Context
India has emerged as a major player in the global clean energy movement. With record renewable capacity additions in 2024 and active leadership in global platforms like the International Solar Alliance (ISA), India’s momentum is strong. Yet, the climate finance gap threatens to slow this progress.
Key Developments
- Solar Growth:
India added 24.5 GW of solar energy capacity in 2024, becoming the third-largest contributor globally after China and the U.S. - Global Recognition:
The UN Secretary-General’s 2025 Climate Report listed India, Brazil, and China as leaders among developing nations in solar and wind expansion. - Employment Impact:
The renewable energy sector employed over 1 million people in 2023, contributing to 5% of GDP growth.
Off-grid solar alone created 80,000 jobs in 2021. - India’s Initiatives:
- International Solar Alliance (ISA) for solar cooperation.
- Sovereign Green Bonds and SEBI-regulated Social Bonds for channeling private capital.
Climate Finance Gap
- Estimated Needs:
- $1.5 trillion by 2030 (IRENA, 1.5°C pathway)
- $2.5 trillion by 2030 (Ministry of Finance) to meet India’s NDCs
- Current Flow:
- Cumulative GSS+ (Green, Social, Sustainability, Sustainability-linked) debt by Dec 2024: $55.9 billion (↑186% since 2021)
- Green bonds = 83% of this; private sector share = 84%
- Gap: MSMEs, agri-tech innovators, and small clean energy firms struggle to access concessional finance due to higher risk perception.
Policy and Institutional Measures Suggested
- Blended Finance:
Combine public and private funds; use partial guarantees, subordinated debt, and performance-linked guarantees to de-risk projects. - Institutional Investors:
- Tap into EPFO, LIC, sovereign wealth funds.
- Enable ESG investment guidelines, long-term green project pipelines.
- Carbon Credit Trading Scheme:
India’s new framework can unlock domestic finance if transparent and equitable. - Innovation in Finance:
- Use AI-driven risk assessment for green portfolios.
- Employ blockchain for transparent tracking of climate finance.
- Develop region-specific blended finance models for Tier-II/III cities.