Domestic climate finance alone won't suffice for India: Eco Survey

India faces global challenges in climate finance and relying solely on domestic resources will not be sufficient, the Economic Survey on Thursday warned, suggesting mobilising private sector finance.

Critical areas, including adaptation, financing for micro, small, and medium enterprises (MSMEs), urban infrastructure, and hard-to-abate industries, remain "underfunded".

Currently, about 83 per cent of India's finance for mitigation and 98 per cent of finance for adaptation is sourced domestically.

"However, the gaps in available finance and the needs persist, relying solely on domestic resources will not be sufficient," the Survey warned.

Although the country has successfully reduced its emissions intensity by 36 per cent since 2005 and achieved 50 per cent non-fossil power capacity ahead of schedule, climate finance remains skewed towards mature sectors such as solar, wind energy and energy efficiency, it said.

 

International public sector climate finance at an affordable cost, is, therefore, essential for mobilising private sector finance, required to meet climate ambitions, the Survey added.

Despite several measures, "challenges persist in accessing finance at scale in India", the Survey said.

The cost of capital for climate projects remains high, access to multilateral finance is often complex, and long-term international capital from institutional investors remains limited.

Risk-mitigation and risk-sharing mechanisms are still underdeveloped, particularly for emerging technologies and large-scale adaptation projects, it added.

STEPS TAKEN TO BRIDGE FINANCE GAP

The Survey said India has taken several steps to mobilise climate finance. Sovereign green bonds have been issued to fund low-carbon public infrastructure, providing policy signalling and market benchmarks.

The broader ecosystem has also been strengthened as 100 per cent FDI has been permitted under the automatic route for renewable energy projects.

Development finance institutions, such as Indian Renewable Energy Development Agency Ltd (IREDA), National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI), Power Finance Corporation Ltd. (PFC), and Rural Electrification Corporation Ltd (REC), offer credit lines and financing schemes for climate-related investments.

Sebi's Business Responsibility and Sustainability Reporting (BRSR) framework, green bond guidelines and IFSCA's guidance on sustainability-linked lending have improved disclosure quality and investor confidence in climate-related investments.

The Reserve Bank of India has also introduced the green deposit framework that optimises the flow of credit to green activities/projects by channelising institutional and household savings, with guardrails in place to overcome greenwashing challenges.