Sustainable Infrastructure: India's Path to a Resilient Future

Infrastructure development serves as a catalyst for India's journey towards a US$ 26 trillion economy, making it critical to prioritise key investments in physical infrastructure with efforts that promote ease of doing business for increased efficiency and cost reduction. India's infrastructure sector is expanding at a rapid pace to support the country's transformation into a worldwide economic powerhouse, aided by a US$ 122 billion (Rs. 10 trillion) budget commitment for infrastructure investment in 2023-2024 and a number of other measures. Infrastructure investment is recognised to have a powerful multiplier impact, accelerating economic growth. It also promotes equitable and sustainable development by providing employment, enhancing accessibility, and increasing production. More than half of India's urban infrastructure needs till 2030, including housing, electricity, transportation, water, and waste management, have yet to be developed. India must invest US$ 4.5 trillion in infrastructure to enhance economic growth and societal well-being. At COP26, India pledged to achieving net zero emissions by 2070. India's updated nationally determined contribution (NDC) includes reducing the emissions intensity of its gross domestic product (GDP) by 45% by 2030 compared to 2005, achieving 50% cumulative non-fossil fuel-based power capacities by 2030, and propagating a healthy and sustainable way of life that includes the adoption of a 'Lifestyle for Environment', or LIFE, movement as a key to combating climate change. The NDCs and reaching Net Zero both depend heavily on the infrastructure sector. Infrastructure will be critical as India strives for sustained and fair growth in Amrit Kaal.

Infrastructure expenditure has a high multiplier impact through a variety of routes, including job creation, enhancing the competitiveness of our industrial and service sectors, attracting FDI, and raising the standard of living in our nation. To boost infrastructure development in the country, the government has launched many programmes over the previous decade, including the National Infrastructure Pipeline (NIP), the National Monetisation Pipeline (NMP), the PM Gati Shakti plan, and the National Logistics Policy.

Sustainable Infrastructure Development in India

Sustainable infrastructure systems are those that are planned, designed, built, operated, and decommissioned in a way that assures economic and financial, social, environmental (including climatic resilience), and institutional sustainability across the whole infrastructure life cycle. Built infrastructure, natural infrastructure, and hybrid infrastructure that combines features of both are examples of sustainable infrastructure. India requires not only infrastructure but sustainable infrastructure. A well-defined framework concentrating on project finance and incorporating environmental and social factors throughout the project lifecycle is critical to making this change. Sustainable infrastructure is critical to India's growth, with investments in renewable energy projects critical to lowering the country's carbon footprint and fostering a more environmentally friendly energy mix.

 Roads, trains, ports, power, and urban infrastructure are some of the important infrastructure sectors that will drive growth in the next years. Roads and railroads accounted for more than half of the Centre's overall capital expenditure during the past two years. The government's investment in road transport and highways has increased at a significant CAGR of over 40% over the previous decade. Railways have witnessed the government's capex rise at a CAGR of 37% in the recent four years (FY20-24), up from 15% in FY15-FY19. The Centre's capital expenditures on energy, ports, civil aviation, and telecommunications have also increased significantly.

Guiding Principles

• Strategic Planning

Infrastructure development decisions should be supported by enabling policies, regulations, and institutions that enable coordination across departments and both national and sub-national levels of government and public administration. These decisions should be based on strategic planning that is in line with global sustainable development agendas and current international conventions.

• Responsive, Resilient, and Flexible Service Provision

Planning and development of infrastructure should be based on a thorough understanding of the requirements for infrastructure services and be guided by the variety of alternatives available to satisfy those requirements. This involves recognising and controlling changing demand, as well as addressing demands through renovation or rehabilitation of current infrastructure before investing in new infrastructure. Infrastructure project systems-level design should encourage synergies for enhanced integration, which can lead to increased productivity, efficiency, sustainability, and spillover benefits of investment. Infrastructure plans should be flexible and resilient to allow for changes and uncertainties throughout time, and they should be updated.

• Comprehensive Life Cycle Assessment of Sustainability

The environmental, social, and economic sustainability of infrastructure should be reviewed as early as possible in the planning and preparation stage, taking into account both financial and non-financial aspects across interconnected projects, systems, and sectors across their entire cycles. Life Cycle Sustainability Assessments should evaluate the cumulative consequences on ecosystems and populations as part of a larger landscape, beyond a project’s immediate vicinity and should take into consideration transnational implications.

• Avoiding Environmental Impacts

Infrastructure's negative environmental consequences should be reduced to the greatest extent practicable, and natural capital should be developed to the greatest extent possible. Construction should be avoided in regions critical to the survival of biodiversity or with high ecosystem service value. The construction of physical infrastructure should attempt to supplement or strengthen, rather than replace, nature's ability to deliver services such as water supply and purification, flood control, and carbon sequestration. Nature-based solutions should be prioritised.

• Resource Efficiency and Circularity

Circularity and the use of sustainable technology and building materials should be planned and incorporated into infrastructure systems to minimise their footprints and reduce emissions, waste, and other pollutants.

• Equity, Inclusiveness, and Empowerment

Infrastructure investment must strike a balance between social and economic aspirations. Infrastructure should enable equitable access to and affordability of services to everyone, with the goal of promoting social inclusion, boosting economic empowerment and social mobility, and respecting, defending, and fulfilling human rights. It should be safe, promote human health and well-being, and prevent damage to communities and users (particularly those who are weak or marginalised).

• Enhancing Economic Benefits

Infrastructure should generate jobs, promote local businesses, and provide facilities that benefit communities in order to maximise and protect its economic advantages.

• Fiscal Sustainability and Innovative Financing

Infrastructure development should take place within the parameters of fiscal transparency, financial integrity, and debt sustainability.

• Transparent, Inclusive, and Participatory Decision-Making

Infrastructure development should be supported by open and transparent planning, information-sharing, and decision-making procedures that allow for meaningful, inclusive, and participatory stakeholder consultation and, in the case of indigenous peoples, their free, prior, and informed consent. Stakeholder complaints and concerns should be handled through national, subnational, and project-level grievance channels.

• Evidence-Based Decision-Making

The development and administration of infrastructure throughout its life cycle should be influenced by key performance indicators that encourage the gathering of data, including data disaggregated by stakeholder groups. Regular monitoring of infrastructure performance and impacts is required to create data, which should be made

available to all stakeholders.

Benefits of sustainable infrastructure

Sustainable Infrastructure Investment

Green finance refers to financial arrangements that are unique to the usage of projects that are ecologically friendly or initiatives that incorporate components of climate change. Energy-efficient projects like green building, waste management that includes recycling, effective disposal, and energy conversion are all examples of environmentally sustainable projects. They also include the production of energy from renewable sources like solar, wind, biogas, etc.; clean transportation that involves lower greenhouse gas emissions; and more. Furthermore, projects designated as sustainable under the disclosure requirement for Green Debt Securities include climate change adaptation, sustainable waste and water management, sustainable land use, including sustainable forestry and agriculture, and biodiversity conservation. New financial instruments, such as green bonds, carbon market instruments (like a carbon tax), and new financial institutions (like green banks and green funds), are being formed in order to satisfy the funding requirements for these kinds of initiatives. They together comprise green financing.

• Green bonds

As on April 28, 2023, 63 green bonds were issued in India. Issuer-wise break up shows that corporates and PSUs have issued the highest number of these bonds. Bond proceeds shall be used solely to finance or re-finance, in part or whole, new and/or existing qualifying green projects that adhere to the four basic components of the green bond principles (GBP). Global green bond issuance in 2021, US$ 578.4 billion (5-year CAGR: 46.9%). Green bond issuance in India in 2021, US$ 8 billion (five-year CAGR: 38%). Recently, Azure Power Energy (US$ 414 million), Power Finance Corporation (US$ 352 million), and ReNew Power (US$ 400 million) issued green bonds in India.

• Sustainability Linked Bonds

Bond instrument with variable financial and/or structural features based on whether the issuer meets preset sustainability/ESG goals. US$ 118.8 billion is issued in sustainability-related bonds globally in 2021. Recent sustainability linked bond issuances in India include JSW Steel (US$ 500 million), UltraTech Cement (US$ 400 million), and Adani Electricity (US$ 300 million).

• Social Bonds

Bond revenues shall be used solely to finance or re-finance new and/or existing qualifying social projects that are consistent with the four basic components of the social bond principles (SBP). Global issuance of social bonds is expected to reach US$ 220.3 billion in 2021 (5-year CAGR: 136.14%). India issued US$ 0.5 billion in social bonds in 2021. Shriram Transport Finance (US$ 475 million) issued a social bond recently.

• Sustainability Linked Loans

Loan instruments and/or contingent facilities that motivate the borrower to meet high, specified sustainability performance targets. The borrower's sustainability performance is monitored using sustainability performance targets (SPTs), which contain key performance indicators, external ratings, and/or similar measures and track changes in the borrower's sustainability profile. Global sustainable financing activity increased by 121%, from US$ 6 billion in January 2016 to US$ 322 billion in September 2021. 90% of these loans were sustainability linked loans.

• Sustainability Bonds

The only purpose of the bond revenues will be to finance or refinance a mix of green and social initiatives. Sustainability bonds correspond to the four fundamental components of both the GBP and the SBP. Global sustainability bond issuance in 2021, valued at US$ 200.9 billion (5-year CAGR: 98.6%). In 2021, India issued US$ 1.2 billion in sustainability bonds. In India, recent sustainability bond issuances include Axis Bank (US$ 600 million).

Indian investments, which rely largely (almost 60%) on the private sector, provide for more than 80% of the country's sustainable financing. Between 2019 and 2020, the percentage of foreign contributions slightly rose from 13% to 17%. Commercial financial institutions make up the biggest number of domestic sources, followed by corporations.

Progress of Sustainable Development Goals

Four national level indicators have been established to track India's progress towards the Goal of Industry, Innovation, and Infrastructure, which encompasses two of the eight SDG objectives for 2030. The four metrics are (i) Road Connectivity, (ii) Mobile Tele-density, (iii) Internet Density, and (iv) Gram Panchayats covered under "Bharat Net". The SDG Index Score for Goal 9 for India is 44, based on the four recognised national indicators, with scores ranging from 0 to 72 for states and 0 to 100 for UTs. The UTs of Delhi and Puducherry are the ones that succeeded in achieving this goal, as they received a perfect score of 100 on the Index. The Pradhan Mantri Gram Sadak Yojana (PMGSY), Bharatmala, and Sagarmala programmes, among others, are some of the measures the Indian government is launching to support the infrastructure industry. We have flagship projects like Make in India and Digital India that are geared towards innovation and industrial growth.

Government Initiatives

• The Government of India (GoI) gives 30% of the installation cost of rooftop solar panels as a subsidy to the institutional, residential, and social sectors in most states. In certain areas of the special category states, the subsidy might amount to up to 70% of the installation cost. Beneficiaries can also take advantage of a generation-based incentive, in which they can get US$ 0.024 (Rs. 2) per unit of generation if their annual generation reaches 1100kWh-1500kWh. Furthermore, surplus electricity can be sold at a government-determined rate.
• In 2015 and 2019, the GoI launched two phases of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme to improve the flow of credit, lower the upfront purchase price of all vehicles, and develop infrastructure (such as charging stations) to encourage green vehicle production and sales.
• To offset the high upfront cost of such cars, the State Bank of India has established a 'green auto loans' plan for electric vehicles, with 20 basis points cheaper interest rates and a longer repayment window than regular car loans.
• The government has implemented a Production Linked Incentive (PLI) Scheme to encourage the production of high-efficiency modules in the field of renewable energy.
• The inclusion of the renewable energy industry within the priority sector lending programme by the RBI, under which businesses in the field are eligible for loans up to US$ 3.63 million (Rs. 30 crore) and households up to US$ 1.21 million (Rs. 10 crore).
• Climate Resilient Cities

Since its inception in 2019, annual assessments are conducted. The first assessment saw 100 Indian cities under the ambitious Smart Cities Mission participate, impacting more than 100 million people. The aim was to promote low-carbon development, deploy energy-efficient technologies and invest in climate-resilient infrastructure at the local level. To provide sustained impetus and long-term perspective to ongoing efforts, the National Institute of Urban Affairs (NIUA) has set up a dedicated “Climate Centre for Cities”. This centre is responsible for regular monitoring of the performance of cities concerning their climate action.

Road Ahead

 Amid global geopolitical uncertainties as the country enters the Amrit kaal period, increasing emphasis on infrastructure-led economic growth holds the key to placing India as a strong leader in global markets. Following the epidemic, the shifting geopolitical scenario provides a chance for India to diversify the global supply chain and take a vital place in the global arena. This makes it even more important for the country to accelerate infrastructure development in order to properly capitalise on this potential. And to do so, India must step up its game against its global competitors, improve its competitive advantage, and be nimble and sensitive to economic conditions, which is only achievable if infrastructure development is done well. It is especially critical at a time when India assumes the presidency of G20 and pursues a bigger agenda in defining and strengthening global architecture and governance on all important international economic challenges.

In today's quickly changing world, self-reliance, sustainable infrastructure, and community support are critical for India's long-term prosperity and resilience. Self-sufficiency and deliberate investments in sustainable infrastructure set the groundwork for a thriving and sustainable future. Recently, there has been a greater worldwide emphasis on sustainable investment, which considers Environmental, Social, and Governance (ESG) factors. Corporations and investors, including sovereign wealth funds, pension funds, private equity firms, and other financial investors, are increasingly focusing on long-term growth. As a result, it is vital that future infrastructure development prioritises sustainable, equitable, and green growth.