NITI Aayog: Macroeconomic Implications of India’s Viksit Bharat And Net Zero Transition
SDG 8: Decent Work and Economic Growth | SDG 9: Industry, Innovation and Infrastructure | SDG 12: Responsible Consumption and Production | SDG 13: Climate Action
NITI Aayog | Ministry of Finance | Ministry of Commerce and Industry | Reserve Bank of India (RBI)
NITI Aayog report, Scenarios Towards Viksit Bharat and Net Zero: Macroeconomic Implications explores India’s pathway to becoming a developed economy by 2047 (Viksit Bharat) while achieving net-zero emissions by 2070. It argues that transition to Net Zero by 2070 is not merely an environmental mandate but a fundamental macroeconomic transformation that will reconfigure the composition of growth—shifting the balance between consumption and investment, and from fossil-based to clean sectors—without materially derailing long‑run GDP expansion.
Utilizing the World Bank’s MANAGE computable general equilibrium model (alongside NCAER’s CGE model), the study indicates that while the transition requires a massive front-loading of capital, it still allows India to sustain high growth—around 7 percent into the 2030s and 2040s—consistent with reaching a USD 30–31 trillion economy by 2047. The transition is characterized by a “structural pivot” where the economy moves from consumption-led growth toward a high-investment regime, specifically targeting green infrastructure and advanced manufacturing. Under the Net Zero Scenario (NZS), the initial investment surge is projected to slightly temper consumption in the short term, but it eventually yields a more resilient, self-reliant economy with significantly reduced exposure to global fossil fuel price volatility.
Strategic Pillars of the Macroeconomic Transition The report identifies several key economic pillars that must be managed to ensure a stable path toward a USD 30 trillion economy:
Investment-Led Growth Paradigm: The transition necessitates a significant increase in the investment-to-GDP ratio. Total cumulative investment requirements for Net Zero are estimated to be substantially higher than the Current Policy Scenario, requiring the mobilization of both domestic private capital and international climate finance.
Fiscal Transformation and Revenue Realignment: The transition will trigger a structural shift in government revenue as fossil fuel-based taxes (such as cess on coal and excise on petroleum) decline. This necessitates a “fiscal hedge” strategy, including the potential introduction of carbon pricing or expanded GST coverage to maintain fiscal stability.
External Sector Resilience: A major macroeconomic benefit of the Net Zero pathway is the drastic reduction in the fuel import bill. By 2070, savings in oil and gas imports are projected to significantly improve India’s Current Account Balance, enhancing the sovereignty of the Indian Rupee.
Labour Market Re-skilling and Migration: The shift from fossil-intensive industries to a green economy will create a “workforce in flux.” While new opportunities arise in renewable energy, electricity, construction and green manufacturing, specific regional clusters dependent on coal mining and and fossil-based industry face transition risks, requiring targeted social safety nets and proactive re-skilling.
Technological Productivity Gains: The “Viksit Bharat” vision relies on the rapid adoption of frontier technologies like CCUS and green hydrogen. Scenario variants where additional low-carbon investments are treated as productive capital show that such technologies, though initially capital-intensive, can support higher long-term output and wages if associated productivity and co-benefits materialise.
What is the “MANAGE” model in the context of India’s Net Zero planning? The MANAGE (Macroeconomic Net Zero Analysis & Growth Evaluation) model is a specialized Computable General Equilibrium (CGE) tool used to simulate how climate policies ripple through the entire Indian economy. Unlike simple forecasting, it analyzes the inter-dependencies between different sectors—such as how higher energy prices or low-carbon investment requirements might influence household consumption, interest rates, trade flows and public finances. By using MANAGE alongside the NCAER model, NITI Aayog can estimate the indicative “GDP cost” or “GDP gain” of various decarbonization pathways, helping policymakers understand the fiscal and social shifts implied by Net Zero targets through 2070.
Policy Relevance
This report represents a transition from environmental target-setting to a rigorous fiscal and macroeconomic strategy for Net Zero. By institutionalizing macroeconomic modeling for climate action, the Ministry of Finance and NITI Aayog are providing the empirical basis for integrating “Green Growth” into India’s long-term budgetary and industrial planning.
Sovereign Risk Mitigation: By projecting a decline in fossil fuel imports, the study provides a roadmap for the RBI and Ministry of Finance to reduce India’s vulnerability to global “energy shocks” and strengthen the external balance.
Fiscal Preparedness: The projected loss in fuel tax revenue acts as an early warning for the GST Council to begin exploring alternative revenue streams, such as green taxes, to prevent a future fiscal deficit.
Financial Market Reform: The massive investment requirement necessitates a “systemic financial reform,” encouraging the Ministry of Finance to further develop green bond markets and de-risking mechanisms for FOAK (First-of-a-Kind) technologies.
Just Transition Planning: Identifying districts dependent on the fossil-based economy allows the Ministry of Labour to design regional transition funds, preventing localized economic downturns in India’s “coal belt” during the move to renewables.
Follow the full report here: NITI Aayog: Scenarios Towards Viksit Bharat and Net Zero (Vol. 2)