India needs to spend 11% of GDP to meet target: Report

Almost 40% of the spending would be in the power sector, the report said.

If India were to achieve net-zero emissions by 2050, it would have to spend an average of $600 billion annually for the next 30 years, which means as much as 11% of its GDP, consultancy firm McKinsey and Company said in a report on Tuesday.

India will be net-zero by 2070, Prime Minister Narendra Modi announced at the Glasgow climate summit in November last year.(File Photo | Representational Image)

Annual capital expenditure on physical assets in India would rise from around $300 billion in 2020 to an average of $600 billion between 2021 and 2050, McKinsey said in its report titled ‘The net-zero transition: What it would cost, what it could bring’. Much of the money will be used to expand renewable energy capacity and reduce use of coal-fired power plants.

India will be net-zero by 2070, Prime Minister Narendra Modi announced at the Glasgow climate summit in November last year. The report advances the deadline by two decades. Net-zero means completely neutralizing the greenhouse gases produced by human activity by reducing and absorbing emissions. At 11% of GDP, India will have to spend significantly more than the global average of about 7.5% of GDP between 2021 and 2050, the report said.

The report highlights the enormity of the challenge -- and also the cost involved in transitioning to net-zero, one reason why India has been insistent that developed countries walk the talk on their climate financing promises. Almost 40% of the spending would be in the power sector, the report said. India may also have to invest more heavily than other countries in climate adaptation measures given its relatively high physical risk exposure to climate change, the report added. For net-zero transition, spending on physical assets for energy and land use systems will cost $9.2 trillion per year on average between 2021 and 2050, or cumulatively $275 trillion globally. This means an annual increase of $3.5 trillion from current levels.

Developing countries will have to spend much more on the transition. Exposed locations in sub-Saharan Africa and India would need to invest at least 1.5 times more than advanced economies as a share of GDP today to support economic development and build low-carbon infrastructure, McKinsey said.