Introduction

Bharat’s electricity sector is set for substantial growth and diversification. Bharat has set several targets for energy transition, security, and access, with specific timelines. As a part of the Nationally Determined Contributions (NDCs) submitted to the UNFCCC, India aims to increase the share of installed capacity for electric power derived from non-fossil fuel sources to 50% by 2030. Additionally, Bharat has set a goal to achieve net-zero emissions by 2070^[1] and is on track to meet this target^[2].

Under the leadership of Prime Minister Narendra Modi, the Government of India (GoI) has initiated an integrated energy assessment to support Bharat’s ambition of providing affordable electricity and clean cooking to everyone, ensuring energy security, and transitioning to renewable energy in a cost-efficient and sustainable manner. The GoI has undertaken progressive and ambitious policies and implementation efforts to electrify all sectors of the economy and provide green electricity. These policies and implementation efforts pave the way for Bharat to ensure energy security, transition, and universal and affordable energy access. The Prime Minister’s Office and the NITI Aayog, in collaboration with various central and state ministries and departments, work collaboratively to set a roadmap towards achieving these shared goals.

This paper highlights the progress made in the two terms of the Modi led NDA government to ensure Bharat’s energy security, energy transition, and universal and affordable energy access. The paper reviews the progress made regarding the push for renewable energy and decarbonisation to achieve these three policy objectives. 

Overall Progress

According to the GoI sources^[3], Bharat has added around 109 GW of RE capacity (excluding large hydro) during the last 10 years. Compared to capacity as of January 1, 2014, it reached over four times the total RE capacity, 31 times solar, and 2.2 times wind during the last 10 years. Bharat has also made significant progress in increasing access to electricity over the past decade. Almost all households in India now have access to electricity, and the distribution network has been strengthened throughout the country.

Projections from the 20th Electric Power Survey (EPS)^[4] indicate a total installed capacity of 777.14 GW by 2029-30, with significant contributions from solar (292.56 GW), wind (99.85 GW), hydro (99.89 GW), small hydro (5.3 GW), and biomass (14.5 GW). These non-fossil fuel sources are expected to account for over 50% of the total installed capacity and contribute around 44% of the gross electricity generation during 2029-30^[5] indicating Bharat’s steadfast commitment to a more sustainable energy landscape.

Renewable Energy Expansion and Decarbonisation Scorecard

Bharat aims to reduce its GDP emission intensity by 45% by 2030.^[6] Currently, thermal power plants, which produce over 50% of Bharat’s total electricity output, account for one-third of the total GHG emissions.^[7] As Bharat strives to meet its renewable energy expansion and decarbonisation goals, the electricity sector has embraced a diversification strategy by transitioning to cleaner energy sources such as solar, wind, bio, hydro, and atomic power.

State-nodal agencies in Bharat have gained significant expertise in renewable energy initiatives over the years. To facilitate mutual learning and the exchange of best practices, the Ministry of New and Renewable Energy (MNRE) established the Association of Renewable Energy Agencies of States (AREAS). The association comprises three standing committees: Technology and Resource Assessment, Policy and Finance, and IT. Policy initiatives like production-linked incentives and domestic content requirements will boost domestic manufacturing. Innovative regulatory support has addressed investment and counterparty risks and spurred demand.^[8] At the same time, record-low solar tariffs and long-term power purchase agreements continue to draw billions of dollars in investment.^[9]

Policies and programmes to ramp up renewable energy and decarbonisation solutions that have been launched and implemented since 2014 are as follows:

• Electricity (Rights of Consumers) Amendment Rules, 2023:
• Electricity (Late Payment Surcharge and Related Matters) Rules, 2022:
• Ujwal DISCOM Assurance Yojana (UDAY), 2015:
• Revamped Distribution Sector Scheme (RDSS), 2021:
• Green Energy Open Access Rules, 2022:
• Green Credit Programme, 2023, and Energy Conservation (Amendment) Act, 2022:
• Financial incentives for power sector reform.

Wind Energy 

Bharat has made great strides in increasing its wind power capacity. As of June 2023, wind energy accounted for 34% of the total installed power generation capacity from renewable energy sources^[10]. India now ranks as the fourth-largest market for onshore wind installations globally, with a 5% contribution to the world’s total onshore wind installations^[11]. This sector has also generated approximately 50,000 jobs and hosts about 10% of the world’s wind turbine component factories^[12].

Bharat has a significant potential for both onshore and offshore wind energy. According to the India Energy Security Scenarios (IESS) 2047, wind energy is expected to contribute about 22.16 million metric tonnes of oil equivalent (Mtoe) to Bharat’s total energy supply by 2032, up from 5.9 Mtoe in 2022^[13]. The GoI has introduced policies to establish hybrid plants combining offshore and solar wind technologies to promote renewable energy.

Policies and programmes that have been launched and implemented to ramp up wind energy are as follows:

• National Offshore Wind Energy Policy, 2015.
• National Wind and Solar Hybrid Policy, 2018.

Solar Energy 

Bharat has made significant progress in solar energy in the past five years, positioning itself as a global leader. As of 2023, solar energy constitutes the largest portion (54%) of India’s total renewable energy capacity. Bharat ranks fourth worldwide in photovoltaic (PV) deployment, with its solar capacity growing by around 200%, from about 21.5 GW in 2018 to approximately 64.3 GW in March 2023^[14]. Bharat intends to derive 50% of its electricity capacity from non-fossil fuel sources by 2030, and solar energy will play a major role in achieving this. India’s solar potential is about 750 GW, which could generate 3.2 million jobs and greatly benefit the economy^[15]. Recent policy measures, such as production-linked incentives and regulatory support, have spurred domestic manufacturing, addressed risks, and boosted demand.

Through the International Solar Alliance (ISA)^[16], the GoI fosters global collaboration to accelerate grid interconnectivity, mobilise investment, and support deployment through capacity-building.¹¹ Bharat must continue to engage global partners and emerge as a key contributor to driving and leading innovation in solar energy.

Domestic Solar Manufacturing

Bharat has also recently made tremendous progress in expanding its domestic solar manufacturing capabilities. Its potential for manufacturing photovoltaic (PV) modules doubled between 2020 and 2023. Bharat is expected to see a fourfold increase in its solar module manufacturing capacity by 2025 compared to 2021^[17]. Furthermore, projections indicate that Bharat will achieve self-sufficiency in meeting the demand for PV modules by 2026, thanks to a projected manufacturing capacity of 110 GW^[18]. Some of Bharat’s major players in the PV manufacturing industry include Waaree, Adani Solar, and Vikram Solar. 

Several policies and programmes to ramp up solar energy that have been launched and implemented in the two terms of the Modi government are as follows:

• Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM KUSUM), 2019.
• GoI had offered financial incentives to support the manufacturing of solar panels.
• PM Solar Rooftop Scheme 2024.

Green Hydrogen

Green hydrogen (GH2) energy is a new development in Bharat. Green hydrogen is produced using renewable energy sources such as solar, wind, or biomass. Bharat consumes about 5 million metric tonnes (MMT)^[19] of hydrogen annually, most of which is produced using fossil fuels like natural gas and naphtha. The demand for hydrogen mainly comes from the industrial sector, which uses it for petroleum refining, fertiliser production, methanol, and metal production.

Green hydrogen can potentially provide low-carbon and self-sufficient economic pathways for Bharat. The country has ample renewable resources, particularly solar and wind energy, highlighting the promising potential for green hydrogen growth. The GoI is increasingly focusing on this sector, and the National Green Hydrogen Mission was launched in 2021 to make Bharat a global hub for producing, using, and exporting green hydrogen. The efforts under this mission are expected to create around six lakh jobs by 2030^[20]. NITI Aayog has prepared a comprehensive roadmap to guide the country’s GH2 strategy and enhance private sector investment^[21].

Several policies and programmes to ramp up green hydrogen that have been launched and implemented in the past decade are as follows:

• National Green Hydrogen Mission, 2023.
• Green Hydrogen Standards for India 2023.
• GoI has offered financial incentives to support the manufacturing of electrolyzers.

Bioenergy

Bioenergy is a type of renewable energy generated from biomass and feedstocks. These include agricultural residues, forestry residues, animal waste, and organic municipal solid waste. As of 2023, bioenergy (biomass power and co-generation) accounts for 2.5% of the total installed energy capacity and 6% of the renewable energy mix^[22]. In Bharat, approximately 32% of the country’s primary energy comes from biomass, and over 70% of the population relies on it for their energy needs^[23]. The bioenergy power generation capacity currently stands at around 10 GW^[24], with over 800 biomass power, bagasse cogeneration, and non-bagasse cogeneration projects established. According to the India Energy Security Scenarios (IESS) by the NITI Ayoog, bioenergy is projected to contribute around 29 terawatt hours (TWh) to the electricity supply in 2047.

At the central level, the National Bioenergy Programme and National Policy on Bio-Fuels are the major policies that the Ministry of New and Renewable Energy implements to boost bioenergy production and achieve ethanol blending targets in gasoline. In addition to these policies, a range of additional initiatives have been undertaken by the central government to support the development of BioCNG plants.^[25] 

Policies and programmes to ramp up bioenergy solutions that have been launched and implemented are as follows:

• National Bioenergy Programme, 2022.
• (Amended) National Policy on Bio-Fuels, 2022.
• Sustainable Alternative Towards Affordable Transportation (SATAT) initiative aims to boost the uptake of compressed biogas (CBG).
• Galvanising Organic Bio-Agro Resources Dhan (GOBARdhan).

Storage Solutions

Energy storage technologies have become increasingly important in Bharat, primarily due to the growing focus on integrating renewable energy into the national energy mix. The expansion of renewable energy sources such as solar and wind presents the challenge of efficiently managing grid stability as they are intermittent. Energy storage plays a crucial role in optimising energy systems by enabling the storage of electricity for later use. Energy storage technologies, including pumped storage hydropower (PSH), and batteries, have become crucial to ensuring a reliable and resilient energy grid. This technology serves various applications, such as grid-level balancing for renewables, electronics, behind-the-metre (BTM) power backup inverters, and supporting the EV sector.

Various energy storage options, such as batteries and PSH plants, are available for commercial use. Additionally, emerging technologies such as flywheels, supercapacitors, and hydrogen offer promising potential. Currently, Bharat has a total energy storage capacity of 4745.60 MW from PSH projects and 39.12 MWh from battery energy storage systems^[26]. In 2018^[27], the demand for energy storage was 23 GWh, but it is expected to grow exponentially. The energy storage market in Bharat has a combined potential of 190 GWh during 2019-25^[28], driven by renewable energy integration, the fast response ancillary services (FRAS) market, and transmission and distribution deferral. The electric vehicle (EV) industry will consume more than 36 GWh of batteries by 2025^[29].

Boosting Domestic Manufacturing of Batteries

A domestic battery manufacturing ecosystem with elements like a robust supply chain of cells will be crucial for Bharat to gain an edge in mobility, grid energy storage, and consumer electronics. This will help reduce import costs of lithium-ion cells, which have increased sevenfold between 2014 and 2020, safeguard against potential supply shocks, and create new jobs. Further, there are opportunities for private players to invest in this sector through arrangements like government partnerships, which enable risk-sharing. The government has already started providing incentives for manufacturers through the PLI scheme approved in 2021.¹³

Policies and programmes to ramp up energy storage solutions that have been launched and implemented are as follows:

• National Energy Storage Mission: In 2018.
• Battery Waste Management Rules in 2022.
• National Programme on Advanced Chemistry Cell (ACC) Battery Storage.
• National Mission on Transformative Mobility and Battery Storage.
• National Mission on Transformative Mobility and Battery Storage.
• National Mission for Enhanced Energy Efficiency, 2021.
• GoI has offered financial incentives to support the manufacturing of solar batteries and related equipment.

Emerging Technologies

New and upcoming technologies in the energy sector are providing exciting opportunities for sustainable and eco-friendly energy sources. The Ministry of New and Renewable Energy (MNRE) is currently focusing on four new technologies—ocean energy, geothermal energy, hydrogen energy, and energy storage—to promote research and industrial development in Bharat. Progress on green hydrogen and storage technologies has been covered above in this paper. Ocean energy and geothermal energy are still in the early stages of development and are largely focused on exploration. Geothermal energy sources are sustainable and offer a consistent source of clean energy by tapping into the earth’s core heat, while ocean energy sources use the power of waves, tides, and temperature differences to generate electricity.

Negative Emission Technologies

Negative emission technologies (NETs) refer to innovative approaches and technologies that actively remove greenhouse gases—usually carbon dioxide—from the atmosphere. The process is referred to as carbon dioxide removal (CDR) if it involves removing carbon dioxide, or more broadly, as greenhouse gas removal (GGR) if it involves removing gases other than CO2. CDR approaches involve capturing and storing CO2 or converting it into useful products, such as via afforestation and reforestation, soil carbon sequestration, bioenergy with carbon capture and storage (BECCS), and direct air capture and carbon capture, utilisation, and storage (CCUS). NETs have the potential to play a crucial role in decarbonising energy-intensive sectors such as electricity, mining, and steel. CCUS is presently the only recognised technology capable of reducing carbon emissions in CO2-intensive and hard-to-electrify sectors such as heavy industries, including steel, cement, oil & gas, petrochemicals & chemicals, and fertilisers.^[30] Bharat plans to capture 750 mtpa of CO2 via CCUS technologies by 2050, which makes up 30% of all capturable emissions of 2400 mtpa.^[31]  Thus, there is a growing interest in negative emission technologies, mainly CCUS, in Bharat as part of the nation’s efforts to combat climate change and decrease greenhouse gas emissions in the energy sector.^[32] One of Bharat’s first CCUS projects is being led by Indian Oil Corporation Ltd. (IOCL) and Oil and Natural Gas Corporation (ONGC), who are setting up Bharat’s first large-scale carbon capture project in Gujarat.^[33] The project involves capturing CO2 at the IOCL refinery, compressing it, and transporting it through pipelines to ONGC’s oil fields for enhanced oil recovery (EOR), leading to increased oil production while ensuring the permanent storage of CO2. 

Policies for NETs are still in their early development stages; however, several guiding frameworks can be leveraged to support Bharat’s decarbonisation efforts:

• Draft 2030 Roadmap for Carbon Capture Utilisation and Storage (CCUS) for Upstream E&P Companies, 2022^[34]:
• CCUS Policy Framework and its Deployment Mechanism in India, 2021.^[35]

Conclusion

The enabling policies and implementation support for renewable energy expansion and decarbonisation efforts over the last decade have been unprecedented in terms of their scale, speed, and reach. Overall, the Modi led NDA government scores an A+ scorecard. As it plans for its third term, reforms to improve the financial health of electricity distribution companies, a continued push for domestic manufacturing of renewable energy components, enhancing access to green finance, enabling policies for scaling up private sector investments, and strengthening the capacity of government functionaries should remain priorities to realise the aims and objectives of Viksit Bharat.

 

Author Brief Bio: Jagjeet Singh Sareen is a Partner at Dalberg Advisors, a global strategy advisor firm. He has previously served as an Assistant Director-General of the International Solar Alliance and a Senior Policy Officer at the World Bank Group.

 

References:

^{[1] Ministry of Environment, Forests and Climate Change,} Net zero emissions target, 2023

^[2] Cabinet, Cabinet approves India’s Updated Nationally Determined Contribution to be communicated to the United Nations Framework Convention on Climate Change, 2022

^{[3] Ministry of New and Renewable Energy, 2024}

^{[4] CEA, Central Electricity Authority, Report on optimal generation capacity mix for 2029-30, 2023}

^{[5] CEA, Central Electricity Authority, Report on optimal generation capacity mix for 2029-30, 2023}

^{[6] Cabinet,} India now stands committed to reduce Emissions Intensity of its GDP by 45 percent by 2030, 2022

^[7] ORF, Power Sector: Stumbling block in India’s net-zero journey, 2022

^[8] CEEW, How India’s Solar and Wind Policies Enabled its Energy Transition, 2021

^[9] IEEFA, Renewable energy investment surges in India; IEEFA, Capital Flows Underpinning India’s Energy Transformation, 2022

^[10] Central Electricity Authority, Executive Summary on Power Sector, June 2023; Note: RES include Small Hydro Project, Biomass Power, Urban and Industrial Waste Power, Solar and Wind Energy

^[11] Global Wind Energy Council, India Wind Energy Market Outlook 2022-2026, 2022

^[12] National Institute of Wind Energy, India’s Wind Potential Atlas at 120m agl, 2019

^[13] NITI Aayog, India Energy Security Scenarios (IESS) 2047, 2021

^{[14] Ministry of New & Renewable Energy,} Physical Progress^{, 2023}; ^{Ministry of New & Renewable Energy,} Solar Energy^{, accessed July 2023}; ^{Ministry of New and Renewable Energy,} Solar Energy capacity has nearly tripled in last 5 years from 21651 MW to 64380 MW^{, 2023}

^{[15]Ministry of New & Renewable Energy,} Solar Energy^{, accessed July 2023}; ^CEEW, India’s Expanding Clean Energy Workforce^{, 2022}

^[16] Isolaralliance.org

^{[17] Ministry of Information and Broadcasting,} Union Budget 2022-2023: India Embarks on a Solar Journey, 2022

^[18] Cabinet, Cabinet approves Production Linked Incentive Scheme on ‘National programme on High Efficiency Solar PV Modules’ for achieving manufacturing capacity of Giga Watt (GW) scale in High Efficiency Solar PV Modules, 2022; Ministry of Power, Government allocates 39600 MW of domestic Solar PV module manufacturing capacity under PLI, 2023

^[19] Ministry of New and Renewable Energy, National Green Hydrogen Mission, 2023

^[20] Ministry of New and Renewable Energy, National Green Hydrogen Mission, 2023

^[21] NITI Aayog, Harnessing Green Hydrogen, 2022

^[22] Ministry of Power, Power Sector at a Glance ALL INDIA, 2023

^[23] Ministry of New and Renewable Energy, Bio Energy, 2022

^[24] Ministry of New and Renewable Energy, Bio Energy, 2022

^[25] Press Information Bureau, Establishment of Bio-CNG plants, 2022

^[26] Ministry of New and Renewable Energy, 64.54 billion units electricity produced from Wind Energy during April, 2022, 2023

^[27]  India Smart Grid Forum, Energy Storage System Roadmap for India: 2019-2032, 2019; India Energy Storage Alliance, India Stationary Behind-the-meter (BTM) Energy Storage & Railway Battery Market Overview 2021-30, 2022; Ministry of Power, National Electricity Plan (Draft), 2022

^[28] India Smart Grid Forum, Energy Storage System Roadmap for India: 2019-2032, 2019

^[29] India Smart Grid Forum, Energy Storage System Roadmap for India: 2019-2032, 2019

^[30] NITI Aayog, CCUS Policy Framework and its Deployment Mechanism in India, 2021

^{[31] NITI Aayog,} CCUS Policy Framework and its Deployment Mechanism in India, 2021

^[32] NITI Aayog, CCUS Policy Framework and its Deployment Mechanism in India, 2021

^[33] Ministry of Petroleum, Oil and Natural Gas, Draft 2030 Roadmap for Carbon Capture Utilization and Storage (CCUS) for Upstream E&P Companies, 2022

^[34] Ministry of Petroleum, Oil and Natural Gas, Draft 2030 Roadmap for Carbon Capture Utilization and Storage (CCUS) for Upstream E&P Companies, 2022

^[35] NITI Aayog, CCUS Policy Framework and its Deployment Mechanism in India, 2021

Has Bharat changed in the last ten years? Many would view the question as rhetorical, as Bharat has not only changed in a myriad of ways over the last decade, but the extent of change has been colossal. Let us examine the changes that have taken place in a few select sectors.

Over the last decade, Bharat’s economy has seen tremendous growth, despite the COVID-19 pandemic, which adversely impacted Bharat and the world during the two-year period from 2019 to 2021. According to the World GDP Ranking 2024 list, Bharat, with a GDP of USD 4.1 trillion, is now the fifth largest economy in the world, up from the tenth position in 2014, where Bharat’s GDP stood at USD 2.04 trillion. The inflation rate was also kept in check for the 2014-2024 decade, with inflation below 5 percent for most of the period. This stood in sharp contrast to the inflation levels during the 2004-2014 period, where inflation hovered for the most part near the 10 percent level. The per capita income also saw a significant rise from USD 1560 in 2014 to USD 2847 in 2024, an increase of 82.5 percent. This, in conjunction with low inflation rates, has substantially raised the standard of living of a vast segment of the population.

Defence preparedness is yet another success story. While Bharat is still heavily dependent on imports for a variety of upper-end defence equipment and is at present the largest arms importer in the world, concerted efforts have been made over the last decade to increase indigenous defence production and reduce dependence on imports through initiatives like the “Make in India” campaign and reforms in defence procurement policies. There is also a renewed focus on defence exports, which have touched USD 2.63 billion in the financial year 2023-2024. This represents a 32 percent increase over the previous year and is set to further increase in the coming years. The private sector is also contributing to Bharat’s growth story in the defence sector, and in conjunction with the Defence Public Sector Undertakings (DPSUs), is playing a crucial role in modernising and strengthening India’s defence capabilities. The last decade has also seen increased focus on the creation of defence infrastructure on India’s Northern and Eastern borders, with a large number of projects being completed by the Border Roads Organisation (BRO). Among these are the Sela Tunnel, constructed at an altitude of 13,000 feet; the Darbuk-Shyok-DBO Road, an all-weather strategic road in eastern Ladakh right up to the border; and the construction of the Zojila Tunnel at an altitude of 11,500 feet, which is part of the broader effort to improve connectivity to the border and correct the infrastructure imbalance with China.

Bharat’s foreign policy has also become more assertive, with a heightened focus on the country’s national interest, as seen by its stance on the Ukraine war, the Hamas-Israeli conflict, and its engagement in strategic partnerships with various countries, including the United States, Japan, Australia, and ASEAN. These partnerships are aimed at enhancing Bharat’s strategic and economic interests and promoting stability in the region. This assertiveness is also seen in Bharat’s response to cross-border terrorism emanating from Pakistan and also to Chinese aggressive behaviour in Eastern Ladakh and along the McMahon Line. A feature of Bharat’s nuanced change in its foreign policy is the role it seeks for itself on the global stage. This includes seeking membership in international forums such as the United Nations Security Council and actively participating in global initiatives on climate change, peacekeeping, and other issues. Another visible change in foreign policy is Bharat’s engagement with its diaspora, which it views as a strategic asset, contributing to economic growth, cultural exchange, and fostering closer ties with countries around the world. This has contributed greatly to India’s soft power and enhanced its image in the world, where Bharat is increasingly being viewed as the voice of the Global South.

Significant progress in the last decade has also been made in reforming the education sector, imparting skills to the population, digitalisation, focusing on upper-end technology, food and energy security, and also in many other fields. But perhaps the most profound change that has occurred is a mindset change that has imbued a new-found confidence and spirit among all sections and strata of society. This self-view of increasingly large segments of the population, as well as of their role in society and in nation-building, is reflected in a burgeoning start-up ecosystem, fuelled by a growing entrepreneurial spirit, supportive government policies, and increased venture capital investment. Young Bharatiyas are increasingly willing to take risks, innovate, and pursue their entrepreneurial dreams. There is a growing realisation, especially among the youth, that while the role of the government as a facilitator is essential for their economic progress and well being, it is their effort and struggle that will ultimately bear fruit. There is also an attitudinal change, where the people of Bharat are becoming increasingly conscious of their culture and heritage and are now proudly attached to their roots. Perhaps this is the reason why the construction of the Ram Temple at Ayodhya was so eagerly awaited, and why its inauguration satisfied a long-felt yearning and need. It was indeed a moment of spiritual awakening for the nation.

Bharat is today on the march, walking confidently on its unstoppable path to progress. This is perhaps the greatest achievement of the decade under the Prime Ministership of Shri Narendra Modi.

 

Author Brief Bio:  Maj. Gen. Dhruv C. Katoch is Editor, India Foundation Journal and Director, India Foundation.

ப ொருபென்னும் ப ொய்யொ விெக்கம் இருெறுக்கும் எண்ணிய தேயத்துச் பென்று

Wealth, the lamp unfailing, speeds to every land, Dispersing darkness at its lord’s command.” – Thirukural, Chapter 76, verse 753

 

For a country like Bharat, inclusive economic growth has been a significant part of its conscious. It is an indispensable part of the value system as enunciated in the four purushaarth – dharm, arth, kaam and moksh. Arth is the driver of all activities in the country, and when informed to all sections of the society, has the ability to transform the developmental outlook for it as well. This value system enabled Bharat to attain the second largest share (over 25%) in the global GDP for over 2,000 years¹.

Post-independence, however, this agenda of robust and inclusive economic growth with central importance of arth, remained inconsistent. During the first two decades of independence, there have been wide variations in India’s growth rate with high frequency of negative growth rates². This trend reflected in India’s poverty rates as well as the percentage of people in poverty increased from 47% in 1951 to 56% in 1974³. Further, in 1969, major banks were nationalised with the objective to organise and improve efficiency of the banking system. While it helped in the expansion of banking services, lack of professionalism, high SLR and CRR rates combined with increasing Non-Performing Assets affected the banking health of the country.

The reforms of 1991 followed by structural changes to improve the economic health of country have been characterised with high economic growth rate, poverty reduction and significant improvement in the banking health. These structural changes helped India sail through the challenges posed by the Global Financial Crisis of 2008. However, the 2004-2014 era was characterised by high inflation rates, low fiscal discipline and increased revenue expenditures.

Starting 2014, a series of structural reforms have aided the country towards achieving its goal of economic prosperity for all. These reforms have been aligned with the broader objectives clearly articulated by the Govt. of India. It includes establishing $5 trillion economy by 2025 and a $7 trillion economy by 2030. The recently announced Viksit Bharat Sankalp by 2047 is an aim to present a holistic vision towards economic growth. The current review analyses the major economic reforms undertaken by the Govt. of India during the past decade under three broad themes, namely Macroeconomic Reforms, Banking Reforms and reforms towards Ease of Doing Business.

Macroeconomic Reforms

In 2014, the newly formed Modi government worked towards a stable macroeconomic policy. The purpose was to make the Indian economy resilient to external shocks post the Global Financial Crisis in 2008. This required effort towards reducing inflation, addressing jobless growth, enabling fiscal discipline and increasing forex reserves. One of the most prominent reforms is the make in India program.

Make in India

The policy is aimed to transform India into a global manufacturing hub. The purpose was to boost investment, foster innovation, enhance skill development, promote employment generation and build a manufacturing ecosystem in the country.

The Make in India initiative has led to a consistent increase in the net Foreign Direct Investment (FDI) inflows. This is evident in the graph 1 given below.

Graph 1:FDI in India (2014-2022)                       Source: World Bank

 

Make in India also has boosted employment generation. The Periodic Labour Force Survey (PLFS), published by the National Sample Survey Organisation (NSSO), has recorded a consistent decline in the unemployment rate of India since 2017 as evident in graph 2.

 

Graph 2: Unemployment Rate (%)

Source: Periodic Labour Force Survey Annual Report 2022-23

 

Make in India has acted as a catalyst to boost employment-oriented economic growth with a priority to produce many wealth creators. Make in India’s real success will come when share of manufacturing in the Indian economy increases from the present 17 percent to 35 percent, as envisioned. Make in India initiative got a further filip with the AtmaNirbhar Bharat Abhiyaan in 2020, that focused on developing a holistic strategy for future-proofing the economy from external shocks and external dependence. Focus was oriented towards providing liquidity to the MSMEs, incentivise agripreneurship and creating viable sources of income for the underprivileged4.

Fiscal Prudence

One of the most crucial aspects of the Modi government’s economic agenda has been a stable and prudent fiscal policy.

To maintain fiscal discipline and regulate government spending, Parliament of India enacted the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. The Act mandated the government to maintain a fiscal deficit of less than 3%. Towards this end, the Govt. of India aims to limit public debt, borrowings and thereby, interest payments. India’s Gross Fiscal Deficit since 2013 has been demonstrated in graph 4. Here, it is visible that even though in the pandemic the fiscal deficit of the country tripled of the desired level, the country is enroute to reduce the deficit, indicating that the government is prudent in its spending.

 

Graph 3: Gross Fiscal Deficit (2013-2023)      Source: RBI

Goods and Services Tax (GST)

One of the single biggest reforms undertaken by the Modi Government is the constitutional amendment that led to the adoption of the GST. Towards improving tax collection and enabling ease of tax payment, the GoI introduced the Goods and Services Tax (GST), a major structural change in the economy. The objective was to replace the prevailing complex and fragmented tax structure with a unified system that would simplify compliance, reduce tax cascading, and promote economic integration. It replaced the previous regime of multiplicity of taxes including VAT and service tax that were imposed on manufacturers.

Since its introduction in 2016 and after the initial hiccups, GST has now streamlined tax collection and has greatly improved tax compliance and collection.

Since its introduction, GST has enabled a decent increase in the indirect tax collection, surpassing more than INR 10,00,000 crores in 2020-21 (see graph 7).

Graph 4: Indirect Tax Receipts (2016-2020)      Source: Union Finance Accounts

As monthly GST collections top 1.78 lakh crore, for the fiscal year 2023-24, total GST collection topped 20 lakh crore and has witnessed double digit growth rates. This indicates a growing economy and a robust tax mechanism, enabling the government to plan its long term spending and capital expenditure.

Banking Reforms

In 2014, the banks of the country were grieving from an unprecedented and undisclosed crisis. With the collapse of the Leeman Brothers in 2008, a set of emergency measures were introduced to provide banks a leeway to prevent spillover of the global crisis. As a result, regulatory forbearance was introduced wherein restructured assets were no longer required to be classified as Non-Performing Assets (NPAs) and therefore did not require the levels of provisioning that NPAs attract. It provided a temporary relief for both the borrowers and the lenders, but its prolonged implementation resulted in piling up of undisclosed NPAs⁵.

Regulatory forbearance was coupled with the fact that banks were involved in increased risky lending since mid-2000s⁶. These borrowers when started to default were not displayed on the balance sheet of the banks owing to regulatory forbearance. Once the forbearance was lifted in 2014, the NPAs started to reflect on the balance of all banks. This fact is reflected in graph 8 that depicts the Gross NPAs of the SCBs. Its clear that GNPAs have increased till 2017-18 after which they witnessed a progressive decline, indicating dispersal of good loans by SCBs.

 

Graph 5: Gross Non-Performing Assets (GNPA) % of total assets of SCBs

Source: RBI

Government’s biggest reform push has been towards a clean up of the banking industry and concerted measures to reduce the GNPA.

 

Mission Indradhanush is one of the most comprehensive efforts to improve the health of Public Sector  Banks (PSB). It covers all aspects of banking functions from appointment to a path towards addressing bad assets. It is meant to bring in transparency, professionalism and build robust balance sheets for banks. The several components of Mission Indradhanush include:

• Appointments – The separation of the post of CEO and MD to check excess concentration of

power and bring greater transparency in decision making.

• Creation of Banks Board Bureau – it has replaced the appointments board of PSBs and advises banks on fund raising; besides holding bad assets for the banks.
• Capitalisation – PSBs that were earlier struggling with bad assets and inadequate capital have now been well capitalised.
• De-stressing – Address pending issues in the infrastructure sector, which in turn reduces the problem of stressed assets for banks.
• Empowerment – providing greater autonomy for banks and more flexibility for hiring manpower that can allow PSBs to become competitive and efficient.
• Framework of accountability – key performance indicators for banks like NPA management, financial inclusion, diversification and growth, improve asset quality are all matrix that are now carefully monitored.
• Governance Reforms

Improved Legal Framework for Loan Recovery for Banks : 

By enacting laws that allow banks to recover bad debts, the Government has aimed to address one of the thorniest issues for banks. amending laws like the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) have provided banks greater visibility in terms of acting against defaulters and bad loans. Such reform measures also go a long way in building investor confidence.

Revised Prompt Corrective Action Framework- 

In 2017, with the idea to implement the Basel III norms, the RBI revised the Prompt

Economic Action Framework for Banks⁸. Capital, asset quality and profitability were the key areas for monitoring. The instruments of monitoring included CRAR, Net NPA Ratio, profitability and Return on Assets. It mandated banks to prepare a recovery plan in cases of emergency, manage credit and market risks. PCA framework is applicable to all the banks operating in the country including small banks and foreign banks. Inability to maintain the standards enunciated by the RBI, banks will be brought under the purview of PCA. The banking regulator can impose a host of restrictions on banks, ranging from restrictions related to the expansion of a branch, dividend and director’s remuneration and so on.

Asset Quality Review

While self-regulation is crucial, RBI has been actively engaging in the process of Asset Quality Review (AQR) initiated in 2015. RBI’s detailed assessment of the bank’s overall lending helps it to analyse the vulnerability of a bank to risky lending. It was through AQR, under which RBI has been continuously monitoring banks, that the rising level of NPAs were addressed. Besides the AQR, the RBI’s Strategic Debt Restructuring scheme have allowed banks to convert their loans to corporates and entities into major equity in the company. This is an innovative strategy that has protected banks from potential defaulters and added a new revenue stream.

Merger of Banks

Since 1991, fewer but stronger PSBs have been envisaged to create an efficient banking system capable to address the needs of a developing economy. These stronger PSBs were envisioned to act as catalysts of growth for the banking sector and provide a robust framework capable to withstand the headwinds of international economy. Merger of PSBs was reiterated by the Narasimhan Committee in 1998 and again the Leeladhar Committee in 2008. Beginning 2017, government has initiated a set of reforms for merger of banks in the country. Since then, the number of PSBs has been reduced to 12. Post these mergers, profitability of banks has consistently risen as presented in figure 1. Profitability figures are also a result of reduced NPAs, lower cost of operation, better geographical coverage and higher economies of scale.

National Asset Reconstruction Company Limited

To enable asset reconstruction, budget 2021-22 announced the formation of an ARC-AMC structure, comprising of two entities for aggregation and resolution of NPAs in the Banking Industry. It has been set up with a strategic initiative to clean up the legacy stressed assets with an exposure of Rs 500 crore and above in the Indian Banking system. It will provide assistance in consolidation of debt, currently fragmented across various lenders, thus leading to faster, single point decision making including through IBC processes, where applicable. It will incentivize quicker action on resolving stressed assets thereby helping in better value realization.

Indian banks, which are the backbone of the economy and are vital for stimulating a virtuous cycle of economic growth, have been witnessing reforms under the government’s 4R strategy, namely Recognition, Resolution, Recapitalisation and Reform.

Fig. 1.: Net Profits of public and private sector banks in India Source: ResearchGate

Ease of Doing Business

For a country like India, setting up a business, operating it and maintaining it were considered to be a meticulous task. The fear of failure of a startup was persistent and continued to plague the development of wealth creators. To give the much-needed boost to entrepreneurship, creation of an investor-friendly ecosystem is crucial. This requirement was felt by the Modi government which worked towards improving ease of doing business. Improvement of India’s ranking in World Bank’s Ease of Doing Business became a priority.

GoI launched the PM MUDRA Yojana wherein loans of upto 10 lakh are provided to income generating micro enterprises engaged in manufacturing, trading and services sectors. More than 37.76 crore loans amounting to over Rs. 20.43 lakh crore have been disbursed since inception of the Scheme in April 2015. It has helped in generating 1.12 crore net additional employment during a period of nearly 3 years ⁹. India ranked 25 in terms of getting credit with the successful implementation of this scheme.

Real Estate (Regulation and Development) Act, 2016

For setting up any business easily, the process of getting construction permits needs to be streamlined. Recognising this gap, Parliament enacted the Real Estate (Regulation and Development) Act, 2016 that significantly helped reduce corruption in acquiring land, building construction and enabling physical operations of the business. Post this major reform, India’s rank improved significantly in this parameter to 27. RERA made it mandatory for builders to register their projects before the start of the project. It also seeks to address other issues like pricing, quality of construction, and other charges. While this has greatly improved ease of doing business, RERA has had a larger impact on improving the real estate sector by providing much-needed transparency.

The third key parameter associated with improving ease of doing business is continued access to electricity. Power reforms related to distribution and transmission have improved the health of state-owned Discoms, thereby ensuring electricity for businesses.

Implementation of the Deen Dayal Updhyay Gram Jyoti Yojana (DDUGJY) and SAUBHAGYA has allowed 100% electrification of rural households enabling them access to electricity and providing better opportunities.

Insolvency and Bankruptcy Code, 2016

Another key aspect of improving the business climate in the country to make it attractive for global investors was allowing easier exits to investors in case of unsuccessful ventures. The Insolvency and Bankruptcy Code (IBC) was enacted in 2016. It provides time-bound processes for insolvency resolution of companies and individuals by licensed Insolvency Professionals (IPs). The Code specifies similar insolvency resolution processes for companies and individuals, which will have to be completed within 180 days. The resolution process will involve negotiations between the debtor and creditors to draft a resolution plan, paving the way for a process-driven exit in a time-bound manner. IBC has significantly helped improve India’s ranking as it ranked 52 in Resolving Insolvency parameter.

IBS allows visibility to investors in case of unsuccessful business ventures. Easier exits give comfort to global investors to evaluate alternate investment opportunities.

Author Brief Bio: Gaurie Dwivedi is a senior journalist and author.

 

References: 

1. Economic Survey 2019-20, Chap 1: Wealth Creation – The Invisible Hand Supported by the Hand of Trust.
2. https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=1986&locations=IN&start=1961
3. https://pdf.usaid.gov/pdf_docs/PNACR801.pdf
4. https://prsindia.org/files/policy/policy_committee_reports/Aatma%20Nirbhar%20Scheme.pdf
5. Economic Survey 2020-21. Chap 7: Regulatory Forbearance – An Emergency Medicine, Not Staple Diet!
6. Economic Survey 2019-20, Chap 1: Wealth Creation – The Invisible Hand Supported by the Hand of Trust.
7. https://www.rbi.org.in/commonperson/english/scripts/Notification.aspx?Id=2523
8. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1882885
9. https://www.ventureintelligence.com/Indian-Unicorn-Tracker.php