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Difficulty: MediumEconomic Developments, Union & State Budgets, and Economic Surveys

Regarding the Sovereign Green Bonds (SGBs) framework and their budgeting treatment in India as presented in recent Union Budgets and Economic Surveys, which of the following statements are correct?

  1. Proceeds raised through Sovereign Green Bonds are credited to the Consolidated Fund of India and subsequently deployed for eligible public sector green projects.Answer
  2. The framework explicitly excludes nuclear power generation and large hydropower projects with capacity exceeding 25 MW from eligible green project expenditure.Answer
  3. C
    Sovereign Green Bond proceeds are maintained in an off-budget special purpose vehicle account managed exclusively by the Reserve Bank of India outside government fiscal accounting.
  4. D
    Annual interest payments (coupon payments) on Sovereign Green Bonds are classified under Capital Expenditure in the Union Budget since they fund long-term environmental assets.

Answer

The statements confirming that Sovereign Green Bond proceeds are credited to the Consolidated Fund of India and that nuclear energy along with large hydropower (>25 MW) are excluded from eligible green expenditures are correct.
The framework established for Sovereign Green Bonds ensures that proceeds pass directly through the Consolidated Fund of India for transparent budgetary tracking, while strict environmental criteria exclude nuclear power generation and large hydropower projects above 25 MW from green project eligibility.

Step-by-Step Solution

1
Analyze the financial accounting mechanism of Sovereign Green Bonds
Green bond issuances form part of the government's gross market borrowing plan under budget receipts and are deposited into the Consolidated Fund of India.
Union Budget guidelines require all sovereign market borrowing to be accounted for under the Consolidated Fund of India.
2
Verify sector eligibility criteria under India's Sovereign Green Bond Framework
Projects eligible for funding focus on renewable energy, clean transportation, energy efficiency, and climate adaptation, while explicitly excluding fossil fuels, nuclear power, and large hydro schemes exceeding 25 MW.
Exclusions ensure compliance with international ESG reporting standards and green taxonomy frameworks.
3
Evaluate the budgetary expenditure classification of interest servicing
Coupon interest servicing is categorized under Revenue Expenditure as part of overall debt servicing costs.
Debt servicing costs do not create physical or financial capital assets directly and are obligatory revenue outlays.

Key Concept

Sovereign Green Bonds Framework and Public Finance Accounting
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Topics

Economic Developments, Union & State Budgets, and Economic Surveys

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