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India is on a path to becoming a low-carbon and sustainable economy. The journey kick-started with the Panchamrit pledge at the 26th session of the Conference of the Parties (COP26) in 2022.
As part of the Panchamrit commitment, India aims to achieve 500GW non-fossil energy capacity by 2030, fulfil 50 per cent of its energy requirements from renewable energy by 2030, reduce total projected carbon emissions by one billion tonnes from now to 2030, cut the carbon intensity of the economy by 45 per cent by 2030 over 2005 levels and attain the target of net zero emissions by 2070.
The upcoming Budget 2026 presents an opportunity to establish a fiscal framework that attracts investment in climate and spurs innovation in clean technologies, thereby accelerating the journey at a time when the world is facing energy security and climate challenges.
As per a government estimate, climate investment needs to increase from $18 billion per year to $170 billion per year to achieve its net-zero targets. According to a working paper authored by renowned economists Janak Raj and Rakesh Mohan, the country needs more than $470 billion in climate finance by 2030 to help steel, power, cement, and transport – four of its most carbon-intensive sectors adopt a low-carbon growth path.
The budget must reflect the intent of the policymakers to propose measures to encourage the public sector, the private sector and development financial institutions to boost partnerships to help in meeting the financial needs.
For that to happen, we look forward to the upcoming budget hopefully creating an enabling fiscal framework, which can trigger innovation and mobilisation in financing, like blended finance with its multiplier effect.
The Pradhan Mantri Kisan Urja Surakshaevam Utthaan Mahabhiyan Yojana (PM-KUSUM Scheme), urban transport electrification scheme PM-eBus Sewa, and the National Bio-Energy Programme have demonstrated effective implementation of the blended finance model.
The time has come to expand such initiatives to other infrastructure sub-sectors for climate finance so that smaller scale industries, farmers, and vulnerable communities can derive benefits from them. If the budget enables de-risking mechanisms, such as credit enhancement programmes, concessional capital infusion and a currency risk buffer, it will boost private capital investment into sustainable infrastructure projects in India.
The debt capital markets, especially thematic bonds – green, social, sustainability-linked, etc. require policymakers’ continued attention to deliver a broad-based impact and crowd-in the private sector institutional investors. In addition, the government needs to incentivise clean energy adoption and environmental sustainability practices so that the sustainability projects remain viable.
On the other hand, there should also be a persistent focus on the project implementation aspect, such as schemes or measures to deploy digital platforms that make fund deployment easily measurable and credit protection is achieved in parallel.
Implementing all these measures calls for re-examining the fiscal math. Increasing the fiscal deficit to mobilise private capital with a long-term outlook could be an option worth considering.
Bridging the policy and implementation gap needs to be prioritised to build confidence among private capital and development finance institutions so that India can march towards its sustainability goals.
(Disclaimer: The article is authored by Nishant Kumar, Managing Director of Asia Investments at GuarantCo and Head of Coverage – Asia at the Private Infrastructure Development Group. The views and opinions expressed are solely those of the author. ETEnergy does not endorse or take responsibility for the content.)
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