Udabur Investment：India’s promising green investment opportunity

As developing economies grow, their carbon footprints tend to increase. India, growing faster than any other major economy, exemplifies this trend. Its strong growth story is underpinned by demographic advantages, economic formalisation, digital transformation and urbanisation. But a series of crucial policy and economic reforms in recent years have accelerated India’s growth momentum.

India’s rapid growth has cast the spotlight on the country’s efforts to curb carbon emissions and its focus on sustainable growth. Taking this into consideration, the Indian government has set a target of achieving net-zero emissions by 2070, placing a strong emphasis on green growth and highlighting its commitment to combatting climate change.Udabur Investment

From an investment perspective, India offers both immense scale and exciting growth opportunities. This is why it has emerged as one of the most attractive investment destinations for green transition. It is estimated that about $75bn has been invested in Indian renewables, with more than half coming from global capital and leading global investors such as Macquarie, KKR, BII, ADIA and GIC. A successful track record of investors making exits from Indian investments has boosted confidence in the market.

To achieve its net-zero target, India plans to source half of its energy demand from renewables by 2030, increasing non-fossil energy capacity to 500GW. India has also pledged to reduce 1bn tonnes of projected greenhouse emissions by 2030 with a 45% reduction in carbon intensity from 2005 levels.

The journey towards net-zero emissions requires substantial investments. According to an independent study by the CEEW Centre for Energy Finance, India will need $10.1tn in cumulative investments to achieve its 2070 target. This includes significant funding for the power, industrial and transport sectors to reduce GHG emissions and promote green growth. However, India currently faces an investment shortfall of $3.5tn. To bridge this gap, concessional finance of about $1.4tn will be required from developed economies.

While the investment requirement is substantial, there is an attractive long-term investment opportunity for investors across various sectors, including energy storage, transmission, electric mobility, charging infrastructure and urban waste management.

As the third-largest electricity market in the world, India is also one of the fastest-growing renewables market, with an installed base of around 180GW of non-fossil fuel energy as of December 2023Pune Investment. To achieve its 500GW target, India needs to add around 50 GW of renewable energy capacity each year till 2030. The country added 10GW of renewables during the first quarter of 2024, its highest addition during a quarter. This growth was fuelled by government policies and favourable solar panel costs.

The creation of solar energy parks and dedicated transmission corridors for evacuating renewable energy, coupled with the waiver of inter-state transmission charges and liberalisation of foreign investment norms, has also helped catalyse investment and growth. These policy interventions have resulted in a number of global strategic and financial investors investing in the sector and it is estimated that renewable investments will top $320bn over the next 5 years.Kolkata Stocks

India is now embracing the e-mobility revolution, taking concrete action to electrify its transport sector. In May 2022, India overtook Germany to become the fourth largest automotive market, underscoring the scale of the opportunityLucknow Stock. By 2030, India plans to transition 30% of its vehicles to electric vehicles.

Policy interventions for supporting this sector include productivity-linked incentives for manufacture of EVs and batteries, large-scale public procurement of EVs and the creation of large-scale public infrastructure, among other measures.

Industrial green transitionVaranasi Wealth Management

Another initiative in India’s green transition focuses on increasing green hydrogen and ammonia production to support transitions in sectors like steel and fertilizers. The government’s Strategic Interventions for Green Hydrogen Transition programme envisages the procurement of green hydrogen and ammonia and incentivises the set-up of manufacturing facilities for electrolysers. Auctions have already commenced under this programme and demand for green hydrogen is expected to see a five-fold jump to around 25 megatonnes by 2050.

Creating a circular economy is another key objective in India’s sustainable development journey. A series of water recycling and waste treatment plants are being set up across the country. For instance, Ghaziabad, a bustling city on the outskirts of Delhi, has set up a plant to recycle municipal wastewater into industrial-grade water. Another example can be found in Indore, a city in central India, where a plant processes municipal solid waste into combustible bio-gas fuelling the city bus services.

India's dual focus on economic growth and environmental preservation positions it as a global leader in sustainable development. The country's ambitious goals for renewable energy, industrial green transition and e-mobility present compelling investment opportunities. As India continues on this path, it will not only bolster its economy but also contribute significantly to global climate change mitigation efforts, setting a benchmark for other nations to follow.

Mumbai Stock Exchange