Sovereign Green Bonds
The finance ministry announced on Wednesday that the government intends to raise Rs 7.5 trillion through market borrowing in the April-September period of 2024-25 to bridge the revenue gap and stimulate economic growth. According to an official statement, out of the estimated gross market borrowing of Rs 14.13 trillion for 2024-25, Rs 7.5 trillion, equivalent to 53 per cent, is slated to be borrowed in the first half (H1).
In the interim Budget, Finance Minister Nirmala Sitharaman suggested borrowing Rs 14.13 trillion through issuing dated securities to address the revenue gap in the upcoming fiscal year. This amount is less than the previous year’s record-high gross borrowing estimate of Rs 15.43 trillion. The Government of India marginally increased the net sum sourced from small savings to finance its fiscal deficit to Rs. 4.7 trillion in the Budget Estimate for FY2024 from Rs. 4.4 trillion in the Revised Estimate for FY2023.
Understanding Sovereign Green Bonds
Bonds represent fixed-income instruments the corporate sector or government issued to fund projects, clear debts, or expand business, offering a specified interest rate returned by the issuer at maturity. In contrast, green bonds are financial instruments that support environmentally sustainable projects, typically offering lower capital costs than regular bonds. The International Capital Market Association (ICMA) defines a green bond as explicitly used to finance or refinance eligible green projects, resulting in environmental benefits. Essentially, they are a debt instrument involving significant fixed-income borrowing by corporations, governments or institutions to fund green initiatives and promote ecological conservation (Agarwal, 2023; Goldman Sachs, 2023).
