India's Manufacturing Growth Poses Net Zero Challenge, Says Chief Economic Advisor
Balancing India's ambitious manufacturing expansion with its commitment to achieving net zero emissions is emerging as a critical structural challenge, according to Chief Economic Advisor (CEA) Anantha Nageswaran. He emphasized that the nation must simultaneously grow its industrial capacity while actively working to reduce its carbon footprint, creating a complex policy dilemma.
Niti Aayog Report Marks Climate Planning Milestone
Speaking on the sidelines of the launch of the Niti Aayog study report titled 'Scenario Towards Viksit Bharat and Net Zero', Nageswaran described the document as an important milestone in India's long-term climate and development planning. "While emissions are largely a legacy of fossil fuel-led growth in advanced economies, India now faces an unprecedented challenge as it seeks to expand manufacturing while simultaneously lowering its carbon footprint," he stated.
The CEA noted that the release of this comprehensive report represents a significant step in India's planning for net zero transition while balancing multiple development objectives. He praised the Niti Aayog report as rigorous and high-quality, suggesting it will serve as a valuable benchmark for future policy deliberations and strategic discussions.
Manufacturing's Central Role in Economic Ambitions
Highlighting crucial structural trends, Nageswaran pointed out that manufacturing has contributed approximately 18 percent to India's GDP over the past decade, while services have been the primary growth driver for several decades. He stressed that manufacturing remains central to India's ambition of becoming a global economic power, citing its essential role in:
- Lowering the cost of capital for businesses
- Strengthening the national currency
- Improving overall state capacity and governance
"Manufacturing matters much more for state capacity than services do," Nageswaran asserted. "A renewed push for manufacturing, also highlighted in the recent Union Budget and the Economic Survey, would inevitably raise the emission intensity of the economy, making India's net-zero journey more complex than that of many other countries."
Financing the Transition Through Domestic Resources
Regarding financing the energy transition, the CEA explained that amid ongoing geopolitical tensions, pressure on multilateral institutions, and rising protectionism globally, India will need to rely predominantly on domestic resources. This approach would require:
- Sustained economic growth at robust levels
- Higher household savings rates
- Substantial employment generation across sectors
- Significant investment creation in green technologies
Nageswaran described this as forming an "endogenous" growth-investment cycle where domestic capabilities fuel the transition process.
Energy Intensity of Renewable Technologies
The Chief Economic Advisor also drew attention to the energy-intensive nature of renewable technologies themselves. Citing data from the Economic Survey, he noted that generating one gigawatt of solar power requires substantial amounts of silver, polysilicon, and aluminium, while wind power depends heavily on copper, whose extraction and processing are themselves energy intensive.
"These facts remind us that the energy intensity of renewable energy itself is quite high," Nageswaran observed. "This reality makes a strong case for investment in moonshot technologies such as carbon capture, utilisation and storage (CCUS), as well as breakthroughs to address intermittency and storage challenges in renewable energy systems."
Call for Increased R&D Investment
Nageswaran emphasized that India's advances in science, research, and development will not only facilitate its own energy transition but could also support other emerging economies facing similar constraints. He called for a sharp scale-up in R&D investments specifically targeting:
- Reducing the energy intensity of renewable technologies
- Improving energy storage technologies and systems
- Advancing carbon capture solutions and applications
Living Document for Evolving Challenges
Regarding the Niti Aayog study, the CEA suggested it should be treated as a "living document" that will require periodic updates as technology evolves, economic conditions change, and global realities shift. "This document will be a stable reference for researchers, policymakers, and students of economics and climate change," he concluded, highlighting its potential as an enduring resource for India's complex journey toward balancing industrial growth with environmental sustainability.
