Finance Minister, during the Budget Session today, proposed the issuance of sovereign green bonds for mobilising resources for green infrastructure as a part of the government’s overall market borrowing in 2022-23. The proceeds will be earmarked for public sector projects that focus on reducing the carbon intensity of the economy. Moreover, they are an effective tool in driving down the cost of capital and are not subject to sectoral limitations or liquidity constraints, as opposed to conventional bank debt.
Sustainable Development is at the core of India’s development strategy. At COP 26 in November 2021, India committed itself to a net-zero carbon emission target by 2070. Green bonds will serve as a transformative step in that direction. The liberalised External Commercial Borrowings (ECB) norms of RBI have also enabled the Indian renewable energy companies and other firms to tap the ECB route for raising finance through green bonds and sustainable bonds, as per the Economic Survey 2021-22.
India has the second-largest Green Bond market in the world and has immense untapped potential. With the recent announcements during the Budget Session, the size and penetration of the green bonds market are expected to go up.
This article was authored by Bhavya Tyagi.