India’s Climate Finance Long Game: Reflections on Economic Survey and Union Budget 2026

If climate action is a priority, countries like India must shift their focus towards strengthening their own domestic financial systems and enabling them to mobilise the required finance. A year ago, the Chief Economic Advisor of India notably observed that economic growth, fiscal sustainability and climate action constitute a trilemma for India. All three cannot be pursued simultaneously.

It was a stark admission of the brutal trade-offs facing developing economy. At present, while the framing remains largely intact in the Economic Survey 2025-26 and the Union Budget, there are early indications that this trade-off may not be as rigid as it once appeared.

India’s climate action narrative has always been shaped by a development-first approach, with adaptation increasingly coming into focus over the past few years.

For a developing country with a large vulnerable population already facing severe climate impacts, this emphasis on development and adaptation is entirely understandable. This year’s Economic Survey and Union Budget, while still firmly aligned with this broader narrative, have quietly laid the foundations for successful mitigation and decarbonisation.

Mitigation activities, much like long-term infrastructure, require large upfront capital and deliver stable returns over time; therefore, they stand to benefit from deeper capital markets and lower taxation of debt instruments. So, although these reforms are not explicitly about climate change mitigation, they may be the most consequential step India can take to fund its green transition.

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Krithika Ravishankar is a senior associate and Ramya Natarajan is a research scientist in the Climate Change Mitigation team at the Center for Study of Science, Technology and Policy (CSTEP),