As India embarks on a pathway to strong climate action, it is faced with the simultaneous challenge of meeting its development goals. Moreover, the transition from fossil fuels to clean energy at scale will require a profound transformation of the Indian economy: some economic sectors are likely to grow while others decline, resulting in differing impacts on workers, regions, and communities.

This note presents potential macroeconomic impacts — on economic growth, employment, and tax revenues — in a long-term decarbonization scenario, aligned to India’s 2070 net-zero emissions target, and analyses the implications of these impacts for a just transition in India.

The analysis is based on results from the India Energy Policy Simulator, an open access model with a public web interface, which allows users to simulate different scenarios of climate policies and assess outcomes on emissions and economic performance over the next three decades.

The analysis indicates that it is possible for India to transition to a low-carbon economy in line with its net-zero target without compromising on economic development. However, policy implementation roadmaps for the transition need to account for the differential nature of its potential impacts to ensure inclusive and equitable outcomes.

Key Findings:

  • The transition is likely to create differential economic impacts at a regional level given the projected change in sectoral economic activity, pointing towards a need for economic diversification programs for fossil fuel dependent regions.
  • The transition is projected to create a shift toward more specialized manufacturing, requiring more skilled workers (and skilling programs).
  • The transition could exacerbate worker vulnerabilities in rapidly expanding sectors, such as the construction sector, which are presently characterized by poor working conditions.
  • The transition is likely to create additional demands on public expenditure in the face of declining tax collections from fossil fuels, underscoring the need to explore new sources of public revenue mobilization.


Preview image by Priyal Shah/WRI India