• India’s Economic Survey 2025–26 reframes climate action as a development-first strategy, placing adaptation, resilience, and human welfare at the centre of policy design.
• Domestic adaptation and resilience spending rose from 3.7 percent of GDP in FY16 to 5.6 percent in FY22, underscoring India’s reliance on internal capital rather than external climate finance.
• Non-fossil fuel sources now account for 51.93 percent of installed power capacity, while critical minerals, nuclear reform, and carbon markets reshape India’s energy and finance architecture.

A Development Lens on Climate Policy

India’s climate strategy is being recalibrated around development realities rather than abstract emissions targets, according to the Economic Survey 2025–26 tabled in Parliament by Union Minister for Finance and Corporate Affairs, Smt Nirmala Sitharaman.

“The global climate change agenda has reached an inflexion point,” the Survey states, adding that what was once framed as a moral and technological transition toward net zero is now defined by trade-offs, capacity constraints, and a widening gap between ambition and operational reality. It cautions that introducing complex systems too quickly, without buffers or institutional capacity, risks fragility rather than resilience.

The Survey’s core argument is explicit: climate policy must prioritise human welfare, particularly for poorer and climate-vulnerable societies, and development itself should be recognised as a form of adaptation.

Adaptation Anchored in Growth

India’s adaptation strategy is embedded in public investment across agriculture, water, urban infrastructure, and social systems. Domestic spending linked to adaptation and resilience rose from 3.7 percent of GDP in FY16 to 5.6 percent in FY22, a scale rarely matched among emerging economies.

The National Action Plan on Climate Change operates through nine missions, many focused on climate resilience. These include climate-resilient agriculture, integrated water management, and ecosystem protection. State Action Plans on Climate Change translate national priorities into local policy, a critical function as urbanisation accelerates and climate risk increasingly shapes land use, infrastructure planning, and service delivery.

The Survey emphasises that adaptation is not a separate climate pillar but a structural feature of India’s growth model.

Energy Transition as a System Strategy

On mitigation, the Survey warns against treating energy transition as a narrow climate exercise. Sustained growth and rising living standards require a large expansion of affordable, reliable electricity. Renewable capacity additions alone do not guarantee dependable supply.

India’s approach blends renewable expansion with nuclear power, green hydrogen, battery storage, and grid stability investments. By December 2025, non-fossil sources accounted for 51.93 percent of installed capacity, exceeding India’s earlier targets.

The Survey contrasts this measured approach with European experiences where transitions outpaced investments in baseload generation and system flexibility, resulting in price volatility and supply risks. Material availability and storage constraints remain binding challenges for India’s clean energy scale-up.

Critical Minerals and Strategic Autonomy

The Survey identifies critical minerals as a decisive factor in the global energy transition. Lithium, cobalt, nickel, copper, and rare earths have emerged as strategic chokepoints, increasingly shaping geopolitical and economic outcomes.

India’s response combines domestic capability building through the National Critical Mineral Mission with international partnerships, including the Minerals Security Partnership and Indo-Pacific frameworks. Through Khanij Bidesh India Ltd., India has secured lithium assets in Argentina and expanded cooperation in Australia and Chile.

This dual-track strategy reflects a broader shift toward supply chain security as an energy policy priority.

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Nuclear Reform and Carbon Markets

In December 2025, India enacted the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India Act, opening nuclear plant operations, equipment manufacturing, and research to private sector participation. The reform marks a structural change in India’s low-carbon baseload strategy.

India is also advancing its Carbon Credit Trading Scheme, launched in June 2023. Built on the Perform, Achieve and Trade framework, the scheme combines mandatory compliance with voluntary offsets, allowing non-obligated entities to generate carbon credits through emissions reduction and removal projects.

Behavioural Change and Climate Finance

Mission LiFE, introduced at COP26, integrates behavioural change into India’s Nationally Determined Contributions. The Survey describes it as the behavioural foundation of India’s climate policy, reshaping consumption patterns rather than operating as a standalone initiative.

On finance, the Survey is blunt. Global climate finance remains insufficient, with a shortfall estimated at $4 trillion for developing countries. Around 80 percent of global climate finance is domestically sourced, reflecting persistent structural bias in international financial systems. In India, 83 percent of mitigation finance and 98 percent of adaptation finance come from domestic sources.

Markets, Governance, and Global Stakes

India’s climate finance ecosystem is supported by specialised institutions, enhanced disclosure frameworks, and expanding bond markets. Sovereign green bond issuance reached ₹72,697 crore cumulatively since FY23, with municipal green bonds emerging as a tool for urban climate investment.

The Survey concludes that strong governance frameworks are essential to ensure climate finance supports growth without undermining macroeconomic stability. India’s development-centred climate strategy offers a counterpoint to transition models that prioritise speed over system resilience, with implications extending well beyond its borders.

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