Great Expectations: India's Tryst With Climate Change

Introduction

While presenting the Union Budget this year, the Indian Finance Minister had announced the government's intention to issue 'green bonds'¹ with a sovereign rating, the proceeds of which would be used to finance a variety of public-sector green infrastructure projects. According to recent media reports,² it appears that the government is about to finalize the framework for such sovereign issuance, including for the purpose of identifying projects/sectors that will qualify for funding.

A source of worry, however, could be India's sovereign credit rating – which is just at 'investment grade'³ (according to some rating agencies). Any further downgrade might lead to global funds reducing their exposure to Indian sovereign securities pursuant to their internal rules. Further, since these bonds will be rupee-denominated, currency risk perceptions might become a critical factor, along with a depressed debt market – given the global effects of inflation and