Archives: Publication

The interim Budget 2024-25 has emphasised on efforts to achieve net-zero emission by 2070. The proposed expenditure for the New and Renewable Energy Ministry has increased significantly — from ₹17,729.46 crore in Budget 2023-24 to ₹26,376 crore in Budget 2024-25.

The major increase is for the Solar Power (Grid) scheme, from ₹4,970 crore in 2023-24 to ₹8,500.35 crore in 2024-25. Additionally, there is an increase for the National Green Hydrogen Mission (from ₹297 crore to ₹600 crore), Bio Energy Programme (allocation of ₹300 crore in 2024-25), and hydropower (grid) (₹31 crore to ₹51 crore).

The Central Government has proposed a number of measures to promote green energy, these include: viability gap funding for harnessing offshore wind energy potential for initial capacity of one giga-watt; establishment of coal gasification and liquefaction capacity of 100 mt by 2030; promotion of phased mandatory blending of compressed biogas (CBG) in compressed natural gas (CNG) for transport and piped natural gas (PNG) for domestic purposes; and provision of financial assistance for procurement of biomass aggregation machinery to support collection.

Rooftop solar

Another thrust area is rooftop solarisation, under which one crore households are expected to obtain up to 300 units of free electricity every month. This scheme not only is expected to generate savings on electricity, but also provide additional income to the households by selling the surplus power to distribution companies and provide entrepreneurship and employment opportunity to youth for manufacturing, supply and installation.

Rooftop solar systems, despite the potential, have not gained much popularity till now. According to Ministry of New and Renewable Energy estimates, the total installed capacity of solar power is 73.32 GW (17.12 per cent of total installed capacity of power generation), of which installed capacity of ground mounted solar plant is 56.92 GW, grid connected solar rooftop 11.08 GW, hybrid projects (solar component) 2.57 GW and off-grid solar: 2.75 GW.

Despite installed capacity, solar power generates only 6.43 per cent of total electricity.

Rooftop solar faces the challenges of lack of awareness, high cost of installation along with lack of access to finance, unwillingness of Discoms driven by frequent changes in policies, lack of support from the regulatory framework, lack of State-level policy support, and inconsistencies related to net metering and gross metering.

The system of net metering lets consumers sell excess electricity generated from solar rooftops to Discoms.

But presently, the limit on how much they can sell back is low, causing hindrances to adopting the system.

Rules relating to obtaining statutory approval for installation of the system vary across States. India’s solar power manufacturing is not yet developed and it is mainly dependent on imported equipment from China. This further leads to high cost of installation, for which it is difficult to get credit for consumers with lower credit credentials.

It is important to structure the existing regulatory system and revision of net metering system to attract new consumers and benefit the existing ones. Increasing awareness and provision of easy loans for installation is also required to strengthen the system.

To develop a viable market for rooftop solar system, Central and State governments need to come up with innovative solutions like installation of rooftop solar plants in government office buildings, removal of regulatory barriers of grid-connected solar systems, carbon credits for industries adopting rooftop solar, region-wise solution of problems to attract Discoms, and skilling youth to encourage local manufacturing and installation.

The writers are Fellow and Professor at NCAER. Views are personal

Gujarat has consistently ranked among the fastest growing States in India. According to the World Bank’s income group classifications, the state is on the verge of achieving high middle-income status.

Three key features characterize Gujarat’s remarkable growth process.

First, growth in the State has been diversified across sectors. Instead of being confined to a manufacturing versus services-led debate, its growth has been led by both the sectors. Further, even its agriculture sector has outpaced the national average.

During the pre-COVID Decade, its agriculture, services, and manufacturing sectors grew by 6, 8, and 11 percent annually, as compared to the national averages of 4.4, 7.7, and 8 percent, respectively. At 37 percent, Gujarat boasts of nearly the highest share of manufacturing in its economy amongst the States currently.

Second, growth in Gujarat has been accompanied by rapid improvements in most indicators of human capital and quality of life.

Its literacy rate has increased from 69 percent to 78 percent between the last two Census rounds, surpassing the national average. Life expectancy is 71 years, at the same level as the national average. Its infant mortality rate declined from 41 to 23 deaths per 1000 live births between 2011 and 2020, below the national average; and the percentage of fully immunized children has rallied close to the national average, at 76 percent.

As regards the basic amenities of life, household access to improved drinking water sources and to electricity has increased to 98 percent and 97 percent, respectively. Household access to improved sanitation facilities has also increased from 44 percent to 74 percent.

Third, Gujarat stands out for its exceptional fiscal prudence.

Gujarat is one of the few States to have fully adhered to the targets laid down under the Fiscal Responsibility and Budget Management rule. It currently runs a modest primary deficit, a small fiscal deficit, and a revenue surplus. Its contingent liabilities have declined to negligible levels. Under most scenarios, its already low public debt is projected to decline further.

Interestingly, both its public expenditure and revenues as percentages of the State GDP, are smaller than those of an average State. This suggests that its government machinery is highly efficient in delivering its mandate.

All the above parameters have made the State an attractive investment destination. It is also ready to take the next leap into a higher orbit, escaping the trap that has afflicted a majority of middle-income economies around the world– a reference to the economic slowdown in countries at middle-income levels that hampers their transition to a high-income status.

What can Gujarat do to defy a middle-income trap? Some pointers:

1. It needs to devise a futuristic strategy for growth that entails investment in skills, entrepreneurship, a high-tech industry, and innovation. It ought to enhance the skills of its own people to make them future-ready, as well as attract the best talent from other States and from around the world. It should strive to build capabilities to garner a larger slice of the global market for goods and services that would be in demand during the coming years and decades.
2. Its indicators of gender parity pose a mixed picture. While its female participation in labour force has increased over time, and exceeds the national average, it remains below the numbers attained in other fast-growing middle-income countries. Besides, a very basic indicator of gender parity, the sex ratio in the age group 0-6 (measured as the number of females per 1000 males) in the State remained below national average until recently, and surpassed it only in the latest National Family and Health Survey.
3. With the content of services increasing across countries in both manufacturing processes as well as in final consumption, most modern path to prosperity traverse through a world-class services sector. The economies that are highly successful as manufacturing hubs need to become equally efficient in services, for the latter are increasingly becoming important determinants of the competitiveness of manufacturing. Gujarat will do well to assess and leverage its untapped potential in the services sector, encompassing–both traditional and modern segments.
4. Given its highly prudent fiscal stance, the State can afford to expand its fiscal envelope to make investments for the future. It can achieve this by increasing its own tax and non-tax revenues, which lag behind the average figures of the other States. If need be, it can run slightly higher deficits and borrow from the market at modest interest rates.

Gujarat has set an example in fiscal efficiency, economic growth, and socio-economic benchmarks. It should now aim to become an innovation hub to redefine its growth story and defy the prevalent middle-income trap, thereby becoming a role model for the entire country and even for the developing world.

See https://www.ncaer.org/PolicyBriefGujarat.pdf  for more details.

Jayanta Talukder contributed to this piece.

The population dialogue in India has been dominated by concerns about population explosion. However, it is time for us to move these fears and learn from the experiences of other countries.

In her speech, while presenting the 2024 budget, Finance Minister Nirmala Sitharaman promised a committee to study India’s population growth to ensure that the nation is on target to meet the Viksit Bharat goal by 2047. Coming nearly 50 years after the brutal implementation of the population control programme in 1976, I hope this move reflects a shift in public discourse regarding the course of India’s demographic transformation.

India is and will remain the world’s most populous nation for the foreseeable future. Nonetheless, it does not appear to be the fearsome prospect it once appeared to be. Fertility has steadily declined to a level where two parents are being replaced by two children and all segments of the society have begun to adopt family planning.

Moreover, India has learned not to let the burden of a growing population pose an obstacle to its continued economic growth. However, we have yet to adapt to the changes that population transformation brings. I hope this committee will focus on reshaping the policy agenda that rides the inevitable demographic wave and not be mired in the old discourse of population bomb. This will require focusing on several priorities.

First, we must recognise that India’s demographic destiny for 2047 has already been written. The workforce of 2047 has already been born and will look very different from the workforce of 2024. Today 33 per cent of the population is aged 20-29, while 23 per cent of the population is aged 40-59. But in 2047, the proportion of the younger population will decrease, and the proportion of older working ages will increase, with each forming about 28 per cent of the population. To ensure that this growing proportion of middle-aged workers can keep up with the changing demands of an increasingly technologically driven economy, we must invest in continued skill upgradation and on-the-job training above and beyond formal education.

Second, all of India will not undergo demographic changes at the same pace. Just as fertility decline first emerged in southern, more developed states, population aging will also be most visible in these states. Dependency burden, defined as the number of individuals ages 15-59 supporting children under 15 and older population above 60, will vary dramatically between states. For example, demographer P.M. Kulkarni estimates that in 2021, in Bihar, 151 working-age adults supported 100 dependents, while in Tamil Nadu, 189 adults supported the same population; this will flip with the worker-to-dependent ratio changing to 201 in Bihar and 132 in Tamil Nadu by 2051.

In short, the future of India’s elderly and children will rest on workers’ productivity in states we have historically considered demographic laggards, such as Bihar, Uttar Pradesh, Madhya Pradesh, and Chhattisgarh. How can we invest in the workers in these states to ensure the future welfare of all Indians? This will be the challenge that the newly formed 16th Finance Commission will face as it decides on inter-state allocations.

Third, as fertility declines, the burden of child care for women drops. My analysis of National Family Health Survey data, undertaken with sociologist Sojin Yu, shows that in 1993, an average woman spent about 14 years caring for children under age five, while that number dropped to eight years in 2021. However, time freed up from childcare has not been utilised in increased participation in the workforce.

Unless we find ways of creating a welcoming labour market for women, we will waste the opportunity of turning a demographic dividend into a gender dividend. One of the best ways of expanding women’s ability to participate in the job market may be to improve the availability of childcare, possibly through creative combinations of Anganwadi and the Mahatma Gandhi National Rural Employment Guarantee Scheme. There is no reason why permissible MGNREGA works cannot include rotational provision of childcare under the supervision of a trained early childhood educator.

Fourth, a combination of rising numbers of elderly and a declining number of children to care for them means we must increase the ability of this older population to be self-sustaining. A combination of policies will be needed, including rising retirement age, enhanced old age pension schemes, and increased ability to sell land or homes, assets in which most of the wealth of the Indian elderly resides.

Historically, the population dialogue in India has been dominated by concerns about population explosion. However, it is time for us to move beyond the Emergency era fears and learn from the experiences of other countries. In its quest for rapid population control, China implemented a strict one-child policy, bringing it to a demographic cliff where the needs of its aging population have begun to drag down its economic growth. Relaxing the one-child limitation has been unsuccessful in increasing fertility. This suggests that India should refrain from a similar panicked reaction and let fertility decline continue at a natural pace. If demography is destiny, let us adapt to it with grace.

These complex challenges require multifaceted attention from demographers, economists, sociologists, and public policy experts. The move to set up a high-powered committee to evaluate the challenges posed by demographic transformation in conjunction with the 16th Finance Commission will allow its recommendations to flow into government spending priorities, creating a virtuous cycle.

The writer is professor at the University of Maryland and the National Council of Applied Economic Research. Views are personal