Second Low-Carbon Energy Programmatic Development Policy Financing

India has made very significant development progress in recent decades and is expected to remain on an ascendent trajectory: its aspirations to become a high-income economy by 2047 would require it to elevate its rate of growth even further. From 1991 to today, the size of the economy has multiplied more than ten times, and gross domestic product (GDP) per capita seven times. From 1993-2022, the extreme poverty rate declined from 48 percent to 12.9 percent, reducing the number of extreme poor people by about 262 million. India’s past achievements set the tone for its future ambitions, notably the target to reach high income by 2047, which will require the economy to grow at 8 percent per annum on average over the next two decades. The actions supported under the proposed operation reflect India’s resolute and pragmatic approach to addressing climate change challenges. India’s policymakers are attempting to strike a complex balance between multiple objectives that entail inherent tradeoffs: boosting growth and innovation, including through targeted industrial policies; achieving energy security; and, contributing to global climate change objectives. Providing secure and affordable energy supply is a top priority for the GoI, with coal remaining the cheapest baseload supply available. The GoI’s drive to promote domestic manufacturing through “Make in India” will boost domestic productive capacity in RE, but it pushes up RE costs in the short-to-medium term, potentially delaying the large-scale adoption of RE. India’s policymakers are also trying to maximize the leveraging of public spending to crowd in the private sector and domestic commercial financing resources by providing just enough support to elicit private sector interest and drive down the cost curves, while optimizing the use of public resources.