India’s policy challenges will hamper net-zero progress, Moody’s says


According to rating agency Moody’s, India’s need for economic development will limit the government’s ability to provide sufficient financial support to finance the carbon transition and leave the way open for the private sector to drive emissions reductions.

Many large companies have introduced a wide range of 2050 emissions targets. India’s net-zero (stable Baa3) target for 2070 and intermediate targets by 2030 pose significant policy implementation challenges for the government.



Nishad Majmudar, associate vice president and analyst at Moody’s, said high growth potential, significant economic development needs and a large agricultural sector are likely to weaken the government’s political resolve and financial capacity to drive the economy’s transition to low-carbon. Therefore, India’s planned emissions reductions will depend on low-cost, long-term private capital.

Many of the country’s big private companies have announced net-zero targets well above the Indian authorities’ targets, while government-related companies lag comparatively behind. Additional policy signals to encourage the transition would lead to higher private investment.

The pace of India’s carbon transition will depend on the government’s ability to balance energy affordability and reliability with its emissions reduction commitments, said Abhishek Tyagi, vice president and senior credit officer at Moody’s.

The reduced storage costs and scalability of renewable projects with storage would support a faster transition.

On climate change targets and the financial sector, Moody’s said Indian banks face transition risks from significant lending to high-carbon sectors and are under pressure to decarbonize their loan books.

At the same time, green finance represents a significant lending opportunity given the dominant role of banks in lending in the country.

India’s pursuit of its goals depends on the country receiving up to US$1 trillion in climate finance from external donors, including multilateral development banks and advanced economies – an unlikely prospect. This carves a bigger role for the private sector and private capital to drive emission reductions.

For example, many of India’s largest non-financial corporations have also adopted carbon neutrality or net-zero emissions targets of varying severity for the next three decades.

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