SDG 7: Affordable and Clean Energy | SDG 9: Industry, Innovation and Infrastructure | SDG 13: Climate Action | SDG 17: Partnerships for the Goals
NITI Aayog | Ministry of Finance | Department of Economic Affairs (DEA) | Reserve Bank of India (RBI)
NITI Aayog study report, Scenarios Towards Viksit Bharat and Net Zero: Financing Needs Vol 9 mentions that India’s dual ambition of reaching developed economy status by 2047 and Net Zero by 2070 requires an unprecedented cumulative investment of USD 22.7 trillion. This reflects an incremental financing demand of USD 8.1 trillion over the Current Policy Scenario, necessitating a surge in annual climate finance from the current USD 135 billion to approximately USD 450 billion. The transition is characterized by a “stage-sensitive” financial requirement, where mature technologies like solar and wind require scale-up capital, while frontier solutions such as green hydrogen and carbon capture depend on grants and blended finance to become bankable.
Financing Needs and Sectoral Gaps The report identifies the specific capital intensity across India’s core infrastructure and industrial sectors:
Power Sector Dominance: Requires USD 12.33 trillion (nearly 50% of total needs) for large-scale renewable deployment, transmission, and storage. It accounts for 82% of the total financing gap.
Industrial Decarbonisation: Needs USD 6.11 trillion, with focus shifting toward high-CAPEX technologies like Green Hydrogen and CCUS post-2045.
Transport Transformation: Requires USD 4.3 trillion to facilitate the shift to Electric Vehicles (EVs) and hydrogen-based long-haul freight.
Strategic Challenges in Capital Mobilisation The transition is hindered by systemic barriers that elevate the risk premium for green investments:
High Cost of Capital: Biased global credit ratings and low sovereign ratings (BBB-) lead to high borrowing costs, disproportionately affecting long-gestation clean energy projects.
Data and Regulatory Fragmentation: Inconsistent reporting and siloes between multiple financial regulators (RBI, SEBI, IRDAI) create inefficiencies and reduce global investor confidence.
Bankability Gaps: A lack of predictable revenue streams and risk-sharing mechanisms prevents private capital from flowing into hard-to-abate sectors.
Policy Suggestions for a Sustainable Financial Architecture To bridge the USD 6.5 trillion financing gap, the report proposes a series of institutional and regulatory reforms:
National Green Finance Institution (NGFI): Establish a central hub to de-risk emerging technologies, aggregate green assets, and provide first-loss guarantees to “crowd in” private institutional capital.
Regulatory Coherence via Taxonomy: Finalise and implement the National Climate Finance Taxonomy to harmonise rules and prevent greenwashing across the financial system.
Deepening Capital Markets: Reorient institutional portfolios (pension and insurance funds) toward green assets and deepen the corporate bond market to 30% of GDP by 2070.
What is the “Integrated Assessment Modelling” (IAM) framework in climate finance? The IAM framework is a sophisticated analytical system that links India’s macroeconomic growth goals with specific sectoral energy and emission pathways. By integrating the World Bank’s Long-Term Growth Model (LTGM) with sectoral models like TIMES, NITI Aayog can estimate not just the total energy demand, but the specific technology-wise CAPEX required for every gigawatt of power or million tonne of green steel. This ensuring that the $22.7 trillion roadmap is a mathematically consistent economic strategy rather than just an environmental target.
Policy Relevance
The Volume 9 report represents a transition from aspirational climate targets to a rigorous fiscal and systemic financial reform strategy. By institutionalising a stage-sensitive financing strategy, the Ministry of Finance is providing the blueprint to lower the cost of capital for Indian industry, ensuring that the “Viksit Bharat” ascent is not slowed by a high-interest green transition.
Strategic Impact:
Energy Sovereignty: Reducing reliance on bank credit by deepening the corporate bond market to 30% of GDP strengthens the resilience of the domestic financial system.
FDI and GIFT City Integration: Tripling Foreign Portfolio Investment (FPI) and scaling FDI to 4% of GDP through international financial hubs will prevent the “crowding out” of domestic private investment.
Hard-to-Abate Support: Creating transition bonds and sector-specific de-risking allows India’s steel and cement sectors to modernise without losing global price competitiveness.
Follow the full report here: NITI Aayog: Scenarios Towards Viksit Bharat and Net Zero (Vol. 9)