India's net-zero ambition is clear, but the climate finance gap looms

A NITI Aayog study flags a multi-trillion-dollar climate finance gap, urging institutional reform and new green funding mechanisms to keep India on track for net zero

New research published by the NITI Aayog this week has brought India’s long-term climate strategy into sharper focus. It lays out pathways to a “Viksit Bharat” by 2047 while keeping the country on track to achieve net-zero emission by 2070. India’s cumulative investment needs by 2070 are estimated at $14.7 trillion under a current-policy scenario and $22.7 trillion under a net-zero scenario. This implies an average annual investment of roughly $500 billion over the coming decades. By contrast, the current investment is estimated at around $135 billion per year, leaving a large and persistent gap. Even under optimistic assumptions about domestic capital formation, the study estimates that India could mobilise about $16.2 trillion by 2070. This still leaves a financing gap of around $6.5 trillion, which would have to be bridged largely through international capital, concessionary finance, and grants. 

The challenges identified are multilayered and structural. India’s climate transition is constrained by a high cost of capital and the limited availability of long-term concessionary finance and grants, which weaken project viability, particularly for capital-intensive sectors such as energy storage, green hydrogen, and industrial decarbonisation. Global uncertainties, which are shaped by rising protectionism, geopolitical tensions, shifting global supply chains, and fragmented policy frameworks, also add to the concern. Investment is further held back by weak and uneven project pipelines across states and sectors, reflecting gaps in project preparation and implementation capacity. Sectoral readiness varies widely: While the deployment of renewable power has scaled up rapidly, progress in grid expansion, storage capacity, and clean industrial technologies has been slow. The report also flags rapid urbanisation, resource constraints, and growing demand for skilled human capital, which necessitate targeted investment in resilient infrastructure, green technologies, and workforce development to sustain this brown to green transition. 

In this context, the Economic Survey 2025-26 underscored many such concerns. It noted that India’s climate finance remained heavily skewed towards mature mitigation sectors such as solar and wind, while adaptation, urban infrastructure, financing for micro, small, and medium enterprises, and hard-to-abate industries remained underfunded. The Survey also highlighted that climate finance in India was still overwhelmingly domestic, with around 83 per cent of mitigation finance and 98 per cent of adaptation finance currently being from domestic sources. 

The NITI Aayog study, therefore, places strong emphasis on institutional and financial reform. On the policy side, it stresses the importance of demand-side measures such as energy efficiency, behavioural change, and material circularity, including initiatives like Mission LiFE, which can deliver emission reduction at a relatively low cost. On the financing side, it calls for the creation of a “National Green Finance Institution” to aggregate and channel capital, reduce risks, and lower borrowing costs. Other recommendations include expanding blended finance facilities, adopting unified climate-finance taxonomies, and deepening markets for corporate and green bonds. Thus, India’s net-zero ambition requires a credible financing architecture, and institutional reform. In effect, India requires long-term planning in a number of areas to get closer to its climate goals.