The economics of green steel challenge conventional cost calculations by recognising the long-term value of sustainable infrastructure
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India’s growth story is written in steel. But underlying this material and figurative narrative is a deep, invisible story — the story of time. Humans’ present choices have always dictated their futures – this is the essence of the notion of sustainability. Therefore, in the realm of infrastructure, also classified as physical or manufactured capital in the framework of Inclusive Wealth, choices of factors do not merely dictate the present costs; they are about trajectories locked into the future.
India’s aspiration of Viksit Bharat 2047 needs to be interpreted in precisely this temporal sense. It is not only a destination defined by per capita income thresholds; it is a pathway that must reconcile growth with ecological stability, efficiency with equity, and ambition with sustainability. While physical infrastructure is the foundation of India’s growth story, and the Union Budgets over the last seven years have emphasised increasing capital expenditures to meet development ambitions, there are often global debates about the need to look beyond GDP metrics in assessing development. Therefore, while Viksit Bharat 2047 is definitely about reaching a particular GDP per capita threshold, it is also about “beyond GDP” — about accounting for the costs of natural capital depletion, combating climate change, and promoting distributive justice and equity.
While infrastructure is necessary for growth, climate concerns must also be addressed. Infrastructure, as a component of manufactured or produced capital in the Inclusive Wealth framework, will therefore require steel, with procurement and production processes aligned with green principles. Therefore, the transition to green steel is not peripheral, but foundational for Viksit Bharat.
At first glance, the economics of green steel will likely seem discouraging, given the higher costs stemming from two major sources. First, green production pathways and processes such as green hydrogen, renewable energy integration, and scrap-based circularity come with a price premium. Second, with the procurement architecture anchored in the logic of L1 (lowest cost), there will be immediate resistance to this transition. This resistance is not an economic inevitability, but an institutional artefact.
Steel production today embeds emissions that persist across decades. While business-as-usual models of procurement and production can work in a world of linear growth, they are not only inadequate but problematically counterproductive in a climate-constrained, resource-stressed world.
As a result, the tyranny of the status quo prevails, with the transition to green steel being resisted, and business-as-usual practices ruling the roost. The problem lies mostly with public procurement, which continues to operate within a framework of static efficiency that entails a cost-minimisation exercise at a particular point in time. In other words, the long-term or temporal dimension is missing from the planning framework. Steel production today embeds emissions that persist across decades. While business-as-usual models of procurement and production can work in a world of linear growth, they are not only inadequate but problematically counterproductive in a climate-constrained, resource-stressed world.
Infrastructure built today defines the ecological and economic opportunities and the costs for tomorrow. When procurement ignores this temporal dimension, it effectively discounts the future too heavily—and in doing so, undermines the very vision of Viksit Bharat.
The Net Present Value (NPV) framework offers a more appropriate lens to understand this transition. While NPV might seem to be merely a financial tool for long-term planning, it is actually much more than that. I would interpret it as the philosophy of time. Though from a purely reductionist arithmetic perspective, it is merely a number, that number is powerful enough to represent how future benefits are valued relative to present costs. In the case of green steel, the asymmetry is clear: the costs are immediate, visible, and politically contested; and the benefits are deferred, systemic, and often imperceptible.
NPV can bring to the fore the future value of the unperceived benefits of green steel. These benefits include avoided carbon liabilities, resilience against global trade measures such as carbon border taxes (for instance, the CBAM), reduced environmental degradation, technological learning that lowers future costs, higher labour productivity due to better environmental and health conditions, and an overall improvement in resource-use efficiency.
NPV can bring to the fore the future value of the unperceived benefits of green steel. These benefits include avoided carbon liabilities, resilience against global trade measures such as carbon border taxes (for instance, the CBAM), reduced environmental degradation, technological learning that lowers future costs, higher labour productivity due to better environmental and health conditions, and an overall improvement in resource-use efficiency. When these are incorporated into an NPV framework—discounted but not disregarded—the narrative shifts. The green premium is no longer a cost burden; it becomes an investment in avoiding future risks and in value addition for the opportunities thus created, thereby adding to the nation's GDP.
The economics of green steel are inherently dynamic, and the time dimension is important. In the initial stages of transition, nascent technologies and limited scale adoption lead to higher costs, inhibiting adoption. But industrial transitions follow predictable trajectories—learning curves, economies of scale, and network effects gradually compress costs over time, leading to greater adoption.
India’s steel sector is already exhibiting this pattern. In the short term, green steel availability remains limited and uneven. But beyond the middle of this decade, as integrated producers adopt deeper decarbonisation pathways, supply expands, and costs flatten. Therefore, what emerges as a premium today is, in reality, a signal of transition—it is the price one has to pay for moving towards a more competitive, future-ready industrial base.
If adopted, GPP will emerge not merely as a policy or decision-making instrument, but as a redefinition of value in public spending. This implies that the definition of price discovery has to shift from “value as the lowest bid” to “value as the lowest lifecycle cost”, inclusive of ecological and social externalities.
India’s public procurement system, which accounts for a significant share of GDP and drives infrastructure demand, needs to serve as a temporal bridge between present costs and future benefits, as articulated in a disaggregated NPV framework. However, the current architecture, dominated by price discovery and fragmented standards, is not designed to internalise lifecycle considerations. Given firms' existing myopia, the transition to Green Public Procurement (GPP) will likely not be easy. But, if adopted, GPP will emerge not merely as a policy or decision-making instrument, but as a redefinition of value in public spending. This implies that the definition of price discovery has to shift from “value as the lowest bid” to “value as the lowest lifecycle cost”, inclusive of ecological and social externalities.
From the perspective of just transition, a phased approach to green steel—starting modestly and scaling over time—appears pragmatic. It aligns with current supply realities and minimises short-term disruptions. But there is a catch here. If ambition remains too modest, the transition may become trapped in incremental efficiency gains rather than structural transformation.
The ambitious vision of Viksit Bharat 2047 cannot be built on incrementalism but on structural shifts—shifts in technology, institutions, and economic thinking. For green steel, particularly in its deeper forms, hydrogen-based production, circular scrap ecosystems, and carbon capture represent such a shift.
This will neither help the cause of long-term competitiveness nor address prevailing climate concerns. Furthermore, the ambitious vision of Viksit Bharat 2047 cannot be built on incrementalism but on structural shifts—shifts in technology, institutions, and economic thinking. For green steel, particularly in its deeper forms, hydrogen-based production, circular scrap ecosystems, and carbon capture represent such a shift.
From an epistemological and ecological economics perspective grounded in holistic development, Viksit Bharat is not merely about income convergence with developed economies. It is also about achieving distributive justice and equity, environmental sustainability, and technical and productive efficiency—the trinity of sustainomics.
Green steel sits at the intersection of all three. It enhances efficiency over time by reducing long-term costs and increasing the total factor productivity. It promotes equity by avoiding the transfer of environmental burdens and the costs of inefficiency to future generations. It ensures sustainability by aligning industrial growth with ecological limits. Therefore, while green steel represents an industrial transition at the sectoral level, it constitutes a developmental reimagination from a macroeconomic perspective.
Therefore, the transition to green steel ultimately comes down to far-sightedness. Do we evaluate decisions within the narrow confines of annual budgets and tender cycles? Or do we extend our horizon to 2047 and beyond? The NPV framework, when properly applied, reveals that the apparent trade-off between short-term costs and long-term benefits is a misperception. The costs are not higher; they are simply re-timed. And in that re-timing lies the essence of sustainable development, and Viksit Bharat 2047.
Nilanjan Ghosh is Vice President - Development Studies at the Observer Research Foundation.
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Dr Nilanjan Ghosh heads Development Studies at the Observer Research Foundation (ORF) and serves as the operational and executive head of ORF’s Kolkata Centre. He ...
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