Eco Survey: Balancing Net Zero, Fiscal Prudence, Competitiveness

Chief Economic Advisor (CEA) V Anantha Nageswaran, the author of the Survey, said the government needs to focus on adaptation strategies as opposed to the developed nations’ mitigation goals. 

The Impossible Trinity

“Between fiscal sustainability, Net Zero goals and economic competitiveness at any given point in time, only two are possible,” Nageswaran said, underlining the concept of the “impossible trinity of net zero.” 

Explaining the theory, he said that a nation cannot simultaneously achieve fiscal sustainability, economic competitiveness and Net Zero goals without significant trade-offs. 

While acknowledging India’s ambitious Panchamrit commitments made at COP26, the Survey shifts its focus towards climate adaptation instead of mitigation, signaling a pragmatic approach amid global uncertainties.

The Survey, a report card of the government, has noted that while decarbonisation remains a goal for India, strategies should centre around adaptation — investing in climate-resilient infrastructure and disaster preparedness, rather than focusing solely on cutting emissions.

The Survey warns that countries, including India, must make difficult choices regarding climate action.

Energy Transition and China’s Dominance 

The Survey underscores that India’s energy transition is heavily reliant on China. As global supply chains for renewable technologies, particularly solar photovoltaic (PV) cells, are concentrated in China, any disruption could pose risks.

“The road to energy transition runs through China,” the Survey notes, highlighting how China’s control over rare earth minerals and battery technologies gives it an outsized role in global decarbonisation efforts.

For India to achieve its 2070 Net Zero target, it must navigate challenges in storage solutions, high costs of green hydrogen and supply chain vulnerabilities in nuclear energy. 

While India has increased its domestic capacity in solar and battery manufacturing, Nageswaran stressed that “there is no formulaic answer” to overcoming these obstacles. Direct incentives, policy support, and research into alternative battery technologies will be critical.

Focus Sectors

The Survey highlights the urgency of decarbonising India’s transport sector, which is a major contributor to emissions. India’s push for electric mobility has seen progress through initiatives such as the FAME (Faster Adoption and Manufacturing of Electric Vehicles) India scheme and Production Linked Incentive (PLI) programmes. 

However, the report warns that 70 per cent of the world’s rare earth minerals are processed by Chinese companies, making India’s EV ambitions dependent on external supply chains.

Agriculture, another vulnerable sector, faces mounting climate risks. The Survey notes that extreme weather events — such as heatwaves, cyclones, and heavy rains — have affected crop yields, leading to inflation in essential commodities like onions and tomatoes. 

From April to December 2024, vegetables and pulses contributed 32.3 per cent to India’s overall inflation rate. To build resilience, the Survey recommends expanding climate-resilient crop varieties, improving water efficiency and strengthening value chains.

Trump 2.0 And Global Climate Landscape

The Survey comes at a time when international climate commitments are in flux. It critiques major economies like the US and the EU for driving over 50 per cent of global emissions while also engaging in trade conflicts over green technology. 

India has consistently pushed for a fairer climate finance mechanism, but recent developments suggest waning global momentum. The US, under the new Trump administration, has completely withdrawn from global climate commitments, further weakening the international climate finance framework. 

Previously, wealthier nations had resisted binding contributions to the New Collective Quantified Goal (NCQG), pushing for voluntary payments instead. Now, with Trump’s exit from the process, the prospects for meaningful climate finance appear even more uncertain, leaving developing nations like India to shoulder the burden of climate adaptation largely on their own.

AI, Data Centres, Hidden Climate Costs 

The Survey raises concerns about the carbon footprint of emerging technologies. Artificial Intelligence (AI) and the data centres that sustain it, consume vast amounts of energy, with a recent Bloomberg analysis estimating that global AI-related electricity demand could reach 1,580 terawatt-hours — equivalent to India’s entire power consumption. 

It warns that without breakthroughs in efficiency, AI’s growth could strain global energy security, water resources and even land use.

It calls for policies that encourage “scaling down resource consumption, while simultaneously boosting performance”. Given India’s aspirations to become a digital powerhouse, balancing AI-driven growth with sustainability will be a crucial policy challenge in the coming years.

Adaptation Takes Centrestage 

India, the world’s fifth-largest economy and a country highly vulnerable to climate change, is walking a tightrope between development and decarbonisation. 

As geopolitical tensions, trade dependencies and extreme weather risks mount, this year’s Survey makes it clear that the country’s India’s climate strategy will remain committed to Net Zero, with an immediate focus on adaptation. The proof is in the pudding, with an increase in adaptation expenditures from 3.7 per cent to 5.6 per cent of the GDP, between FY15-16 and FY21-22. 

With the US scaling back its climate commitments and China tightening its grip on renewable supply chains, India’s path to sustainability will require innovative domestic policies, stronger infrastructure and a push for self-reliance in green technology.

The coming years will test whether India can balance the ‘impossible trinity’ — or redefine it entirely.