplar of sustainable development.
India’s successful transition to Net Zero will hinge both on expanding clean technologies and
mobilising capital, and on reorienting its broader development model, strengthening institutions,
and undertaking deep structural reforms. If pursued as a coherent package, these reforms can
convert Net Zero from a constraint into a strategic growth opportunity—enabling India to
sustain high employment, enhance export competitiveness, and demonstrate an alternative
model of sustainable prosperity. The following chapter is organised into four broad themes:
(1) Building a resilient, low-carbon and globally competitive economy
(2) Mobilising capital for the Net Zero transition
(3) Reforming regulatory and fiscal systems for green growth, and
(4) Advancing green jobs, skills, and innovation.
These themes collectively provide a comprehensive roadmap for enabling India’s long-term
transition.
5.1 Theme-1: Building a Resilient, Low-Carbon and Globally
Competitive Economy
Building a resilient, low-carbon and globally competitive economy is central to sustaining
India’s growth in an era of rising climate risks and trade protectionist measures. As living
standards rise and resource pressures intensify, the development model must increasingly
prioritise reforms, efficiency and sustainability. This theme delves into aspects of promoting
climate-friendly lifestyles and how India can realign its trade to emerge stronger in a highly
volatile global economy.
5
India’s Net Zero Pathway:
Challenges and Suggestions 69
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
1. Redefine Development: Leverage India’s Civilisational Wisdom and
Mission LiFE as Blueprints for Sustainable Growth
The globally promoted development paradigm remains heavily skewed toward resource-
intensive growth, often prioritising consumption over sustainability. Across the world,
development is increasingly measured through a narrow set of urban and economic indicators,
reinforcing a model that equates prosperity with material abundance rather than ecological
balance, cultural rootedness, or long-term resilience. If India were to follow this trajectory
uncritically, it risks locking itself into energy- and carbon-intensive patterns of growth at odds
with its climate commitments and social priorities.
Conventional Development Indicators:
Per capita Income (USD): Often treated as the single most important measure
of development. US: >85,000; OECD avg: > 45,000; India: ~2700 (2024) (IMF
2024)
GDP per worker: Commonly used to compare economic efficiency (USD/
worker)
US: ~153,000; World average: ~48,000; China: ~45,000; India: ~24,000
(Our Word in Data, 2024)
Per capita electricity generation (kWh):
World avg: ~3,780 kWh; High-income countries: >8,900 kWh; India:
~1,400 kWh (Our World in Data, 2024)
Cooling demand: Global building stock is moving toward 24/7 HVAC
dependence—almost half of global building energy use is now for cooling and
heating (IRENA, 2023). AC penetration in developed economies >80%; India:
10% (IEA, 2018)
Per capita floor area: Often viewed as a proxy for prosperity. OECD
metropolitan cities: > 40–450 sqm (Banquet, A. et al. 2022); India: 12 sqm
(NITI Aayog, 2024)
Car ownership (per 1,000 people): US: >850; Australia, Canada, Italy:
>700; India: ~30, (but growing fast, linked with urban sprawl and energy use)
(OICA, 2024)
Average household size: OECD average: ~2.4; India: ~4.5. Evidence suggests
larger households consume lower per-capita energy and material.
These indicators provide useful benchmarks, but they are not the full story. The aim is not to
discard them, but to complement them with measures that capture the quality, sustainability, 70
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efficiency, and resilience of growth. For instance, material wealth alone is a poor predictor of
well-being: Japan, with a GDP per capita less than two-thirds of the US, has a life expectancy
nearly six years higher (84.8 years vs. 78.9 years)(WHO 2023). Costa Rica, whose GDP
per capita is barely one-fifth that of the US, achieves comparable life expectancy (80.3
years) through preventive healthcare, community cohesion, and active lifestyles. These cases
highlight that prosperity and well-being can be achieved without replicating high-consumption
pathways, opening space for India to advance an alternative development approach by drawing
on its civilisational wisdom and climate-conscious practices.
Traditional Indian homes, built with local materials, natural ventilation, and passive
cooling, consume far less energy than the globally favoured glass-and-steel structures
reliant on artificial climate control.
Multi-generational households, a longstanding feature of Indian living, can
significantly reduce per capita energy and material demand, especially in dense
urban settings.
According to the Pew Research Center (2021), about 39% of Indian adults identify
as vegetarian, far higher than in most Western countries, limiting meat consumption
for cultural, religious, or health reasons. These diets are both climate-friendly and
supportive of health outcomes.
Key Suggestions:
i. Energy efficiency has a central role in meeting our developmental needs: The
study estimates that India’s cooling demand will increase by 3 times as the living
standards of people improve. However, with widespread adoption of high-efficiency
appliances and building designs rooted in passive cooling, energy demand can be
reduced by 1/3rd. Similar measures across various end-use sectors will result in
India’s energy intensity of GDP reducing from 0.22 MJ per INR in 2025 to 0.09
by 2047 and 0.05 by 2070, decoupling growth from energy consumption while
maintaining quality of life. Therefore, the developmental norms need to shift from
energy-intensive practices to promotion of localized resources and climate-resilient
designs.
ii. Mission LiFE and Behavioural Shifts: The Prime Minister's Mission LiFE (Lifestyle
for Environment) provides a crucial platform to mainstream sustainable behaviours.
Small but systemic shifts, like setting ACs at 24–25°C, discouraging single-use
plastics in favour of reusable fabric bags, harvesting rainwater, promoting public
transport systems, promoting multi-generational households, promoting access to
clean cooking fuels (reducing the use of traditional biomass) and embracing natural
farming, can reshape household consumption and resource use at scale. 71
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iii. Promoting circularity for sustainable growth: Operationalizing the circular
economy paradigm through interventions such as reduced demand for virgin steel
and cement through greater material circularity and recycling of critical minerals
will be crucial.
2. Adapt to Geopolitical Fragmentation by Diversifying Exports and
Anchoring Low-Carbon Competitiveness
Global trade is entering an era of fragmentation. The post-pandemic world has seen a
marked shift from hyper-globalisation towards “geoeconomic fragmentation” (IMF 2023).
Rising resource nationalism and supply chain insecurity are reshaping trade strategies. “Just-
in-time” efficiency is giving way to “just-in-case” resilience, as countries prioritise supply
security over cost optimisation. Analysis of the recent trade-volume patterns suggests that
“China+1” has not yet delivered any desired shift with China’s export volumes continuing to
grow since 2020, while world exports excluding China have remained stagnant. Moreover,
much of global import growth has been driven by the United States rather than a widespread
reallocation of demand to alternative export hubs. This implies that any meaningful decoupling
from China would likely require stronger protectionist or quasi-protectionist measures such
as tariffs, local-content requirements, subsidies, and tighter screening which can raise input
costs and reduce efficiency, shifting resilience into a higher-cost equilibrium.
This challenge is compounded by the fact that the development context that enabled East
Asia’s rapid catch-up and industrial upgrading in the 20th century was materially different.
The geopolitical backdrop then was more supportive (often described as a “trade–security
nexus/umbrella” anchored in U.S. alliances) (Min Gyo Koo et al., 2011), there was no energy-
transition constraint, demographics were more favourable, and industrial policy was tightly
focused on productivity and performance backed by sustained investment in primary education
and vocational training.
In contrast, India is attempting to develop under constraints that China and the rest of East Asia
did not face: a global model of capital-intensive growth that sits at odds with India’s labour
endowment, an energy-transition “double-whammy” for capital-led manufacturing ambitions,
and rising AI/robotics pressures that threaten services jobs first and physical labour later
together posing risks to social stability if jobs and productivity do not keep pace. For India,
the IMF estimates potential GDP losses of 1.5–3.3% if fragmentation intensifies, making it
imperative to combine resilience measures such as domestic manufacturing capacity, strategic
stockpiling with continued engagement in global value chains (GVCs) and trade agreements.
Prepare for Non-Tariff Barriers and Emerging Carbon Standards: While average global
tariffs have declined, recent policy shifts in key markets such as the United States suggest tariff
measures could once again play a prominent role in trade tensions. At the same time, non-tariff 72
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measures (NTMs) have surged. The UNCTAD–UNESCAP 2024 database shows that 2,366
NTMs, 2.6% of all such measures, are climate-related, concentrated in CO₂-intensive sectors
such as steel, aluminum, cement, and electricity.
The EU’s Carbon Border Adjustment Mechanism (CBAM) and Deforestation Regulation
(EUDR) are prominent examples. Together, they could affect USD 9.5 billion of Indian exports
to the EU, about 12.9% of India’s exports to the bloc (Economic Survey 2024-25). Although
positioned as green policy, such measures also act as protective trade barriers. At the same
time, they reward exporters, European or otherwise, who can demonstrate the lowest carbon
footprint. With little steel production capacity remaining in Europe, the most competitive non-
European producers will be those that can decarbonise rapidly and credibly.
Since FY 2014–15, India’s merchandise trade has grown at a 4.3% CAGR (Ministry of
Commerce and Industry), but its share of world exports remains just 1.8%, compared to
China’s 14.6% (WTO, 2025). China’s success was built on high-volume specialisation in
“network products” such as electronics, an area where India has potential. It will be critical
to review the current export potential, accelerate industrial decarbonisation and strengthen
compliance systems to expand India’s share in global trade.
Key Suggestions:
In a fragmented trading system, market access is increasingly shaped by standards, subsidies,
investment screening, and climate-linked compliance not tariffs alone. Export diversification
and low-carbon competitiveness therefore need to be pursued as a single strategy: diversifying
into products and services less exposed to carbon and compliance shocks, while building
credible, verifiable low-carbon production to reduce exposure to instruments such as CBAM
and to compete in green procurement markets. In parallel, FDI and supply chains are being
re-routed by geopolitical alignment (“friend-shoring”), so trade agreements must increasingly
function as investment corridors supporting technology transfer, scale, and predictable rules
rather than relying on tariff relief alone.
i. Diversify Exports and Build Monitoring Systems for Global Standards: Climate
action will reshape India’s trade profile. Modeling from the current study indicates
that under a Net Zero global scenario, India’s exports could be lower than the exports
under the Current Policy Scenario by 4.75% by 2050 and 2.2% by 2070 in a Net Zero
domestic-financing pathway, driven largely by falling demand for carbon-intensive
goods. Imports would also dip modestly, although foreign-financed Net Zero
pathways could see higher imports. This reinforces the urgency of diversifying into
low-carbon export sectors and investing in certification and monitoring infrastructure
to comply with emerging global standards. 73
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ii. Strengthening Domestic Manufacturing to Leverage Shifting Global
Manufacturing Patterns and GVC Realignments: A focused industrial strategy
under the National Manufacturing Mission can raise manufacturing’s GDP share and
GVC integration. Priority sectors include electronics & semiconductors; apparel &
textiles; automobiles & components; toys, capital goods, etc. Low-carbon production
could become a significant comparative advantage in each of these sectors, not only
where price incentives like CBAM are in play, but also in meeting the evolving
sustainability demands of global customers.
Participation in these value chains will also require India to import parts and
equipment efficiently, implying the need to lower selected import barriers and to
attract greater foreign direct investment (FDI) to bring in technology, scale, and
market access. Recent Economic Survey 2024-25 data points to early trends:
Apple assembled 14% of its global iPhones in India in FY24.
Foxconn is building component plants in Karnataka and Tamil Nadu.
India attracted interest from 28 of 130 global firms seeking supply chain
diversification.
iii. Leverage FTAs to Secure Market Access and Align Regulations: Strategic
free trade agreements (FTAs) are critical to India’s future market access. FTAs
can unlock market opportunities, but with Non-Tariff measures proliferating, their
success will depend on India’s ability to meet regulatory, sustainability, and carbon
standards. Future agreements should move beyond tariff cuts to include cooperation
on certification systems, carbon measurement protocols, and digital trade rules.
Aligning domestic regulations with those of key partners, will be critical to sustaining
competitiveness in a fragmented trade environment.
Prioritise FTA sequencing using a “demand + capital” lens: partners that combine (a)
large shares of global manufactured imports (as end-markets) and (b) large shares
of global outward FDI (as sources of capital, technology, and production networks)
should be treated as first-order priorities. This points to the EU and the United States
at the top of the list, alongside major outward investors such as Japan, the United
Kingdom, and the Republic of Korea.
For these partners, FTAs should be structured as deep economic partnerships not just
tariff schedules covering investment facilitation, supply-chain cooperation, workable
rules of origin, and regulatory alignment to reduce behind-the-border friction and
unlock sustained GVC participation.
Finally, embed low-carbon competitiveness into these priority FTAs through
cooperation on Monitoring, Reporting, and Verification, carbon accounting, 74
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interoperability of sustainability certifications, and digital rules that enable traceability
and reporting at scale so exporters face lower, more predictable compliance costs as
standards tighten.
5.2 Theme-2: Mobilising Capital for the Net Zero Transition
Mobilising capital at scale is central to India’s Net Zero transition and its broader development
vision for 2047. Investment needs far exceed current flows, making it essential to expand
financing for infrastructure, industry, and emerging low-carbon technologies while safeguarding
macroeconomic stability. This theme focuses on how a balanced mix of domestic savings,
patient foreign capital, and sustained public investment can crowd in private finance, lower
the cost of capital, and ensure that the Net Zero transition strengthens, rather than constrains,
long-term growth.
1. Finance the Green Transition with a Balanced Mix of Domestic and
Foreign Capital
As per the Scenarios towards Viksit Bharat and Net Zero: Financing Needs (Vol. 9) report,
investment requirements even in the Current Policy Scenario (CPS) are estimated at ~ USD
14.7 trillion until 2070, translating to roughly USD 300 billion per year, compared to current
inflows (2024) of only about USD 135 billion (of which ~USD 87 billion corresponds to
clean sources (IEA 2025)). This means that mobilising significantly more capital toward
infrastructure and industrial capacity will be essential for achieving the 2047 development
vision, regardless of whether Net Zero is pursued. Further, pursuing Net Zero will significantly
raise the investment demand to USD ~22.7 trillion (USD 500 billion per year).
Avoid Over-Reliance on Domestic Financing: Model results indicate that Net Zero pathways
relying solely on domestic financing (NZdom, NZdom+, NZdomsub) tend to exert a negative
impact on investment relative to the Current Policy Scenario, most notably between 2040 and
2050, when investment is lower than the Current Policy Scenario by 3–5%. The mechanism
is straightforward: higher domestic borrowing lifts real interest rates, making capital more
expensive for both public and private projects. This aligns with IMF findings that heavy
reliance on domestic debt in emerging markets can crowd out private investment by raising
financing costs (IMF 2024).
In these scenarios, higher interest rates encourage savings over consumption, reducing
household spending. While productive-investment variants (NZdom+) raise household
incomes enough to offset this effect, the domestic-financing cases see small but significant
net consumption declines. 75
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Leverage External Capital to Ease Rate Pressures: External capital can ease financing
pressures and sustain growth. In contrast to domestic-only pathways, externally financed
scenarios (NZfor, NZfor+) tend to increase investment relative to Current Policy Scenario.
By lowering interest rate pressures, foreign capital allows more projects to be financed on
competitive terms, supporting the view that blended finance is essential to scaling climate
investments in emerging markets and developing economies (World Bank 2023).
However, the external-financing scenarios carry a higher current account deficit (CAD),
around 3–3.5% of GDP compared to 2–2.5% in domestic-only cases. A CAD in this range
should be sustainable, especially if India maintains high growth rates near 7-8% per year, as
global patterns show several fast-growing economies financing even higher CADs without
instability. As the IMF notes, "a country can run as large a CAD as the rest of the world is
willing to finance" But in a world where developed economies are also competing for green
capital, India must actively court this investment rather than assume it will arrive.
Key Suggestions:
i. Crowd-In Patient Foreign Capital: Strengthen India’s ability to attract long-term
foreign capital by expanding technology partnerships, demonstrating a long-term
policy vision, and building a pipeline of bankable projects. Scale co-investment
platforms in GIFT City to attract foreign institutional investors like sovereign wealth
funds, global pensions funds, etc.
ii. Broaden Domestic financial savings:
a. Deepen the corporate bond market by lowering issuance costs, enabling bank
refinancing through bonds, and broadening the investor base to include PFs,
Insurers, retail investors, supported by risk guarantees, improved financial
literacy, and more diverse savings products. Unlock domestic insurance and
pension funds investment into investment-grade green bonds; deepen the
corporate bond market beyond AA/AAA issuers via partial credit guarantees
(SEBI, 2024).
b. Leverage recent advances in digital banking and offer households attractive, low-
risk savings products transparently linked to infrastructure and green investment.
iii. Lower Cost of Capital via De-Risking: Establish clear and predictable policies,
strengthen payment-security mechanisms, and apply blended finance for early-stage
technologies.
iv. Shift to Targeted Subsidies: Replace universal electricity subsidies with direct
benefit transfers (DBTs) for vulnerable households. This approach preserves fiscal 76
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space, maintains consumption resilience and strengthens the financial viability of
DISCOM sector.
v. Develop a Pipeline of Bankable, De-Risked Projects: India needs a pipeline of
bankable, de-risked projects with transparent revenue models and predictable policy
environments. Lessons can be drawn from the National Monetisation Pipeline (NMP)
and mega-project execution in renewable parks, highways, and DFC corridors,
demonstrating that large-scale, well-structured projects can mobilise significant
private capital.
A balanced financing mix, anchored in domestic savings but amplified by long-term patient
foreign capital, can maintain investment momentum, keep trade competitive, and ensure the
Net Zero transition strengthens rather than strains macroeconomic stability.
2. Continue and Intensify Infrastructure Investments for a Net Zero
Future
India has already scaled up infrastructure investments, with visible gains in access to services
and productivity. These efforts must be sustained and intensified to meet the country’s
development objectives for 2047. Rapid urban population growth, rising economic output, and
surging energy demand require large investments in core infrastructure systems. These needs
will be further magnified by climate change impacts and the necessity of building resilience
into new infrastructure.
Key Suggestions:
i. Frontload Investment to Enable the Net Zero Transition: As per the Scenarios
towards Viksit Bharat and Net Zero: Financing Needs (Vol. 9) report,, over the course
of India’s Net Zero transition, investment requirements rise sharply, reflecting both
the scale and urgency of low carbon transition. In the near to medium term (2026-
2050), Current Policy Scenario calls for USD 5.8 trillion in investments, while the
Net Zero pathway demands USD 8.05 trillion, creating an incremental gap of USD
2.25 trillion–about USD 90 billion annually, equivalent to about 2-2.5% of India’s
GDP in 2025. These early years are the most challenging, as investments must be
front-loaded in renewable capacity, grid expansion, and industrial decarbonisation
technologies.
Over the long-term horizon (2050–2070), Current Policy Scenario investments total
USD 8.86 trillion, compared with USD 14.69 trillion under Net Zero Scenario. The
incremental gap widens to USD 5.83 trillion, with annual needs climbing to around
USD 290 billion during 2050-70. Although the absolute financing requirement peaks
in this period, its share of GDP becomes more manageable as India’s economy 77
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
expands, the near term remains the harder test, given the urgency of accelerating clean
energy and enabling infrastructure. Although the costs are higher in the near term,
they are offset by reduced operational costs and energy imports. These investments
deliver high returns and accelerate technological upgradation and productivity
growth, explaining why the transition has a small impact on GDP and income growth
in macroeconomic simulations.
ii. Use Public Investment to Unlock Private Capital: Public sector investments,
particularly in basic infrastructure and network systems are critical especially in
areas such as electricity transmission and distribution, which enable the integration
of privately-financed renewable energy. Similarly, public support for EV charging
stations, can catalyse larger flows of private investment in e-mobility, including
e-buses.
iii. Prioritize Key Infrastructure Areas for Green Growth: To maximize productivity
gains, leverage private investments, and support rapid growth consistent with a Net
Zero pathway, India should focus on the following areas:
The electricity grid;
Urban infrastructure, such as bus and bike lanes;
Charging infrastructure for e-mobility;
Multimodal transport and logistics systems, including electrified railways and
waterways;
Efficient irrigation systems and water storage;
Energy efficiency and electrification end-use sectors;
Sanitation and wastewater treatment;
Solid waste management.
5.3 Theme-3: Reforming regulatory and fiscal systems for green
growth
As India’s economy grows and evolves, its institutional, regulatory and fiscal systems need
to keep pace so they can better support new industries and promote low-carbon growth. This
theme examines how India can strengthen institutions, streamline regulatory frameworks, and
reorient fiscal tools to support a greener, efficient and competitive economy.
1. Strengthening Institutions to Deliver the Green Transition
India’s ability to deliver on its energy transition and broader growth ambitions is not constrained
only by capital or technology, it is equally limited by the capacity, mandate, and incentives 78
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
of the institutions tasked with implementation. Be it agriculture or manufacturing, buildings
or power or transport, enforcement, fragmented mandates, and fiscal stress in nodal agencies
risk delaying or distorting outcomes. Strengthening and, where necessary, restructuring these
institutions, including through private participation, can unlock efficiency, reduce fiscal
leakages, and attract investment at scale.
In the power sector, state-owned DISCOMs remain the weakest institutional link in India’s
energy system, with chronic AT&C losses (~15–20%), delayed subsidy payments, and tariff
freezes. The Revamped Distribution Sector Scheme (RDSS) ties central funding to loss
reduction and cost recovery targets, but enforcement has been inconsistent. Similarly in the
transport sector, State Road Transport Undertakings (SRTUs) and urban bus agencies remain
fiscally stressed, with outdated fleet procurement models that focus on vehicle ownership
rather than contracting services. As a central institution in India’s green transition, the role
of the Bureau of Energy Efficiency needs to be strengthened as it rolls out Carbon Credit
Trading Scheme (CCTS) and implements Energy Conservation and Sustainable Building Code
(ECSBC) and Energy Conservation-New Indian Way for Affordable & Sustainable Homes
(ECO NIWAAS) norms.
Key Suggestions:
i. Align Agriculture Energy Support with Climate Outcomes: The PM-KUSUM
scheme’s solar irrigation component may be paired with groundwater metering and
buyback of surplus solar power.
ii. Strengthen the role of Bureau of Energy Efficiency: Multi-year cap-and-trade
roadmaps for CCTS, harmonised monitoring, reporting and verification protocols
aligned with global standards, and predictable compliance and penalty frameworks will
be essential for improving CCTS’s operational effectiveness. The same institutional
strengthening can support more consistent, on-ground implementation of Energy
Conservation and Sustainable Building Code (ECSBC) and Energy Conservation-
New Indian Way for Affordable & Sustainable Homes (ECO NIWAAS) norms,
creating an integrated regulatory architecture for industrial and building-sector
decarbonisation.
iii. Fix DISCOM Finances Through Tariff Reform and Private Participation:
a. Privatisation, full or partial, whether through full sale (as in Delhi’s BSES model)
or input-based franchisees, has shown measurable improvements in collection
efficiency and service quality. The Ministry of Power’s evaluations suggest
AT&C losses can fall by 30–50% within three years of private management. 79
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
b. Tariff rationalization is equally urgent. Many states maintain very high cross-
subsidies, with industrial/commercial tariffs over 150% of cost and agriculture/
residential tariffs at 50% or less. The National Tariff Policy (2016) recommends
reducing cross-subsidies to within ±20% of average cost of supply, but state
regulators have been slow to act.
iv. Shift from Asset Procurement to Service-Based Contracts in Transport: Under
PM-eBus Sewa and FAME-II, agencies are pivoting to gross-cost contracts with
standardised payment-security mechanisms, aggregated state-level procurement,
and integrated depot/charging infrastructure. Institutionalising this service-based
approach can reduce operating costs, improve utilisation, and accelerate deployment
of clean public transport.
2. Overhaul Regulatory Systems to Accelerate the Green Transition
IMF Article IV Staff Report (2024) highlights that state-level clearance delays and inconsistent
environmental permissions remain barriers to clean tech adoption. It also highlights that if
India narrowed its distance to the EM frontier
15
by 25% in areas such as credit market, it could
unlock a ~5% rise in private investment. Embedding these improvements into building, labour,
and compliance reforms will not only advance India’s green transition, but also structurally
elevate investor confidence and growth potential.
The Energy Conservation Building Code (ECBC) and Eco-Niwas Samhita (ENS) provide
a national framework for energy-efficient construction, but state adoption and municipal
enforcement remain patchy. The Ministry of Housing and Urban Affairs’ Model Building
Bye-Laws (2016) and the Bureau of Indian Standards’ codes are often diluted at the city
level, with excessive setbacks, mandatory parking minima, and outdated FAR norms locking
in high lifetime energy demand.
Key Suggestions:
i. Enforce Energy Codes and Modernise Municipal Bylaws: Linking budgetary
allocations to verified ECSBC/ENS enforcement rates, and streamlining digital
building approvals, can make energy-efficient construction the default. Harmonise
state building codes with the Model Building Bye-Laws (MoHUA, 2016) and the
National Building Code (BIS) to optimise setbacks, ground coverage, floor area ratio
(FAR), and parking requirements. Permit higher FAR and mixed-use zoning along
transit corridors to reduce commuting distances and transport energy demand.
15 Distance to the frontier is defined as the difference in values between the frontier (best performer) and India. 80
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
ii. Promote land-neutral RE solutions: Agrivoltaics (APV) present a promising
pathway, combining agricultural production as the primary use with electricity
generation as the secondary. This model reduces land-use conflict while allowing
efficient water use, since water withdrawn for panel cleaning can be reused for
irrigation. Similarly, floating solar and decentralized solar can reduce the demand
for land.
Further, India’s extensive stock of degraded lands offers an underutilised opportunity
for clean energy. These lands have limited agricultural value but can host solar and
wind projects with relatively low social cost. Additionally, repurposing the 2,500
km² of land already mined for coal and lignite (Kiesecker et al., 2024) would serve
dual goals: advancing decarbonisation while supporting a just transition in mining-
dependent regions by creating new jobs and infrastructure.
iii. Streamline Approvals through the National Single Window System: Expand
coverage to construction, power, and environment clearances, integrate digitally with
state pollution control boards (SPCBs) and urban local bodies (ULBs) through APIs;
and publish state-wise median and 95th-percentile clearance timelines.
iv. Streamline Dispute Resolution and Compliance
a. Fast-Track Dispute Resolution: Extend commercial court and mediation fast
tracks to EPC and O&M disputes in clean energy and manufacturing; align
with Insolvency and Bankruptcy Code (IBC) timelines to reduce investor risk.
b. Simplify Compliance: Consolidate overlapping returns and inspections into a
single compliance calendar; expand self-certification and risk-based inspections
under labour codes; adopt “no-surprise” inspection protocols.
v. Ensure Regulatory Predictability
a. Sustain Corporate Reform Momentum: Continue decriminalising minor
company law offences and digitising RERA processes to reduce friction for
smaller developers and green real estate projects.
b. Build Investor Confidence: Stable, transparent regulations will lower the cost
of capital for climate-aligned infrastructure, making projects bankable for both
domestic and foreign long-term investors. Introduce performance standards for
key sectors, such as appliances, vehicles, and industrial equipment, five to ten
years in advance to give businesses the certainty needed to invest in low-carbon
technologies.
Many of these reforms, particularly those involving land-use norms, zoning, and outdated
labour restrictions, will require substantial amendments to state-level regulations. Ensuring 81
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close Centre–State coordination, model guidelines with fiscal incentives, and capacity support
for state departments will be essential. Without alignment at the state level, the pace and impact
of national green-transition reforms will remain constrained.
3. Reform Subsidies and Fiscal Instruments
India’s central government subsidies have risen over the past decade, rising from 1.3% of
GDP in 2016–17 to 2% in 2022–23, with a pandemic peak of 3.6% in 2020–21 (Ministry
of Finance, 2024). Over 90% of this spending is concentrated in food and fertiliser support.
In FY 2022, total public support for the energy sector, including subsidies, PSU capital
expenditure, and PFI lending, was about INR 5 lakh crore (USD 68 billion). Subsidies alone
accounted for INR 2.25 lakh crore, with fossil fuels receiving more than four times the support
allocated to clean energy. While clean energy subsidies doubled for the first time since FY
2017—reaching INR 11,529 crore, largely driven by a 155% surge in solar PV installations,
they remain far below what is required to meet climate targets (IISD, 2022).
RBI’s State Finances: A Study of Budgets 2023–24 (2022–23 RE) reveals sharp interstate
variation in subsidy intensity, measured as a share of GSDP. While most large states allocate
between 1% and 2% of GSDP to subsidies, several diverge sharply from this range:
High-burden states: Chhattisgarh (5.8%), Tamil Nadu (5.0%), Madhya Pradesh
(3.2%), and Punjab (3.0%), largely due to expansive power tariff support, public
distribution schemes, and farm input subsidies. These elevated commitments reduce
fiscal flexibility to fund infrastructure, green transition projects, and climate resilience
measures.
Mid-range states: Karnataka (1.4%), Gujarat (1.2%), Maharashtra (1.2%), Andhra
Pradesh (1.1%), and West Bengal (1.1%), which combine targeted welfare with some
fiscal space for development.
Low-burden states/UTs: Kerala (0.2%), Assam (0.3%), and Union Territories such as
Delhi, Goa, and Sikkim, maintain minimal subsidy outlays relative to GSDP, often
reflecting narrower welfare portfolios or reliance on centrally funded schemes.
The contrast underscores a structural policy challenge: high subsidy-to-GSDP ratios risk
crowding out productive public investment unless schemes are better targeted and efficiency
is improved.
Key Suggestions:
i. Rationalize inefficient fossil subsidies: Rationalise inefficient fossil fuel subsidies
over the medium term while ensuring targeted support for vulnerable groups.
ii. Scale Direct Benefit Transfers (DBTs) to Improve Targeting: A transition from 82
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
untargeted price subsidies to DBTs, leveraging India’s JAM stack (Jan Dhan–
Aadhaar–Mobile), offers a proven pathway to improve targeting, cut leakages, and
preserve equity. Scale DBTs across electricity, fertiliser, and PDS, with Aadhaar-
linked beneficiary lists and public dashboards on coverage and savings.
iii. Broaden the Tax Base to Support Green Transition: The Economic Survey
highlights India’s narrow personal and corporate tax base. A coordinated Centre-
State approach, modeled on the GST Council, could review personal income tax
thresholds, remove exemptions, and simplify compliance, thereby widening fiscal
capacity without hurting small farmers.
iv. Earmark savings for a “Green Fiscal Space” to finance renewable integration,
grid upgrades, and storage.
5.4 Theme-4: Advancing green jobs, skills, and innovation.
India’s demographic window is open until the 2040s. UN DESA’s World Population Prospects
projects India’s working-age population (15–59 years) will keep rising until about 2044,
adding millions of job seekers each year. The challenge is structural: nearly 46% of workers are
in agriculture, while organised manufacturing accounts for just 2.8% of total share (compared
with China’s 28.8%) (Economic Survey 2023-24). Expanding labour-intensive manufacturing
and modern services, while raising agricultural productivity, is therefore critical. Without
targeted measures, compared with the Current Policy Scenario, Net Zero could mean 16
million cumulative job losses by 2045. With the right policy package, it could deliver 32
million net job gains by 2070.
India’s ability to convert its demographic strength into green jobs will depend not only on
expanding labour-intensive sectors but also on building the technological capabilities that
anchor future industries. The transition demands a workforce equipped for new energy systems
and climate-resilient value chains, making innovation, skilling, and R&D central to sustaining
competitiveness.
India invests just 0.65% of GDP on R&D, less than half the average of top economies
according to World Bank’s Development indicators. India’s R&D expenditure is far below
global innovation leaders such as South Korea (~5.2%), Japan (~3.4%), and the US (~3.5%). 83
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0.0%
1.5%
3.0%
4.5%
6.0%
South Korea US Japan China Brazil India
R&D (as % of GDP)-2022
Figure 5.1: R&D as a % of GDP for various countries
Source: World Bank
Business sector contribution remains India’s weak link. Private industry accounts for only
37% of total R&D spending, far below the 68% average among the world’s top ten economies
(UNESCO, 2023). Moreover, India’s R&D effort is concentrated in a narrow band of sectors,
namely pharmaceuticals, IT, transport, defence, and biotech, with limited investments in
cleantech and industrial decarbonisation.
India has export strengths and manufacturing capabilities in products and technologies that
will be in high demand during the global green transition (International Monetary Fund’s
2025 Article IV Report). However, India has produced comparatively few environment-related
patents (2,800 in the last decade, only 10 percent of what China or Germany have produced)
and ISO 14001 certifications (3.7% of total global share).
1. Make “Jobs for the Green Transition” a National Mission
Net Zero job outcomes hinge on financing and complementary policies. Model estimates show
the employment impact of Net Zero is moderate in aggregate, but varies sharply depending
on financing and policy support:
Domestic-financed pathways (NZdom): Employment is lower by nearly 1%
compared to Current Policy Scenario; cumulative jobs less than Current Policy
Scenario by ~16.1 million by 2045; real wages are lower than Current Policy Scenario
by up to 6% due to reduced productivity and tighter capital.
Foreign-financed pathways with subsidies (NZforSub): Employment is higher
by 1.0–1.2% compared to Current Policy Scenario from 2045–2060; cumulative
jobs more than Current Policy Scenario by ~32.45 million jobs by 2070; real wages
are higher than Current Policy Scenario by about 3% as green investment boosts
productivity. 84
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Complementary measures: particularly renewable energy subsidies, targeted
reskilling, and flexible labour regulations, turn the transition into a net job creator
rather than a drag.
These findings are consistent with international experience: across economies, the impact
of climate mitigation policies on employment tends to be modest and either net positive or
neutral, although distributional outcomes can be uneven (Godinho, 2022).
Sectoral shifts will be significant, and policies must enable workers to move where demand
grows. Without supportive measures, Net Zero could slow the shift from agriculture to services.
In NZdom scenario, services’ employment share is lower than Current Policy Scenario by 0.35%
while agriculture is higher than Current Policy Scenario by 0.60%. Even in the NZdomSub
scenario, services jobs are lower than Current Policy Scenario by 0.40%, agriculture jobs are
higher than Current Policy Scenario by 1.0%, signaling a need to smooth labour mobility.
Manufacturing shows mixed results, gains in some scenarios, declines in others, depending
on specialisation and technology uptake.
Coal mining, petroleum and coal products manufacturing jobs see significant decline in Net
Zero Scenario compared to Current Policy Scenario by mid-century
In contrast, the non-fossil energy sector employement (especially nuclear and wind) is higher
by 140–300% compared to Current Policy Scenario, adding about 400,000 jobs by 2050 and
up to 2.5 million cumulatively by 2070 (NZdom).
Key Suggestions:
i. Harnessing the Demographic Dividend through Green and Digital Skills: India’s
young population (~65% under 35) presents a once-in-a-generation opportunity. Yet,
only 51.25% of youth are currently deemed employable, up from 34% a decade ago
(Economic Survey 2023-24). Skilling efforts must now scale and focus on green and
digital sectors.
This push must be grounded in strong foundational capabilities, particularly literacy,
numeracy, and problem-solving, so workers can adapt to evolving technologies rather
than being locked into skills that may quickly become obsolete. To convert India’s
demographic edge into economic strength, skilling must align with market demand,
particularly for green, digital, and gig economy jobs. A “Green & Digital Skills
Stack” should include:
National Skill Qualification Framework (NSQF)-aligned green skills catalogue
consisting of solar O&M, battery assembly, efficient building retrofits etc.
Dual training/apprenticeship models tied to MSME clusters. 85
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Micro-credentials enabling laddered progression from technician to supervisor
to manager.
Industry-co-designed curricula in ITIs/polytechnics with modern CNC/PLC/
energy-efficiency labs.
ii. Prepare the Workforce for AI and Automation: AI is reshaping the global labour
market, and India must prepare its workforce. Technology, especially artificial
intelligence (AI), is becoming a strategic economic differentiator. While it can boost
productivity, it also threatens labour displacement. According to Cazzinaga et al.
2024, 26% of Indian workers are in high AI-exposure occupations.
14% are in roles where AI is complementary (e.g. diagnostics, logistics),
potentially raising productivity and wages.
12% are in high-risk jobs, vulnerable to displacement without reskilling.
India’s relative insulation, 46% of the workforce still in agriculture, may delay
immediate AI shocks, but this advantage will erode as structural transformation
advances. Without preparing the labour force, AI could worsen inequality and
constrain job creation for youth.
iii. Integrate Gig Economy Roles into the Green Transition:
Expand social protection via full operationalisation of the Code on Social
Security (2020).
Ensure portability of benefits and aggregator contributions for gig and platform
workers.
Recognise gig roles like, EV drivers, solar installers, e-waste handlers, as part
of India’s green economy.
iv. Fully Implement Labour Codes across States: Operationalise new labour codes
uniformly to improve hiring flexibility, promote formalisation, and attract industrial
investment, especially in labour-intensive manufacturing.
However, it is important to recognise that these projections operate amid significant “unknown
unknowns” around technological change, labour mobility, and global market shifts.
2. Launch a Bold Innovation Push for India’s Net Zero Ambitions
Many critical green technologies are not yet commercially viable and public-private R&D
must bridge the gap. According to the IEA’s Energy Technology Perspectives (ETP 2023) and
Net Zero by 2050 Roadmap, nearly 50% of the required emissions reductions by 2050 depend
on technologies that are still at prototype or demonstration stage, especially in: 86
India’s Net Zero Pathway: Challenges and Suggestions Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Clean hydrogen and ammonia.
Carbon Capture, Utilisation and Storage (CCUS).
Battery chemistries for long-duration storage.
Green steel and cement
Advanced biofuels and sustainable aviation fuels (SAFs)
Without a robust R&D and demonstration pipeline, India risks being a technology follower,
dependent on costly imports, and missing the strategic opportunity to lead in areas such as
green hydrogen, battery manufacturing, or process innovations for low-carbon manufacturing.
Progress in near-commercial products and technologies is best promoted by creating niche
markets where they can compete. This can be achieved through demand creation by public &
private entities , such as voluntary offtake agreements, green procurement, long-term contracts
by anchor firms, and early-adopter coalitions that provide revenue certainty and incentivise
firms to invest in applied R&D and demonstration.
Key Suggestions:
i. Scale Business-Sector R&D Capacity: Increase business contribution to R&D
personnel and researchers from 30% and 34% respectively to levels closer to the
top-ten economy average (58% and 53% respectively) by 2035 (Economic Survey
2020-21).
ii. Create Mission-Driven R&D Clusters: Like China, establish mission-driven R&D
clusters pooling resources across academia, national labs, and industry, with a focus
on commercialization of breakthrough technologies.
iii. Mandate Sectoral Innovation Funds: Require large carbon-emitting sectors (steel,
cement, refining) to invest in dedicated innovation funds for low-carbon technology.
Anchor these missions at leading CSIR labs, IITs, IISc, and other institutions with
clear tech-to-commercialisation pathways. ANNEXURES 88Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex A
Description of the Models
The analysis of India’s Net Zero transition relies on a two CGE models to provide an assessment
of the economy-wide impacts. First, a long-run GDP growth pathway, the Reform Scenario, is
produced with the World Bank’s Long-Term Growth Model (LTGM). This projection serves as
the official reference baseline. Subsequently, two different Computable General Equilibrium
(CGE) models: the MANAGE-WB CGE model and the NCAER CGE model use this baseline
to analyze how various Net Zero (NZ) policy scenarios would cause the economy to deviate
from its projected path, assessing impacts on GDP, employment, and other key indicators.
This section summarizes the three modeling approaches, with detailed descriptions provided
in the Annex A (NCAER) and Annex B (MANAGE).
Annex A.1. NCAER Methodology
A.1.1 Introduction
Historically, there has been a significant association between the energy consumption and
countries’ development, a composite indicator of human well-being (Pasternik 2000, WEO
2004). There is a positive causality between the level of electricity consumption which is a
representative of modern energy, and human development of a country. The higher the income
of a country, the greater is its electricity consumption and the higher is its level of human
development (Niu, et al., 2013). Considering the importance of energy in social and economic
development of a country, the energy systems and the energy security problems, ranging from
energy poverty to climate change also vary across different countries. Energy security based
on the principles of affordability, availability, accessibility and acceptability, is one of the
main drivers of energy policies in countries (Cherp & Jewell, 2014). Being under the grip
of energy poverty and mostly being a net importer of fossil fuel energy resources, energy
security is crucial for India (Bhide & Monroy, 2011). Affordability, availability, accessibility
and acceptability of energy is of central focus when drafting the national energy policy.
India has already taken steps towards the goal of sustainable energy development by setting
the goal to make available 24x7 power to all by 2019, achieve 175 GW of renewable energy 89
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
generation capacity by 2022, reduce imports of oil and gas by 10 per cent by 2022-23, and
continue to reduce emission intensity of GDP in a manner that will help India achieve the
intended nationally determined contribution (INDC) target of 2030 (Niti Aayog, 2018). At
the Glasgow COP Summit, India revised its commitment that its renewable energy capacity
will reach 500 GW by 2030, meeting 50% of the country’s energy requirements by then. It
would reduce its total projected carbon emissions by one billion tonnes by 2030, reduce the
carbon intensity of its economy by 45% by the same year, over 2005 levels, and achieve Net
Zero emissions by 2070.
The transition to a low carbon pathway requires a methodology to provide an economy
wide assessment of alternative policy choices towards sustainable and inclusive economic
development. Only by understanding the combined forces of behavioral realities, markets and
prices, and technological innovation and infrastructure together, can coherent responses be
built to transition energy systems (Grubb, Hourcade, & Neuhoff, 2015).
The relations between the economy, the energy sector and the environment are described in
two broad classes of models called top-down and bottom-up respectively. Usually to assess
long term climate policies, a top-down macro-economic model and a bottom-up technology-
energy-environment model are coupled to a hybrid top-down/ bottom-up model producing
a macro-economic scenario with detailed technology description (Drouet, et al., 2005). The
top-down models describes the whole economy and emphasize the possibilities to substitute
different production factors in order to optimize social welfare. The production functions
describe the interplay of factors of production and intermediate products, and changes in their
combinations through the elasticities of substitution. The bottom-up models include interaction
among the numerous individual energy technologies that make up the energy system of an
economy, from primary energy sources, via conversion and distribution processes to final
energy use (Helgesen & Tomasgard, 2018).
It is important to analyze the issues in a modelling framework that determine prices in the
system. This is possible only if price is endogenously determined in the model through sectoral
demand/supply equation. In that case, economic equilibrium (where demand and supply in
the economy meet) would result in determination of price and output in the economy. In an
economic model, demand and supply equations for all the sectors of the economy including
energy sector are explicitly built in and hence price and As the above discussion suggest, the
duality of energy and economic system is captured in an economic model. The Computable
General Equilibrium Model (CGE) is a class of economic model that use actual economic data
to estimate how an economy might react to changes in policy, technology or other external
factors. In such model, sectoral growth as well as market driven prices are endogenously
determined through optimizing behavior of agents (typically consumers, producers) of the
economy. For this reason, the impact on the economy due to policy can be analyzed in CGE 90
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
model. Since, energy related sectors are a part of the overall economy, effects of shocks
on same can also be analyzed. If price in the energy sector between different sources vary,
consumer of energy would substitute away from high energy source to low one and as well
as make innovation in the medium to long term to reduce energy demand. If the consumer
(producer) income (revenue) do not change, the economic agent can reduce the demand.
Furthermore, an economic model typically integrates trade with rest of world. So, it is capable
to capture the impact of trade in energy sectors on the economy as well as the price effects
of energy sector from the global market to domestic economy and their effects on the energy
system.
As an improvement to the existing studies available in Indian landscape of deep decarbonization
and Net Zero, the current study emphasizes on establishing a structured mechanism to
endogenize energy demand in the system model framework linked with macroeconomic growth
factors. The uniqueness of the study is thus on integrating macroeconomic impacts on sectoral
energy demand and subsequent assessment energy supply mix in a least cost manner. In this
structure of analysis, the additional advantage will be to capture the cross sectoral linkages of
economic activities and substitution impacts of fuel and technology changes over the model
horizon. The study proposes to derive the sectoral energy demand through macroeconomic
general equilibrium model which will provide robust demand pattern of energy through sectoral
output growths. General equilibrium approach-based energy demand assessment considering
intra and inter sectoral impacts of other commodities (transformation and substitution). While
projecting the future energy demand for each of the economic sectors, this approach considers
the recursive dynamic approach. CGE based energy demand estimate are more inclusive and
reactive to other economic performances. The improvements we envisage in this study are
as follows:
Obtaining much deeper understanding of the socio-economic impacts of deep
decarbonization or Net Zero condition
Understanding of the investment demand for various new and upcoming low carbon/
carbon neutral technologies like CCS, Green Hydrogen etc.
Obtaining wider policy options for deep decarbonization at national level
Assessment of potentiality of implementing Article 6 in achieving NDC/ Net Zero
conditions
Stronger methodology for generating long term demand scenarios
Section 2 describes the modeling structure of our CGE model, along with the working of
recursive dynamic model. Section 4 shows our results from integrated modelling framework
while section 5 provides concluding remarks. 91
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
A.1.2 NCAER’s CGE Model of India
Below, we describe the structure of our CGE model.
The India Energy Model is patterned after the ORANI-G Model, which was developed by
Dixon et al (2012). The multi-household structure of the model is adapted from the work of
Corong and Horridge (2012).
Given that the focus of the model is to analyze issues relating to low carbon pathway, the
model has incorporated in detail both primary and commercial energy sectors. The sectors
of our model is shown in Table 2-1. As this table shows, all major sources of electricity
productions in India are modelled as separate sectors. Similarly, energy intensive sectors like
cement, aluminum, iron and steel figures as independent sectors. ic vehicles in the policy
declaration, there is a switch towards rail transport by electrical transmission and increased use
of waterways for cargo movement in order to reduce logistics cost. Hence, we have included
a disaggregated transport sector in our model. In all, we have 56 sectors in our model.
Table A2-1: Sectors of India model
1.Agriculture21.Solar electricity
2.Livestock22.Wind electricity
3.Forestry23.Hydro electricity
4.Fishing24. Gas electricity
5.Coal25. Coal electricity
6.Natural Gas26. Rest of electricity
7.Crude Petroleum27. Electricity distribution
8.Mining (others)28. Railway Transport
9.Textiles29.Land Transport
10.Paper products30.Water transport
11.Petroleum Products31.Air transport
12.Cement32.Other transport supporting activities
13.Ferrous Metals33.Trade
14.Aluminum34.Storage Warehouse
15.Other Non-Ferrous Metals 35.Communication
16.Fertilizers36.Hotels & Restaurants
17.Other Chemicals37.Finance & Insurance Services
18.Other Manufactured products 38.Water Distribution
19.Construction39.Dwelling
20.Nuclear electricity40.Other Services 92
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
There are four factors of production (land, capital, unskilled labor and skilled labor), three types
of domestic institutions (households, enterprises and government), and an external sector. In
a country like India where there are significant variations in income across household classes
and across location (rural, urban), any discussion on policy interventions always focuses on
whether the same change is inclusive across income classes or not. The same debate recurs
in the case of adoption of low carbon pathway for India. For this reason, our CGE model of
India incorporates 5 income quantile classes each for rural or urban households.
Our model economy assumes that perfect competition prevails across all sectors of the
economy and thereby each producer, firm, industry is a price taker. Demand and supply
equations for private-sector agents are derived from the solutions to the optimization problems
(cost minimization, utility maximization, etc.) which are assumed to underlie the behavior
of the agents in conventional neoclassical microeconomics. The agents are assumed to be
price-takers, with producers operating in competitive markets which prevent the earning of
pure profits. Given a production technology, the producers try to minimize their costs so
as to optimize their returns. Consumers try to optimize by price minimization and utility
maximization. The production technology assumes constant returns to scale, though we may
introduce increasing returns to scale in some of the sectors of our model at a later stage. The
endowments are assumed to be fixed within a period, so over period due to influx of foreign
capital, and population growth respectively, the supply of land is assumed to be fixed.
A.1.2.1 Production Structure
Each producing sector has a nested production function, and the structure of nesting being
the same across sectors. The producer’s input and output decisions are governed by costs
minimization while deciding on the optimal mix of inputs and profit maximization while
choosing the optimal mix of products to be produced. A series of nests as depicted in Figure
A2-1 represents the producer’s behavioral parameters.
At Stage 1, input of aggregated labor composite by skilled and unskilled occupation type
is combined using constant elasticity of substitution (CES) for each industry. At stage 2, all
the primary factor inputs of capital, land and composite labor are combined to form a CES
primary factor aggregate. All intermediate inputs from domestic and imported commodities are
combined using another Armington-CES function, which represents imperfect substitutability
between domestic and foreign commodity inputs. Stage 3 depicts Leontief production function
using intermediate commodity inputs, primary factors and other costs such as stamp duties
etc. Stage 4 and 5 represent the output supply decisions of the firm, in which stage 4 is for
multi-products firms to decide on optimal mix of products to produce through a Constant
Elasticity of Transformation (CET) function and stage 5 depicts the firm’s decision of supply
of products to the domestic and export markets through Armington-CET function. In our 93
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
model, we have assumed that electricity distribution sector facilitates electricity to all the
agents of the economy.
Good 1Up to
Local Market Export Market Local Market Export Market
Labor occupation
type skilled
Labor occupation
type upskilled
Primary FactorsOther costs
Land Labor Capital
Local Market
Get
Export Market Local Market Export Market
Good 1
Output/Activity Level
Leantel
Get
Good 2Up to
STAGE 5
STAGE 4
STAGE 3
STAGE 2
STAGE 1
Oth
Functional
Form
KEY
Input/Output
Good G
CesCes
Ces
Get
Figure A2-1: Production Structure of Industries
This sector buys electricity produced by all modes and distribute them to the various agents
depending on their needs. The production structure for the distribution industry is illustrated
in Figure A2-2. The input structure for the distribution industry is similar to other industries
in that the distribution industry choose a combination of composite intermediate inputs
and the decision to create a composite electricity commodity is facilitated via a number of
nests. Equations in each nest solves a specific optimisation problem. At the top level, the
composite electricity commodity is created via a combination of electricity generated from
nuclear, renewable sources (green) and from fossil fuels. The composite renewable electricity
commodity is created via the combination of solar, wind and hydro while electricity from
fossil fuels is created via a combination of natural gas, coal and other fossil fuels. 94
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
In the bottom nests, the fuel sources are sources domestically or imported. In describing the
input decisions by the electricity distribution industry, we begin by the topmost input-demand
nest.
Industry Output
Leontief
Intermediate
Composite
Good 1
Domestic
good 1
Imported
good 1
Intermediate
Composite
Good 1
Primary factor
composite
CES
Domestic
good
Imported
good
Domestic
good 1
Imported
good 1
Nuclear
Labour
type 1
Labour
type 2
Capital Land Labour
Nuclear
GreenFossil
WindHydro
Domestic
good
Imported
good
Other
Domestic
good
Imported
good
Natural gas
Domestic
good
Imported
good
Coal
Electricity
Composite
Up to
CES
CES
CESCES
CESCESCES
CES
CES
CES
Domestic
good
Imported
good
Domestic
good
Imported
good
Domestic
good
Imported
good
Figure A2-2: Production structure of the Electricity Distribution industry 95
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
A.1.2.2 Investment Demands
The investor combines commodities to produce new units of capital. Figure A2-3 shows two
stage nested structure to produce new units of investment/ capital goods as illustrated in stage
1 where optimal demand for source specific capital inputs is determined by imposing imperfect
substitutability between domestic and imported capital
STAGE 2 STAGE 1
New Capital
for Industry I
Leontief
Domestic
good 1
Imported
good 1
CES
Good 1
Domestic
good G
Imported
good G
CES
Good G
……… Up to ………
Figure A2-3: Structure of Investment Demand
A.1.2.3 Household Demands
At stage 1, a nested CES Armington function is employed for the imperfectibly substitutable
domestic and imported goods governed by utility maximization and cost minimization of the
economy-wide household.
Multiple categories of households, of five rural and five urban classes, have been prepared to
showcase their varied consumption pattern. Stage 2 denotes the optimal consumption of various
goods as per the Klein-Rubin function, which requires each household to first buy subsistence
consumption regardless of its price and later allocate budget for luxury goods. A small value of
the parameter indicates a subsistence commodity, while a large value corresponds to a luxury.
Given consumption prices, each household chooses the optimal consumption of commodities
for utility maximization. 96
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
STAGE 2 STAGE 1
New Capital
for Industry I
Leontief
Domestic
good 1
Imported
good 1
CES
Good 1
Domestic
good G
Imported
good G
CES
Good G
……… Up to ………
Figure A2-4: Structure of Consumer Demand
A.1.2.4 Trade Demands
Imperfect substitution between domestically produced and imported goods is allowed in CGE
models. In other words, producers/consumers are free to sell or buy goods from the domestic
or foreign market based on relative prices. The Armington function is used to capture the
substitution possibilities between domestically produced and imported goods. The import
demand function, derived from the Armington function, specifies the value of imports based
on the ratio of domestic and import prices. sIn our model, we have followed two approaches
to model export functions. The principal sectoral exports are modelled individually and
foreign demand responds to sectoral foreign/domestic prices. However, as exports have a
weak relationship with prices in case of service exports, they are modelled collectively. The
collective exports on the other hand all move together in collective group by taking average
price of the collective group and via a constant elasticity of demand curve.
A.1.2.5 Government Demands
Government expenditure is on the consumption of goods and services, transfers to households
and enterprises, and subsidies. Government income is from taxes (direct and indirect), capital,
public and private enterprises, and rest of the world. Direct tax implies income tax, while
indirect taxes include excise duty, import and export tariffs, sales, stamp, service, and other
indirect taxes. hold consumption requires more government services Government savings
which is the difference between government expenditure and income is determined residually
in the model. 97
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
A.1.2.6 Inventory Demands
Demand for Inventories is assumed to follow domestic production. The change in the volume
of each source specific commodity going to inventories is a fixed share (measured at current
prices) of the change in domestic production of that commodity.
A.1.2.7 Margin Demands
Margin commodities are required to facilitate the transfer of each source specific commodity
to each user. If the margin technology terms is held constant, each user’s effective demand
for margin commodities is proportional to the commodity flows with which the margins are
associated.
A.1.2.8 Total Demand for Commodities
The ordinary change in supply of domestically produced commodities is equal to the ordinary
change in the demand by all agents in the economy. Similarly the ordinary change in supply of
imported commodities is equal to the ordinary change in the demand for imported commodities
by all agents in the economy.
A.1.2.9 Purchasers’ Prices
Purchaser’s prices are calculated as a sum of basic prices of commodities, commodity taxes
and margin costs. Owing to different sales tax rates and different margin costs, purchaser prices
for producers, investors, households, exporters, government are different. The purchaser’s
prices are calculated by summing the basic prices, commodity taxes and margins. The base
prices are the value received by the producers and the amount paid by the importers including
the import duties.
A.1.2.10 Gross Domestic Product
The income-side of GDP comprise of economy-wide factor payments of land, capital and labor,
aggregate economy wide indirect taxes, value of other costs, production taxes or subsidies.
The expenditure side of GDP comprise of summation of quantity and price indices of
aggregate real household consumption, investment, aggregate exports, aggregate value of
public consumption expenditure and inventories. In the case of inventories the price index
is computed using the basic prices of source specific commodities. The GDP in income and
expenditure forms must be equal. There is a separate check in the model to ascertain that.
A.1.2.11 Dynamics
The model is multi-periods in nature, where the unit of period is one year. It is a recursively
dynamic (RD) model and is solved as a sequence of static single-year CGE models, after 98
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
updating sectoral capital stocks, available labor supply each year and other plausible policy
shocks over the year. The logic for using a recursive dynamic model is that India government
has set policy target for short, medium and long term for low carbon pathway. To some extent,
RD version of model can attempt to simulate these changes. The sectoral capital stocks are
exogenously given at the beginning of a particular period. Between two periods, there will be
additions to capital stocks in each sector because of the investment undertaken in that sector
in the previous period. More precisely, the sectoral capital stocks for any year t are arrived
at by adding the investments by sectors of destination, net of depreciation, in year t-1 to the
sectoral capital stocks at the beginning of the year t-1. Labor supply is updated each year by
adding the new entrants to the labor force, which is governed by population growth. Apart
from the above variables, dynamic version of the model needs assumption regarding changes
in foreign prices for future years, sectoral productivity growths of endowments, technology
and preferences (tastes). These may be shocked depending on the policy interventions.
Our CGE model has been calibrated to the benchmark equilibrium data set of the Indian
economy for the (financial) year 2024-25, which has been a practically normal year for India.
The core data base of the model comes from the Supply Use table for India for the year 2018-
19 and the social Accounting Matrix (SAM) with 10 household class (5 rural, 5 urban) for
the year 2021-22, which we prepared ourselves for this study (2014). The model also requires
other parameters and elasticities which are drawn from literature surveys with focus on India.
Most of the parameters, elasticities, are for the paper are drawn from Ojha, Pohit and Pal (2009).
The sectoral productivity numbers are collated from various Indian studies and India KLEMS
database.
A.1.3 Policy analysis with a dynamic model
The ORANI-India model is a versatile and flexible comprehensive analytical framework that
explicitly traces each variable through time at annual intervals. As illustrated in Figure 3-1,
policy analysis with a dynamic CGE model requires two simulations. The first simulation is
the baseline forecast or business-as-usual simulation. This simulation models the growth of
the economy over time in the absence of the policy change under consideration. The second
simulation is the policy simulation. n generates a second forecast that incorporates all the
exogenous features of the baseline forecast, plus policy-related shocks reflecting the details
of the policy under consideration. The impacts of a policy are typically reported through
percentage deviations away from the baseline forecast. 99
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Baseline
B
C
A
202020242070
Policy
Deviation
Figure A3-1: Policy analysis with a dynamic model
The CPS simulation is the control projection against which policy scenarios are compared
(See Figure A3-1). In building the baseline for this study, the simulation period was divided
into two parts. The first, covering the years 2019 to 2022, should be viewed as the period
where the database is updated to the most recent year. The second part, covering 2025 to
2070, incorporates forecasts period.
To accommodate the extraneous information supplied to the model, numerous naturally
endogenous variables in the model are made exogenous. To allow the naturally endogenous
variables to be exogenously determined, an equal number of naturally exogenous variables
are made endogenous. For example, real GDP is a naturally endogenous variable in the model
while the economy-wide technology variable is naturally exogenous. To accommodate the
exogenous settings of real GDP, the economy-wide technology variable is set endogenously
and allowed to adjust as to accommodate change in real GDP.
Assumption for the CPS and NZ
Table A3-1: The Aspirational GDP growth rate (%) for the model until 2070 is summarised below
Year
2026-
2030
2030-
2035
2035-
2040
2040-
2045
2045-
2050
2050-
2055
2055-
2060
2060-
2065
2065-
2070
Growth
Rate
7.6 7.4 6.9 6.8 6.1 4.9 4.0 3.2 2.4
Achievement of Female Labour Force Participation (FLFP) rate of 70% by 2047
(Target embedded in the Viksit Bharat Vision document) and saturate thereof. 70%
is close to 50th percentile of FLFP seen in High Income (HI) economies. In-case of 100
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Male Labour Force Participation Rate (MLFP), 77.5% reported in 2024 is already
close to 50th percentile seen in High Income economies. Therefore, MLFP is assumed
to be constant.
We have assumed an inflation of 4% inflation till 2047 and 3% after 2047
We have assumed that exchange rate would depreciate by 1.5% till 2047, after 1%
thereafter.
Population trajectory follows UN population after 2035 and India projection till
2035.
Urbanisation is expected to reach 65% by 2070.
Due to the compactness of urban agglomerations, the urban population have reduced
demand for transport by 15%
The share of rail rises to 40% in 2070 in freight movement.
The share nuclear electricity increases from 2% (2025) to 12% in 2070.
We have assumed the adoption of carbon emission capture technology in emission-
intensive sectors, like cement, aluminum, small iron and steel, and all types of fossil
fuel electricity. The adoption starts in 2035, reaching 3-5% by 2050 and 95% of
required 1255 MT capacity by 2070.
The use of fuels (coal, crude oil, natural gas, refined petroleum) in current production
becomes more efficient over time with advancements in the energy-saving technologies
in use. An improvement of 1% per annum.
The use of refined petroleum by households becomes more efficient by 0.50% per
annum with energy-saving apparatus and increasing consciousness.
Efficiency of carbon sequestration increased by 5% per annum with the increasing
popularity of urban forestry, vertical and roof gardening, municipal and panchayat
proactiveness, community forestry and farming in rural areas, etc.
Green hydrogen rises by 10 times between 2030 and 2070.
However, as our model is sequentially solved and output and prices are endogenously
determined, we are not in a position to hit the exact targets that are specified. We can only
attempt to arrive close to it. 101
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex A.2: MANAGE Methodology
A.2.1 Production structure
The MANAGE-WB model is a recursive-dynamic, single-country Computable General
Equilibrium (CGE) framework designed by the World Bank to analyze the macroeconomic
implications of policy changes
16
. It is built on a neoclassical growth foundation, capturing
economic growth through the core drivers of capital accumulation, labor stock, and
productivity growth. The model simulates the behavior of key economic agents—including
firms, households, and the government—and captures the complex interplay between different
sectors of the economy through market-clearing mechanisms. Its structure is particularly well-
suited for analyzing the energy transition, as it allows for detailed substitution between capital,
labor, and different energy sources.
Production in each sector follows a nested structure based on constant elasticity of substitution
(CES) functions, enabling the model to capture varying degrees of substitutability among
inputs such as capital, labor, energy, and intermediate inputs. This nesting framework is further
adapted to reflect decision-making in the energy sector.
At the top of the production nest, output is formed by combining value added and
intermediate inputs, with intermediate inputs treated as complements. To account for the
role of energy, the model broadens value added inputs to explicitly integrate energy demand
nest, characterized by an additive CES function. This specification allows for more flexible
substitution patterns among energy sources while maintaining constraints on overall energy-
capital-labor substitution. The model allows for substitution between an energy bundle and a
combined capital-and-skilled-labor bundle, capturing how firms can reduce energy use either
through capital investment in efficient technologies or by employing skilled labor for better
energy management. Within this energy nest, production processes draw on electricity (both
generation and distribution), refined petroleum products, coal, gas, green hydrogen (GH), and
biomass.
The nesting structure varies across sectors to reflect heterogeneous production technologies.
Energy-intensive industries such as iron and steel, cement, and chemicals have different
substitution elasticities compared to service sectors, capturing their limited flexibility in
replacing energy with other inputs. Hence, the model allows for customized nesting patterns
and elasticity values for each industry and activity.
16 Here is the correct link to the latest documentation. https://documents.worldbank.org/en/publication/documents-reports/
documentdetail/099543511132534267 102
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
A.2.2. Production Structure in MANAGE
Output
by vintage (XPυ)
Value added
bundle (VA)
Armington
demand (XA
i
)
Unskilled labor
bundle (LAB1)
Energy bundle
(NRG)
Skilled labor
bundle (LAB2)
Armington
demand (XA
e)
Labor
demand (L
d
ul
)
Labor
demand (L
d
sl
)
Land (LAND)
K+SK+E
bundle (KSE)
Capital (K)
Intermediate
demand bundle excl.
NRG (ND)
Capital skilled labor
bundle (KSK)
s
p
s
u
s
k
s
e
s
ks
s
ul
s
n
s
sl
A.2.3. Household and Government Behavior
Household Income and Consumption Households receive income from multiple sources:
factor payments (wages, capital returns, and land rents), transfers from other institutions, and
debt service payments from the government. The model distinguishes between 10 household
categories, differentiated by location (urban/rural) and income quintile, allowing for detailed
distributional analysis. Each household type has specific shares in total factor income, reflecting
differences in asset ownership and labor market participation across income groups. After
paying personal income taxes and making transfers to other institutions, households determine
their disposable income, which forms the basis for consumption and savings decisions.
Household consumption follows a Constant Difference in Elasticity (CDE) utility function,
which provides flexibility in capturing non-homothetic preferences and allows calibration to
observed income and price elasticities across different commodity groups.
Household Savings Behavior Household savings decisions respond endogenously to relative
returns through a Constant Elasticity of Transformation (CET) function. Households adjust
their savings rate based on the composite returns to savings relative to consumption prices.
When interest rates rise or inflation erodes the real value of consumption, the relative return
to savings increases, inducing households to save more. There is a transformation elasticity 103
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
parameter that governs this responsiveness: higher elasticity means households more readily
shift between consumption and savings in response to changes in interest rates, inflation,
or investment returns. This specification ensures macroeconomic consistency as household
savings adjust to clear the market for loanable funds, equilibrating savings supply with demand
from government and private investment.
Government Revenue and Expenditure The government sector operates through a
comprehensive fiscal framework encompassing multiple revenue streams and expenditure
categories. Revenue sources include factor taxes, production taxes and subsidies, commodity
taxes (both domestic and import), trade taxes, direct taxes on households and enterprises,
and carbon taxes on emissions. On the expenditure side, the government provides transfers
to households, finances public consumption, undertakes public investment, and services debt
obligations.
Fiscal Balance and Closure Rules Government fiscal behavior is governed by targeting
specific fiscal balance ratios as a share of GDP, with government consumption adjusting
endogenously to meet these targets. When the government balance is negative, new borrowing
equals the deficit; when positive, the government provides additional savings to finance
private investment. Real public investment is fixed as a share of GDP following targeted
growth paths, while tax revenues can adjust through a general tax shifter that scales all tax
rates proportionally. The framework monitors debt dynamics separately for domestic and
foreign borrowing, ensuring that government financing needs are met through an appropriate
combination of expenditure adjustment and new borrowing that equilibrates with available
domestic and foreign savings.
A.2.4. Trade
Import Demand Structure The model employs the Armington assumption, treating
domestically produced and imported goods as imperfect substitutes within a CES framework.
All agents (households, firms, government) are assumed to share identical preferences between
domestic and imported varieties of each good, allowing aggregation to the national level. The
Armington elasticity of substitution determines how readily agents switch between domestic
and imported goods in response to relative price changes. High default Armington elasticities
suggest domestic and foreign suppliers are easily substitutable. These elasticities can be
adjusted to reflect sector-specific characteristics, allowing for heterogeneous substitution
patterns across the economy based on empirical evidence or policy analysis needs.
Import prices faced by agents are converted to domestic currency via the exchange rate, then
augmented by import tariffs, trade and transport margins, and value-added taxes. For key
energy commodities, world prices follow exogenous trajectories based on international market
projections provided by the energy model. 104
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Export Supply Mechanism Domestic producers allocate output between domestic and export
markets through a CET function, maximizing revenue given relative prices. The transformation
elasticity governs how readily producers can shift sales between domestic and export markets.
As with import elasticities, these transformation parameters can be calibrated to capture sector-
specific realities and structural changes over time. Export prices are determined by world
prices adjusted for exchange rates, with domestic producers receiving the world price less
any export taxes and trade margins.
Balance of Payments Closure The nominal exchange rate serves as the numerarire, anchoring
domestic prices and inflation. With domestic prices fixed, the exchange rate must adjust
endogenously to maintain external balance through the balance of payments identity, where
the current account deficit (imports minus exports plus net transfers) equals capital inflows
(foreign savings). Foreign savings are fixed as a share of GDP, following projected current
account trajectories. Under this closure, when foreign savings are fixed, any increase in
import demand or decrease in export competitiveness triggers real exchange rate depreciation,
restoring equilibrium through relative price adjustments.
A.2.5. Investment
Savings-Investment Balance Total investment in the economy is determined by the availability
of loanable funds through the savings-investment identity. This macroeconomic balance
ensures that all investment is financed, with the allocation between government bonds and
private capital determined through a market mechanism where savers seek the highest returns.
Investment influences GDP through its effects on the capital stock and productivity–productive
investments increase the capital available for production, enhancing output and long-term
growth. On the other hand, unproductive investment for instance, an incremental cost of
capital goods with lower GHG emissions than the least-cost option does not contribute to the
economy’s productive capacity and divert resources from more productive uses, potentially
slowing economic growth in the short run.
Foreign versus Domestic Investment Foreign investment introduces additional capital that
complements domestic savings, thereby increasing total resources available for productive
sectors. Unlike domestic investment, which competes with government borrowing for
limited domestic savings, foreign investment helps avoid crowding-out effects where private
investment is reduced due to government financing needs. This additional capital from abroad
allows the economy to maintain higher levels of productive investment even when domestic
resources are constrained by government deficits or large-scale transition investments. The
availability of external capital thus helps mitigate potential negative impacts on GDP that
might arise from crowding out within the domestic economy. 105
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
A.2.6. Labor
Labor Market Dynamics and Demographics Labor force growth is driven by demographic
changes in the working-age population, which enter exogenously based on population
projections. Labor supply also responds endogenously to real wages, which are determined
by market-clearing mechanisms featuring an upward-sloping supply schedule. This allows the
model to capture discouraged worker effects.
Labor Supply and Structural Transformation The model distinguishes between four labor
categories based on skill level (skilled/unskilled) and employment type (formal/informal),
capturing the heterogeneity of the labor market. The flexible nesting structure allows different
degrees of substitutability between labor types, with skilled and unskilled workers typically
being imperfect substitutes within the same formality category.
Labor allocation across sectors follows a CET function, with transformation elasticities
determining the degree of intersectoral mobility. Finite positive values allow gradual
reallocation in response to wage differentials–higher elasticities indicate more flexible labor
markets. This mechanism works in conjunction with the labor mobility constraints and wage
differentials to determine the actual pace and pattern of sectoral reallocation. The model
ensures labor market equilibrium by equating sector-specific labor demand with available
labor supply across all sectors.
A.2.7. Emissions
Emissions are calculated through three primary channels: (i) consumption of emission source
commodities by Armington agents for both intermediate and final demand, including energy-
related emissions from fossil fuel use; (ii) factor-based emissions from production inputs
such as livestock or land use; and (iii) output-based emissions from production processes.
Consumption-based emissions follow trajectories directly linked to energy use patterns, with
emission coefficients improve over time to reflect technological progress and efficiency
gains. The provided emission trajectories undergo validation against energy models to derive
appropriate improvement rates for emission coefficients, ensuring internal consistency between
projected energy consumption and corresponding emissions throughout the modeling period.
A.2.8. Key assumptions
The methodological framework incorporates several structural assumptions. The GDP deflator
serves as the numeraire, anchoring domestic prices and inflation. Since domestic prices are
fixed by this numeraire choice, the exchange rate must adjust endogenously to maintain
external balance. This endogenous adjustment of the exchange rate ensures equilibrium in the
external sector by aligning domestic relative prices with international prices. 106
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Meanwhile, land supply for agriculture is treated as fixed. However, as India’s economy
develops, the model assumes that there is an improvement in land productivity, resulting from
enhanced fertilizers and better crop varieties over time, mirroring productivity gains observed
in other rapidly developing economies.
A.2.9. Social Accounting Matrix (SAM)
The model is tailored to India’s economic structure by calibrating it to India Social Accounting
Matrix (SAM), which was built on 2019 Supply and Use Tables (SUT) from the Ministry of
Statistics and Programme Implementation (MoSPI)
17
. The SAM includes current, fiscal, and
debt accounts, populated with data from the National Account Statistics (NAS) published by
MoSPI, and cross-verified against the Macro Poverty Outlook (MPO) Databank
18
. Subsequently,
the SAM was macro-updated to 2022 using key macro economic indicators from the NAS.
In the original SUT, all electricity generation is aggregated into a single sector. However,
to accurately capture the energy transition, this sector is disaggregated into seven distinct
sectors—solar, wind, nuclear, gas, coal, hydro, and other. The cost structures for these segments
are derived from the GTAP 11 database, while the electricity mixes are informed by NITI’s
energy model.
Beyond the standard set of activities presented in the Supply and Use Tables (SUT), we
include two emerging sectors with significant projected growth: modern biomass and green
hydrogen (GH). Although modern biomass does not appear explicitly in the original SUT, the
chemical sector (producing organic chemicals) offers a suitable proxy, given the similarity in
feedstock-based transformations and chemical processing.
To capture the emerging role of green hydrogen (GH) in India’s energy mix, we introduce to
the SAM a dedicated GH sector, which was absent in the original SUT. Although currently
nascent, GH is projected to become a significant energy carrier, according to the energy
demand projections provided. We assume that the cost structure of PEM electrolysis for GH
production is assumed to follow that of the US, based on data from the H2A Hydrogen Analysis
models developed by the National Renewable Energy Laboratory (NREL), with electricity
costs for operating the electrolyzer and capital expenditures as the primary cost drivers.
The resulting SAM, with dimensions 251×251, features 74 activities and 148 commodities,
including 7 distinct power sectors (coal, gas, solar, wind, hydro, nuclear, and other). It
also identifies 3 primary factors of production (labor, capital, and land) and 4 labor types,
differentiated by skill level and formal/informal status. On the household side, 10 household
17 https://mospi.gov.in/sites/default/files/reports_and_publication/statistical_publication/National_Accounts/
Note_on_Supply_and_Use_Tables_for_the_year_2019-20.pdf
18 https://www.worldbank.org/en/publication/macro-poverty-outlook 107
Annex A Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
categories are distinguished (urban and rural across income quintiles), while 7 separate tax
and subsidy items are captured, covering production taxes, commodity taxes, direct taxes,
subsidies, and tariffs. Finally, 3 investment accounts—public GFCF, private GFCF, and stock
changes—are included, along with 1 debt account to track financing of the government’s
fiscal deficit. 108Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex B
Figures and Tables
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
2030 2035 2040 2045 2050 2060 2070
Agriculture
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
2030 2035 2040 2045 2050 2060 2070
Manufacturing
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
2030 2035 2040 2045 2050 2060 2070
Service
Figure B1: Deviation of sub-sector shares in NZfor from CPS
(in percentage points) (MANAGE). 109
Annex B Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Figure B2: Impact of NZ transition on fossil fuels output (% deviation from CPS) (MANAGE). 110
Annex B Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Exports on GDP (% deviation from CPS)
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
2030 2040 2050 2060 2070
NZdom Nzfor+
Impo rts on G DP (% deviation from CPS)
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
2030 2040 2050 2060
NZdom Nzfor+
Figure B3: Exports and imports as a percentage of GDP (% deviation from CPS).
-1.600
-1.400
-1.200
-1.000
-0.800
-0.600
-0.400
-0.200
0.000
0.200
2030203520402045205020602070
Agriculture (NZdom)
-1.6
-1.4
-1.2
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
2030203520402045205020602070
Agriculture (NZfor+)
-25
-15
-5
5
15
2030203520402045205020602070
Manufacturing (NZdom)
-25
-15
-5
5
15
2030203520402045205020602070
Manufacturing (NZfor+)
-6
-4
-2
0
2
4
2030203520402045205020602070
Service (NZdom)
-6
-4
-2
0
2
4
6
2030203520402045205020602070
Service (NZfor+) 111
Annex B Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
-1.600
-1.400
-1.200
-1.000
-0.800
-0.600
-0.400
-0.200
0.000
0.200
2030203520402045205020602070
Agriculture (NZdom)
-1.6
-1.4
-1.2
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
2030203520402045205020602070
Agriculture (NZfor+)
-25
-15
-5
5
15
2030203520402045205020602070
Manufacturing (NZdom)
-25
-15
-5
5
15
2030203520402045205020602070
Manufacturing (NZfor+)
-6
-4
-2
0
2
4
2030203520402045205020602070
Service (NZdom)
-6
-4
-2
0
2
4
6
2030203520402045205020602070
Service (NZfor+)
Figure B4: %Change of export revenue by sector in NZ scenarios compared to the CPS.
(MANAGE)
-6.00%
-5.00%
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
Percent age
Year
CAD -NZ (% of GDP )
Y2024-30
Y2031-35
Y2036-40
Y2041-45
Y2046-50
Y2051-55
Y2056-60
Y2061-65
Y2066-70
Figure B5: Current Account Deficit (NCAER) 112
Annex B Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
NZdom
NZforSub
Figure B6. Sectoral employment deviation from CPS (million people) (MANAGE) 113
Annex B Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
0
0.05
0.1
0.15
0.2
0.25
Proportions
Secto rs
Export
Y2025 Y2045 Y2070
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Mining CrudeP et FerrosM et ONonF erMet OthC hemicals OthrMfg
Proportions
Secto rs
Imports
Y2025 Y2045 Y2070
Figure B7: %Change of export and import expenditure by sector in NZ scenarios
compared to the CPS (NCAER)
Y2024-30
Y2031-35
Y2036-40
Y2024-30
Y2041-45
Y2046-50
Y2051-55
Y2056-60
Y2061-65
Y2066-70
Y2024-30
Y2031-35
Y2036-40
Y2024-30
Y2041-45
Y2046-50
Y2051-55
Y2056-60
Y2061-65
Y2066-70
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
Percent age
Year
A. Path of Electricity Prices, Green
(Deviation from CPS)
0
0.5
1
1.5
2
2.5
3
Percent age
Year
B. Path of Electricity Prices, Fossil
(Deviation from CPS)
Figure B8: Path of electricity prices (NCAER) 114
Annex B Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
CPS
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Share
Year
Agriculture IndustryServices
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Share
Year
NZ
AgricultureIndustryServices
Figure B9: Sectoral shares under CPS and NZ (NCAER)
-8.00%
-7.00%
-6.00%
-5.00%
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
20302040205020602070
Percentage
Year
Fiscal Deficit (% of GDP)
CPS NZ
Figure B10: Fiscal deficit (% of GDP) (NCAER) 115Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex C
Assumptions on Price Series,
Consumption and, Import Trends
of Fossil Fuels in the CPS and Net
Zero Scenarios
Annex C.1
a. Starting-year Fuel Prices (2011 INR per BTU)
FuelPrice
Coal0.00010824
Petrol0.0018037
Diesel0.00143806
Crude oil0.00060852
Gas0.00051556
b. Assumed Fuel-Price Escalation Rates (based on Annual Energy Outlook 2023
1
)
Price escalation trend for fossil fuels
Year Coal Petrol Diesel Oil Gas
2023 1.000 1.000 1.000 1.000 1.000
2025 1.008 0.998 1.024 1.011 0.965
2030 1.027 1.068 1.094 1.081 1.078
2035 1.038 1.132 1.151 1.142 1.139
2040 1.053 1.180 1.191 1.186 1.145
2045 1.072 1.241 1.250 1.246 1.131
2050 1.091 1.301 1.288 1.295 1.191
2055 1.104 1.362 1.352 1.357 1.228
2060 1.120 1.423 1.405 1.414 1.261
2065 1.136 1.483 1.458 1.470 1.295
2070 1.152 1.543 1.511 1.527 1.328
1 Annual Energy Outlook 2023–U.S. Energy Information Administration (EIA) 116
Annex C Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
c. Consumption Trend of Fossil-Fuels (TIMES model, figures in MToE)
Year
Oil products (petrol + diesel)
consumption
Coal consumption
CPS NZ CPS NZ
2022 219 219 437 437
2030 319 304 641 602
2035 382 329 790 633
2040 441 361 940 652
2045 468 344 981 632
2050 480 293 979 532
2055 476 271 965 442
2060 495 289 927 161
2065 475 288 848 100
2070 451 296 711 61
d. Import Trends of Fossil-Fuels in the CPS and Net Zero Scenarios (TIMES model,
oil and gas figures in MToE; coal in million tons)
Year
Oil Imports Gas imports Coking coal imports
CPS NZ CPS NZ CPS NZ
2022 227 222 30 30 54 54
2030 274 261 39 36 75 81
2035 328 283 61 44 95 92
2040 379 310 82 58 115 101
2045 402 295 100 70 148 101
2050 413 251 117 69 137 91
2055 409 233 117 50 169 75
2060 426 248 115 19 198 57
2065 408 247 110 0 198 38
2070 387 254 90 0 195 24 117
Annex C Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex C.2: Capacity and Price Assumptions for Nuclear Fuel Use
a. Total Installed Nuclear Capacity 2022-2070 (in GW)
Year CPS NZ
2022 7 7
2030 16 29
2035 23 50
2040 34 71
2045 45 92
2050 56 113
2055 67 133
2060 78 154
2065 89 175
2070 100 196
b. Assumptions on Price Estimation and Projections based on Kryzia and Gawlik
2
Uranium price trend
(study)
Scaled actual uranium prices
(per kg, in 2011 INR terms)
202091150
202590163
203091164
203597175
2040108195
2045118213
2050130235
2055130236
2060137249
2065144261
2070151273
The scaling of actual uranium prices was carried out in line with the price projections suggested
by the above study
2 Forecasting the price of uranium based on the costs of uranium deposits exploitation 118
Annex C Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex C.3: Critical-Minerals Related Assumptions
a. Elements Identified as “Critical Minerals” by the Indian government
3
and considered
in this analysis
Antimony Gallium Lithium Phosphorous Strontium
Beryllium Germanium Molybdenum Potash Tantalum
Bismuth Graphite Niobium REE Tellurium
Cobalt Hafnium Nickel Rhenium Tin
Copper Indium PGE Silicon Titanium
Tungsten Vanadium Zirconium Selenium Cadmium
Colour Key
Blue for battery
Yellow for PVs
Green for both
b. Total Installed solar PV capacity (Utility and Distributed) in Gigawatts for the CPS
and Net Zero Scenarios (TIMES)
Year CPS NZ
2022 105 105
2030 250 325
2035 400 650
2040 700 1140
2045 950 1800
2050 1300 2600
2055 1700 3500
2060 2150 4400
2065 2550 5250
2070 2850 5800
c. Li-ion Battery Storage Capacity in Gigawatt for the CPS and Net Zero Scenarios
(TIMES)
Year CPS NZ
2022 00
2030 180 200
2035 340 760
3 Press Release:Press Information Bureau 119
Annex C Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Year CPS NZ
2040 820 1740
2045 1400 3280
2050 2180 5360
2055 3160 8040
2060 4060 9880
2065 5040 10400
2070 5700 12080
d. EV Critical-Mineral Use Coefficients
4
and Starting-Year Prices
5
For EVs ton/GWh Price/ton (USD 2022)Price/ton (lakh 2011 INR)
Nickel483164036
Cobalt1334762118
Lithium10082323
Copper33394764
e. Annex B.3.5 Solar Critical Minerals-Use Coefficients
6
and Prices
7
For photovoltaicsTons per MW
Price per ton
(2022 USD)
Price per ton
(lakh 2011 INR)
Copper3.2 9476 3.6
Silicon
(polycrystalline)
33663 1.4
f. Solar Cell Cost Assumption
8
and Conversion
0.04 dollars per watt
40 dollars per kilowatt
40,000 dollars per megawatt
0.33 Cr per MW (2022 INR)
0.17 Cr per MW (2011 INR)
4 Based on The key minerals in an electric vehicle–Mining Doc
5 Based on averaged annual prices listed from Daily Metal Price: Copper Price (USD / Pound) Chart for the Last Month
6 Based on ETC-Materials-Report_highres-1.pdf
7 Based on averaged annual prices listed from Daily Metal Price: Copper Price (USD / Pound) Chart for the Last Month
8 Based on Solar price trend–EnergyTrend 120
Annex C Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
g. Annex B.3.7 Li-ion Battery Cell Cost Assumption
9
For this analysis, the cost of batteries is fixed at USD 68 per kWh (or 2,573 INR per kWh in
constant 2011 prices). No decline in lithium-ion battery prices is assumed over the modelled
timespan.
9 Based on NEP 2023–Generation 121Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex D.1 Assumptions on Price Series, Consumption and, Import
Trends of Fossil Fuels in the CPS and Net Zero Scenarios
Starting-year Fuel Prices (2011 INR per BTU) from relevant sources (Ministry of Coal, 2019),
(Our World In Data, 2024), (MoPNG, 2020)FuelPrice
Coal0.00010824
Petrol0.0018037
Diesel0.00143806
Crude oil0.00060852
Gas0.00051556
Fuel tax rates expressed as average share of price that is tax
Taxed fuel(present, dimensionless)
Coal (incl GST @5%, coal cess and royalty) 0.233
Petrol (incl. Excise duty, Sales Tax)0.491
Diesel (incl. Excise duty, Sales Tax)0.373
Assumed Fuel-Price Escalation Rates based on Annual Energy Outlook 2023 (EIA, 2023))
Price escalation trend for fossil fuels
Year Coal Petrol Diesel Oil Gas
2022 1.000 1.000 1.000 1.000 1.000
2025 1.008 0.998 1.024 1.011 0.965
2030 1.027 1.068 1.094 1.081 1.078
2035 1.038 1.132 1.151 1.142 1.139
2040 1.053 1.180 1.191 1.186 1.145
2045 1.072 1.241 1.250 1.246 1.131
2050 1.091 1.301 1.288 1.295 1.191
2055 1.104 1.362 1.352 1.357 1.228
Annex D 122
Annex D Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Price escalation trend for fossil fuels
Year Coal Petrol Diesel Oil Gas
2060 1.120 1.423 1.405 1.414 1.261
2065 1.136 1.483 1.458 1.470 1.295
2070 1.152 1.543 1.511 1.527 1.328
Consumption Trend of Fossil-Fuels (TIMES model, figures in MToE)
Year
Oil products (petrol + diesel)
consumption
Coal consumption
CPS NZCPSNZ
2022 238238415415
2025 263266526528
2030 304297620605
2035 350328763719
2040 385335951823
2045 408325 1077 856
2050 412284 1127 804
2055 415263 1038 653
2060 414231949478
2065 405207831312
2070 39619671983
Import Trends of Fossil-Fuels in the CPS and Net Zero Scenarios (TIMES model, oil and gas
figures in MToE; coal in million tons)
Year
Oil Imports Gas imports Coking coal imports
CPS NZ CPS NZ CPS NZ
2022 208 208 28 28 38 38
2030 222 224 30 29 39 39
2035 259 252 35 43 43 43
2040 301 279 50 54 58 50
2045 332 281 66 68 80 56
2050 350 267 82 77 108 58
2055 348 221 92 74 133 56
2060 345 194 93 42 142 50
2065 339 156 90 25 145 41
2070 323 125 85 7 141 30 123
Annex D Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex D.2: Capacity and Price Assumptions for Nuclear Fuel Use
a. Total Installed Nuclear Capacity 2022-2070 (in GW)
Year CPS NZ
2022 7 7
2030 16 29
2035 23 50
2040 34 71
2045 45 92
2050 56 113
2055 67 133
2060 78 154
2065 89 175
2070 100 196
b. Assumptions on Price Estimation and Projections based on Kryzia and Gawlik
(Dominik Kryzia, 2016)
Uranium price trend
(study)
Scaled actual uranium prices
(per kg, in 2011 INR terms)
202091150
202590163
203091164
203597175
2040108195
2045118213
2050130235
2055130236
2060137249
2065144261
2070151273
The scaling of actual uranium prices was carried out in line with the price projections suggested
by the above study 124
Annex D Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
Annex D.3: Critical-Minerals Related Assumptions
a. Elements Identified as “Critical Minerals” by the Indian government (PIB, 2023)
and considered in this analysis
Antimony Gallium Lithium Phosphorous Strontium
Beryllium Germanium Molybdenum Potash Tantalum
Bismuth Graphite Niobium REE Tellurium
Cobalt Hafnium Nickel Rhenium Tin
Copper Indium PGE Silicon Titanium
Tungsten Vanadium Zirconium Selenium Cadmium
Colour Key
Blue for battery
Yellow for PVs
Green for both
b. Annual Solar Capacity Additions (Utility and Distributed) in Gigawatts for the CPS
and Net Zero Scenarios (TIMES)
Year CPS NZ
2022 105 105
2030 218 239
2035 236 406
2040 251 419
2045 354 636
2050 499 741
2055 618 1042
2060 618 1042
2065 825 1548
2070 825 1548 125
Annex D Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
c. Li-ion Battery Storage Capacity in Gigawatt for the CPS and Net Zero Scenarios
(TIMES)
Year CPS NZ
2022 0 0
2030 168 792
2035 360 552
2040 342 1134
2045 1260 2934
2050 1650 3594
2055 2184 3468
2060 2460 4926
2065 2808 5676
2070 2322 9222
d. Battery Storage Critical-Mineral Start-Year Prices based on Ministry of Commerce
and Industry Estimates (Ministry of Commerce and Industry, 2025). Prices remain
fixed for the modelled timespan
For EVs Price/kg (2011 INR)
Copper406
Cobalt1946
Nickel1582
Lithium559
e. Solar Critical Minerals Prices (Ministry of Commerce and Industry, 2025). Prices
are assumed to remain constant through the modelled timespan
For photovoltaics Price per kg (2011 INR)
Copper406
Silicon (polycrystalline)663
f. Solar Cell Cost Assumption (Energy Trend, 2024) and Conversion. No change in
prices assumed for the solar cells in the modelled timespan
0.04dollars per watt
40 dollars per kilowatt
40,000 dollars per megawatt
0.33 Cr per MW (2022 INR)
0.17 Cr per MW (2011 INR) 126
Annex D Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications
g. Li-ion Battery Cell Cost Assumption (BloombergNEF, 2024)
For this analysis, the cost of batteries is fixed at 50 lakh per MWh in constant 2011 prices
based on price conversion of final figures in the Bloomberg source. No decline in lithium-ion
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MACROECONOMIC
IMPLICATIONS
SCENARIOS TOWARDS VIKSIT BHARAT AND NET ZERO
VOL. 11
SOCIAL IMPLICATIONS
OF TRANSITION
SCENARIOS TOWARDS VIKSIT BHARAT AND NET ZERO