Climate Finance and India's Transition towards a Low-Carbon Economy: Opportunities and Challenges

Dr. D. Muniswamy

Associate Professor, Department of Economics, Nagarjuna Government College (A), Nalgonda, Telangana.

136-146 Vol: 15, Issue: 4, 2025

Receiving Date: 2025-10-29
Acceptance Date: 2025-12-12
Publication Date: 2025-12-20

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http://doi.org/10.37648/ijtbm.v15i04.010

Abstract

Climate finance has emerged as a critical instrument for accelerating India's transition towards a low-carbon and climate-resilient economy. As a developing economy with increasing energy demand, India faces the dual challenge of sustaining economic growth while reducing greenhouse gas emissions and strengthening resilience to climate change. This research article examines the role of climate finance in supporting renewable energy, energy efficiency, sustainable transportation, green hydrogen, industrial decarbonisation and climate adaptation. It uses a descriptive and analytical research design based on secondary data from the Government of India, NITI Aayog, the International Energy Agency (IEA), the Organisation for Economic Co-operation and Development (OECD), and the Climate Policy Initiative (CPI). NITI Aayog's 2025 report indicates that India's tracked green investment increased from approximately US$17 billion in FY2016–17 to US$57 billion in FY2021–22, while the IEA estimated clean-energy investment at US$87 billion in 2024. Despite this progress, substantial additional investment is required to meet India's climate commitments and long-term net-zero objective for 2070. The article identifies high capital costs, limited access to affordable finance, technological risks, inadequate private-sector participation and insufficient funding for climate adaptation as major constraints. It argues that strengthening green bond markets, expanding blended finance, mobilising international concessional funding and improving climate-finance transparency can help address these challenges. The study concludes that climate finance must be integrated with India's broader development strategy to achieve an inclusive, economically viable and environmentally sustainable low-carbon transition.

Keywords: Climate finance; green finance; low-carbon economy; renewable energy; green bonds; energy transition; sustainable development; India.

References

Climate Policy Initiative (CPI). (2024). Landscape of Green Finance in India 2024. Climate Policy Initiative.
Government of India. (2025). Economic Survey 2024–25, Chapter 10. Ministry of Finance, Department of Economic Affairs.
International Energy Agency (IEA). (2024). World Energy Investment 2024: India. IEA, Paris.
International Financial Services Centres Authority (IFSCA). (2024). Expert Committee on Climate Finance submits First Report on Transition Finance to IFSCA. Press Information Bureau, Government of India, 2 July 2024.
NITI Aayog. (2025). Scenarios Towards Viksit Bharat and Net Zero: Financing Needs. Government of India.
Organisation for Economic Co-operation and Development (OECD). (2022). Clean Energy Finance and Investment Roadmap of India: Opportunities to Unlock Finance and Scale up Capital. OECD Publishing, Paris. https://doi.org/10.1787/21b6e411-en .
Srinivasan, M., Ghoge, K., Haldar, S., Bazaz, A., & Revi, A. (2023). Climate Finance in India 2023. Indian Institute for Human Settlements.
United Nations Framework Convention on Climate Change (UNFCCC). (2015). Paris Agreement. United Nations.

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