The global climate conversation has entered a decisive and uncomfortable phase. What once appeared as a linear moral and technological transition towards net zero is now confronting the limits of systems, institutions, and political economy. The Economic Survey 2025–26 captures this inflection point with rare candour. It recognises that climate action today is no longer about ambition alone, but about managing trade-offs, sequencing transitions, and preventing systemic fragility in economies that are still climbing the development ladder.
The Survey’s most consequential intervention lies in its rejection of one-size-fits-all climate pathways. It cautions that introducing complex energy and climate systems too rapidly, without adequate buffers, redundancy, and institutional capacity, risks making economies brittle rather than resilient. This is a critical insight, particularly for developing countries. Climate policy, the Survey reminds us, must ultimately prioritise human welfare. For climate-vulnerable societies, development itself is adaptation.
For India, this framing is not theoretical. Sustained economic growth and rising living standards demand a substantial expansion in affordable and reliable electricity. Renewable energy will play a central role, but capacity additions alone do not guarantee energy security. Grid stability, storage, transmission infrastructure, and baseload power remain indispensable. The Survey is clear: the coming decade must be approached not as a narrow climate policy exercise, but as a comprehensive energy system transformation, where resilience matters as much as decarbonisation.
Nowhere is this realism more evident than in the Survey’s emphasis on adaptation. India’s climate strategy is already distinct in its development-led approach. Adaptation and resilience-related public spending rose from 3.7 per cent of GDP in FY16 to 5.6 per cent in FY22, underscoring that climate action in India is being embedded within broader development priorities. Through the National Action Plan on Climate Change and its nine missions, particularly those focused on sustainable agriculture, water security, and urban resilience, India has anchored adaptation within institutional frameworks rather than standalone climate programmes.
The federal architecture of climate action also emerges as a strength. While national missions provide coherence and financing pathways, State Action Plans on Climate Change translate these priorities into locally grounded interventions. As urbanisation accelerates, the Survey rightly stresses that climate risk must be internalised into land use planning, infrastructure design, and service delivery. Climate resilience, in this context, becomes a governance function, not merely an environmental objective.
On mitigation, the Survey adopts a similarly pragmatic lens. India’s energy transition is being pursued through diversification rather than substitution. Nuclear energy, solar and wind, green hydrogen, bioenergy, storage systems, and critical minerals are being developed in parallel to address both security and sustainability imperatives. The Survey’s reference to European experiences is instructive. Transitions that outpace investments in baseload generation, transmission, and flexibility can undermine energy affordability and social stability. India’s approach, therefore, reflects a calibrated transition rather than a rushed leap.
The data supports this caution. India has already surpassed 50 per cent installed power capacity from non-fossil fuel sources, reaching nearly 52 per cent by December 2025, backed by record renewable additions. Yet the Survey does not gloss over constraints. Material availability and storage technologies remain binding challenges. The global energy transition, it notes, is increasingly shaped not by technology alone, but by access to critical minerals.
Lithium, cobalt, nickel, copper, and rare earth elements have become strategic chokepoints. Control over these supply chains is now central to climate geopolitics. India’s response reflects strategic realism. The National Critical Mineral Mission, overseas resource partnerships through KABIL, and participation in multilateral initiatives such as the Minerals Security Partnership signal a recognition that energy security and climate strategy are inseparable.
This realism also extends to nuclear energy. The enactment of the SHANTI Act in December 2025 marks a structural shift by enabling private sector participation across nuclear operations, manufacturing, and research. In doing so, India is expanding its low-carbon baseload capacity while strengthening domestic technological capabilities, a combination that many advanced economies are now rediscovering.
Market-based mechanisms form another pillar of India’s evolving climate architecture. The Carbon Credit Trading Scheme, notified in 2023, moves India decisively from framework design to implementation. By integrating compliance obligations with voluntary offsets and leveraging the existing PAT infrastructure, the scheme creates a pathway for emissions reductions across both regulated and unregulated sectors. This is particularly significant for MSMEs and emerging industries, which often remain outside formal climate regimes.
Equally distinctive is India’s emphasis on behaviour. Mission LiFE positions lifestyle change as a core climate instrument rather than a peripheral campaign. By aligning household, community, and enterprise behaviour with national climate objectives, India’s strategy seeks to reshape consumption patterns and social norms. The Survey’s framing of Mission LiFE as the behavioural foundation of India’s climate policies reflects an understanding that durable transitions are as much social as they are technological.
Yet finance remains the binding constraint. The Survey acknowledges that global climate finance flows remain deeply misaligned with the needs of developing economies. Despite abundant global capital, an estimated USD 4 trillion annual financing gap persists. International public finance remains limited, and domestic sources account for the overwhelming majority of India’s mitigation and adaptation spending. Moreover, finance continues to gravitate toward mature sectors, leaving adaptation, MSMEs, urban infrastructure, and hard-to-abate industries underfunded.
India’s response has been to strengthen domestic financial architecture while cautiously engaging international markets. Institutions such as IREDA, NABARD, SIDBI, and PFC are playing catalytic roles in project preparation and de-risking. Regulatory reforms through SEBI’s BRSR framework, green bond guidelines, and sustainability-linked lending norms have improved transparency and investor confidence.
The development of deep and liquid bond markets is particularly consequential. Sovereign green bonds have provided benchmarks and signalling, with cumulative issuances exceeding ₹72,000 crore since FY23. Municipal green bonds, already issued by cities such as Indore, Ahmedabad, and Ghaziabad, hold the potential to unlock up to USD 6.9 billion over the next decade for locally driven climate action. The Survey’s nuanced assessment of India’s “intermittent greenium” highlights that credibility, liquidity, and reporting frameworks matter more than intent alone.
At the global level, the Survey offers a clear critique of multilateral development finance. MDBs remain constrained by risk aversion and balance-sheet conservatism. A shift from “originate-to-hold” to “originate-to-share” models is essential if private capital is to be mobilised at scale. Guarantees, insurance, and blended finance must become core tools rather than exceptions.
Taken together, the Economic Survey signals a quiet but important recalibration. India is not retreating from climate ambition; it is grounding it in systems thinking, institutional capacity, and development realism. In a world increasingly prone to energy shocks, supply-chain disruptions, and climate extremes, resilience is emerging as the true measure of climate leadership.
For India, the path to a low-carbon future will not be linear. But by embedding climate action within development, energy security, and institutional reform, it offers a model that is not only ambitious, but durable.
