As India approaches the Union Budget 2025, there are myriad expectations from the Government and policies, which will further fuel sustainability-driven enterprises. The Indian government has played a crucial role in fostering an environment conducive to innovation, especially in the sustainability and climate-tech sectors. With an evolving sustainability landscape, policy interventions, and strategic incentives, the upcoming budget is an opportunity to enhance these efforts with targeted fiscal support and clarity on the regularity framework.

Positive Contributions

Development of the Indian Carbon Market (ICM)

The launch of the Indian Carbon Market (ICM) is a landmark initiative that has opened new avenues for sustainability-focused ventures. By creating a structured mechanism for carbon trading, the ICM enables startups to develop and monetise solutions that contribute to emission reductions. 

Industry expectation from budget

Expansion of the carbon market with clearer guidelines on voluntary carbon credits, incentives for early adopters, and mechanisms to integrate smaller sustainability startups into the carbon credit framework.

Policy frameworks and incentives
The introduction of frameworks such as the National Action Plan on Climate Change (NAPCC) and its various sub-missions has created a fertile ground for innovation. Policies like the Perform, Achieve, and Trade (PAT) scheme and Renewable Energy Certificates (RECs) are encouraging sustainability startups by offering them structured market opportunities.

Industry expectation from budget

More targeted subsidies and tax breaks for climate-tech startups, increased allocation for research and development in green innovation, and simplification of compliance processes for emerging ventures.

Focus on ESG and Net Zero goals
India’s commitment to net-zero emissions by 2070 has intensified the demand for sustainable practices across industries. As businesses align themselves with Environmental, Social, and Governance (ESG) benchmarks, sustainability startups find themselves at the centre of this transformation, offering tech-enabled, scalable solutions to help enterprises measure, manage, and offset their environmental impact.

Industry expectation from budget

ESG reporting mandates for SMEs, funding incentives for startups developing ESG-aligned solutions, and financial support for training and green supply chains.

Boosting circular economy and resource efficiency
A major shift towards circular economy principles is emerging, supported by initiatives like the Extended Producer Responsibility (EPR) framework and waste management regulations. Startups working on circular economy solutions, sustainable packaging, and recycling innovations are seeing increased opportunities for collaboration and growth.

Industry expectation from budget

Expansion of EPR mandates, tax benefits for companies adopting circular economy models, and increased financial backing for waste-to-value startups.

Challenges in scaling up

Despite the robust policy support, startups in the sustainability domain continue to face hurdles.

While policies exist, the lack of seamless coordination between various government departments makes it difficult for startups to navigate regulatory complexities. Access to funding and incentives, though available, requires a more streamlined approach to enhance their efficacy at the grassroots level. Here, the government must consider creation of a single-window clearance system for sustainability startups to access regulatory approvals and government incentives seamlessly.

Government initiatives have significantly boosted sectors like renewable energy and electric mobility. However, startups in areas such as waste management, circular economy, and sustainable agriculture often struggle to access the same level of structured incentives and investor confidence. The budget must think of sector-specific funding initiatives beyond renewable energy, especially for waste management, circular economy, and climate resilience solutions.

While green finance is growing, many early-stage sustainability startups struggle with funding access due to high capital requirements and long gestation periods for return on investment. More venture capital and blended finance solutions are needed to support these enterprises. There is a dire need of green startup funds, venture capital tax exemptions for climate-tech investments, and lower interest rates on sustainability-focused loans.

Besides, many businesses, particularly SMEs, which are backbone of national economy, lack awareness or resources to integrate sustainability solutions into their operations. Greater emphasis on awareness-building programs and incentives for sustainable business transitions can help bridge this gap. This budget must announce some new grants and subsidies for SMEs adopting sustainability solutions, awareness campaigns on green business benefits, and incentives for industries transitioning to low-carbon models.

For India’s sustainability startup ecosystem to thrive, it is imperative that government support evolves into a more integrated and sector-agnostic framework. While government initiatives have provided a strong foundation, a more agile, innovation-friendly, and inclusive approach, for green start-ups, supported by new budget allocations, will determine the success of decarbonisation 2030 and net zero 2070 India.