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New Delhi: Despite sustained global efforts, the gap between sustainable development ambitions and available financing has continued to widen — particularly for developing countries — reaching an estimated USD 4 trillion annually, the Economic Survey 2025–26 said. The Survey underlined that this gap “does not arise from a lack of global capital, but rather from the disparity between where capital is concentrated and where investment needs for sustainable development are most pressing,” flagging climate finance as the most binding constraint on India’s energy and climate transition.
It also stressed that bond markets are crucial for financing climate infrastructure, which requires substantial upfront capital and extended repayment horizons, making access to long-term, low-cost finance essential for scaling clean energy and resilient infrastructure.
“Climate finance remains the binding constraint,” the Survey said, adding that the mismatch reflects “structural weaknesses in the international financial architecture rather than a lack of ambition or bankable projects.”
The Survey underlined that India is largely financing its climate action domestically. “Around 83 percent of India’s finance for mitigation and 98 percent of finance for adaptation is sourced domestically,” it said, cautioning that domestic resources alone will not be sufficient to meet the scale of investment required.
It called for reforms in multilateral development banks (MDBs), greater use of risk-sharing and blended finance, and recalibration of credit rating practices to lower the cost of capital for developing economies.
The Survey warned against pushing climate mitigation ambition without parallel support in finance and technology. “Raising climate ambition in India — especially on mitigation — without corresponding support in finance and technology is neither realistic nor equitable,” it said.
A credible transition away from fossil fuels, it added, depends on the timely availability of reliable non-fossil energy sources, including nuclear power, alongside a clearly defined peak-emissions pathway.
The Survey stressed that India has not yet reached peak energy demand and that ensuring energy access, affordability and security remains central to its development pathway.
“India’s mitigation strategy reflects pragmatism rather than prescriptiveness,” the Survey said, highlighting rapid growth in renewable energy, advances in energy efficiency, expansion of nuclear power and development of green hydrogen, while emphasising system reliability and affordability.
Drawing lessons from Europe, the Survey cautioned that rapid expansion of variable renewable energy without adequate baseload capacity, grid reinforcement and storage can lead to higher electricity prices and grid stress.
It cited instances of congestion, curtailment and rising tariffs in countries that expanded renewables ahead of system readiness, arguing that India’s transition must be grounded in engineering realities rather than headline targets.
Despite the transition push, coal remains central to India’s energy system. The Survey noted that coal contributes about 55 percent of the national energy mix and fuels over 74 percent of power generation, with India achieving record coal production of 1,047.52 million tonnes in FY25.
It also flagged India’s “critical dependence on imported coking coal” for the steel sector, linking energy transition risks to raw material and mineral security.
The Survey positioned nuclear power as a key pillar of India’s clean energy strategy, capable of providing firm baseload power and supporting heavy industry. It reiterated the government’s target of 100 GW of nuclear capacity by 2047 and highlighted recent reforms enabling private sector participation.
At the same time, India crossed 50 percent installed power capacity from non-fossil sources by December 2025, supported by record renewable capacity additions, the Survey said.
Summing up India’s approach, the Survey said climate action is no longer an environmental add-on but a core component of development strategy, with adaptation at its centre.
“India’s climate pathway is anchored in development realism,” it said, emphasising sequencing, affordability and resilience as the guiding principles of the country’s energy and climate transition.
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