India’s tax-payer friendly budget has signalled a boost to its ongoing efforts towards cleaner energy and transport systems. The Budget 2025 has introduced several measures to support domestic clean technology manufacturing, expand credit access, and enhance climate resilience in agriculture.
A notable provision is the expansion of the credit guarantee scheme, which is expected to unlock ₹1.5 lakh crore in additional credit over the next five years for MSMEs, startups, and exporters. This support is aimed at strengthening industries including clean technology and renewable energy.
The budget also prioritises boosting domestic manufacturing in key clean energy areas. It focuses on increasing capacity in sectors such as solar PV cells, EV batteries, motors and controllers, electrolysers, wind turbines, high-voltage transmission equipment, and grid-scale energy storage. To further support local production, basic customs duties have been removed on cobalt powder, lithium-ion battery scrap, lead, zinc, and 12 additional critical minerals—a follow-up to the July 2024 policy that exempted 25 key minerals from import duties. This measure is expected to lower input costs, secure raw material supply chains, and promote job creation in renewable energy and electric mobility sectors. It also has the potential to spur investments in domestic manufacturing and promote sustainable mobility in India. The EV industry, which was looking forward to a favourable tax structure that caters to different automotive technologies, did not find a mention in the Union Budget.
In the agricultural sector, the budget has announced the National Mission on High Yielding Seeds. This mission will focus on enhancing research, developing pest-resistant and climate-resilient crops, and ensuring the commercial availability of over 100 improved seed varieties released since July 2024. Alongside this, the Kisan Credit Card (KCC) loan limit has been increased from ₹3 lakh to ₹5 lakh, providing greater financial flexibility for around 7.7 crore rural entrepreneurs to invest in agricultural productivity and rural livelihoods. This has the potential to boost credit availability for climate-friendly agricultural practices.
Finally, the budget announcement about renewed support for nuclear energy with the introduction of a ₹20,000 crore Nuclear Energy Mission aimed at developing Small Modular Reactors (SMRs), signals India’s focus on cutting emissions in energy production. The initiative targets the operationalisation of at least five indigenously developed SMRs by 2033, positioning nuclear energy as a secure, low-carbon option to support long-term energy security and sustainability.
On adaptation
The Prime Minister Dhan-Dhaanya Krishi Yojana that targets 100 districts with low productivity by boosting agricultural output, promoting crop diversification, and enhancing post-harvest storage and irrigation, can add immensely to India’s climate adaptation efforts. Modernising agriculture and diversifying rural income sources alongside improved credit access for farmers, can reduce the risks of climate variability while increasing productivity. The six-year Mission for Aatmanirbharta in Pulses reinforces this approach by seeking to leverage past successes in food security and sustainable practices.
The reforms can be complemented by the Rural Prosperity and Resilience programme that seeks to to generate diverse employment opportunities in rural India, according to the minister. Focus on under-employed groups—including rural women, young farmers, and landless families—and incorporating global best practices and multilateral support, can help improve long-standing economic vulnerabilities, making more resources available to climate-hit communities.
Also, the Urban Challenge Fund announced in the budget that seeks to allocate up to 1 lakh crore rupees to modernise urban infrastructure and boost climate adaptation in Indian cities seeks to support projects under initiatives such as ‘Cities as Growth Hubs’, ‘Creative Redevelopment of Cities’, and improved ‘Water and Sanitation.’
The fund can help enhance the capacity of urban areas to adapt to extreme weather, mitigate urban heat islands, and manage water resources more effectively. With a financing model covering up to 25% of project costs—requiring at least 50% funding from bonds, bank loans, and PPPs—and an initial allocation of ₹10,000 crore for 2025-26, the initiative is designed to drive resilient urban growth while integrating adaptation measures into the redevelopment process.
Budget Estimate Comparison 2024-25 and 2025-26 |
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2025-26 |
2024-25 |
|
|
Budget Estimates (In Rs crores) |
Budget Estimates (In Rs crores) |
Revised Estimates (In Rs crores) |
Min of Heavy Industries |
7680.23 |
7242 |
4560.63 |
Min of New & Renewable Energy |
26549.38 |
19100 |
17298.44 |
Min of Environment, Forests and Climate Change |
3412.82 |
3330.37 |
3125.96 |
Min of Power |
21847 |
20502 |
19845 |
Min of Coal |
501.20 |
192.55 |
141.21 |
Min of Housing and Urban Affairs |
96777 |
82576.57 |
63699.93 |
Min of Petroleum and Natural Gas |
19326.90 |
15930.26 |
17367.70 |
Expert Quotes:
On Clean Transition
Shruti Sharma, Lead Energy Program, International Institute for Sustainable Development
“India’s Union Budget takes a critical step forward by incentivizing electricity distribution reforms and enhancing intra‐state transmission capacity, which will undoubtedly improve the financial health of our DISCOMs—the linchpin of the renewable energy transition. However, while measures like the Revamped Distribution Sector Scheme have already helped trim subsidies by about 3%, we must urgently address the elephant in the room: consumption subsidies, which now represent over 93% of total energy subsidies. If left unchecked, these subsidies will only escalate as electrification spreads across all sectors, potentially undermining the very reforms designed to make our energy system more efficient and resilient. Unchecked, consumption subsidies are like a tinderbox waiting to ignite, threatening to undo hard-won reform gains as electrification accelerates.
Missing from the budget was any mention of PM-KUSUM—a beacon for transforming agriculture that now goes largely unnoticed. With farmers collectively pocketing nearly 75% of all electricity subsidies, solar irrigation isn't just a green initiative; it's the lƒer that could shift demand to daylight hours and power our renewable future. Earlier last year, the scheme received an extension till 2026 - that is a positive step, but without a clear political push in the budget, the signal to states and private developers remains dim, leaving a golden opportunity unlit."
“This year's budget has re-ignited the call for clean-tech manufacturing—setting the stage for a transformative revolution in our domestic production of solar PV cells, EV batteries, motors, electrolyzers, wind turbines, and more. Hopefully, this isn't just policy talk; and is a rallying cry that echoes through the corridors of industry, energizing private investment as seen in the early successes of the PLI schemes for high-efficiency solar modules, advanced batteries, and green hydrogen. The budget's focus on these initiatives, through the Make in India mission, lights the path for India to emerge as a powerhouse in clean energy technologies.”
Rishbah Jain, Senior Programme Lead, Council for Energy Environment & Water
“The union budget has rightfully focussed on doubling down on making domestic manufacturing and exports competitive, which would create new jobs, economic growth, and a stable energy transition. Currently, for many clean energy equipment manufacturers, it is increasingly becoming difficult to compete with Chinese giants on artificial selling costs and overcapacities. CEEW analysis suggests that with backward and forward integration, India has potential competitiveness in many clean energy components such as battery anodes, solar wafers, silver paste, wind turbine gearbox, etc. However, lack of minerals and technological capabilities to process them, import reliance for manufacturing equipment, limited skilled workforce and trade barriers are often limiting factors. The new initiatives such as the National Manufacturing Mission, Export Promotion Mission, Bharat Trade Net and the National Centres of Excellence for Skilling are welcome initiatives, but these need to be followed up through inter-ministerial actions and close collaborations between the state and central governments. Further, with rapidly changing technology, the industries need to also invest in R&D and can potentially tap the talent from the PM Researcher Fellowship.”
Labanya Jena, Sustainable Finance Specialist
“India’s push for nuclear energy is bold, but with high capex and tail risks, the key challenge remains—who will fund it, and who will bear the risks? India’s ₹10,000 crore Fund of Funds can be a game-changer, but earmarking a portion for climate solutions for clean technologies in India will support the country’s climate action solutions. India can also be a climate tech hub. The National Manufacturing Mission’s focus on clean tech is a step in the right direction. However, the real question is: Can India’s green industry compete with China, where there are massive subsidies for green industries?
“Enhancing credit access for MSMEs is crucial but directing it towards energy efficiency and rooftop solar will reduce costs and align India’s small businesses with its climate ambitions.
“The Urban Challenge Fund must prioritise pollution control and climate adaptation—without it, our cities risk becoming economic hubs struggling with environmental distress.”
Aarti Khosla, Director, Climate Trends
"The Union Budget presents an ambitious framework to boost its transition economy. With the announcement of the National Manufacturing Mission at its core, the document provides a vision to plug India’s supply chain vulnerabilities by further boosting the ‘Make In India’ vision in the current geopolitical context. Solar energy gets the highest allocation of Rs 24224 crore, with a clear focus on rooftop solar with the PM Surya Ghar Yojana. The announcement for a Nuclear Mission with the aim for 100 GW of non-fossil based energy by 2047 is a clear indication that the government is looking at options to decrease its baseload reliance on coal. However, the issues of safety associated with nuclear energy still loom large. Just 10 days before the deadline for submission of revised NDCs to the UNFCCC, India has shown its intent for climate action very clearly."
Karthik Ganesan, Fellow & Director - Strategic Partnerships, Council for Energy Environment & Water
"This budget provides a shot in the arm for a sector that has not received consistent funding , despite being one of the older nuclear programmes in the world. The R&D efforts needed for an indigenous modular reactor are significant and the 2033 timeline for 5 reactors would put it as one of the fastest to market. International collaboration to accelerate the development and learn from what other countries have done would also be a welcome step. "
On Sustainable Transport
Mahua Acharya, Founder CEO, INTENT and former MD & CEO, Convergence Energy Services Limited, Govt of India
“The specific focus on Budget 2025 on clean tech manufacturing is obviously a welcome step. We must do all we can to produce in India - and to that extent, the recognition of the need for batteries and raw materials is a really welcome step! The manufacturing mission is an excellent move - and the recognition of the need for grid scale batteries, EV batteries, PV cells is spot on as India looks to transition rapidly into greener growth.”
Randheer Singh, CEO, ForeSee Advisor & Former director E-Mobility, NITI Aayog
“The Union Budget 2025 signals a strong commitment to India’s clean mobility and energy transition. The focus on expanding the EV ecosystem, strengthening domestic battery manufacturing, and supporting startups and alternative investment funds (AIFs) is a welcome step toward sustainability and self-reliance. The emphasis on lithium-ion and alternative battery chemistries, along with measures to enhance green financing, will be instrumental in accelerating EV adoption and energy storage solutions.
However, while the budget lays a solid foundation, certain areas warrant further attention. A more comprehensive roadmap for commercial megawatt level charging infrastructure, incentives for fleet electrification, and clarity on execution frameworks will be critical to ensuring effective implementation. Additionally, broader environmental sustainability measures, such as targeted pollution reduction strategies in urban areas and deeper interventions for river rejuvenation, remain areas where more focused initiatives could have further strengthened the vision for a cleaner and greener India.
Similarly, as the economy continues its growth trajectory, proactive measures to address food price inflation and ensure supply chain resilience will be key to maintaining economic stability. While this budget provides a strong directional push, the industry now looks forward to further policy refinements and execution strategies that will drive long-term impact.”
Prashant Rathee, Founder, The Energy Company
“While the U.S. is rolling back its EV mandates, India is taking a forward-looking approach by strengthening its battery ecosystem. The exemption of basic customs duty on capital goods for cell manufacturing paves the way for domestic sourcing, reducing dependence on imports. For Battery and Vehicle OEMs, this will lower working capital needs, improve supply chain stability, and enable closer R&D collaboration for optimized battery packs in future. A stronger local battery ecosystem ensures India stays ahead in clean energy innovation, making energy storage more affordable, scalable, and competitive.”
On Adaptation
Prof Sachchida Nand Tripathi, Dean, Kotak School of Sustainability, IIT Kanpur
“The Union Budget 2025-26 has the theme of clean transition and sustainability embedded in it The focus on clean-tech manufacturing, investments in PM Surya Ghar yojana, exempting the Basic Custom Duty on critical minerals and impetus on sustainable transport are signals that India is investing in a climate-friendly economy. However, focussed initiatives to target air pollution, river rejuvenation for water security and adaptation measures beyond agriculture would have further strengthened India’s vision for a cleaner greener future.”
Abinash Mohanty, Global Sector-Head Climate Change and Sustainability, IPE-Global
“The Union Budget 2025 marks a significant step in India's journey towards energy transition and net-zero goals. With a strong focus on the Atmanirbhar Mission, the budget underscores our nation’s commitment to clean energy, economic resilience, and sustainability. The much-anticipated push for nuclear power and cleaner energy alternatives sends a clear message—India is strengthening its position as a global thought leader in low-carbon development. Through a walk-the-talk green growth and green transition budget speech that tries to climate-proof the trinity of jobs, growth, and sustainability misses patenting the invaluable grains of climate adaptation. Yet, while the budget increases the allocation for the Ministry of Environment, Forest, and Climate Change (MoEFCC), we must recognize a crucial gap—the lack of a robust climate adaptation strategy -- which is a subtle miss in the budget speech. Social protection policies, particularly those aimed at vulnerable communities, must have been fortified to withstand climate shocks through an ear-marked budgetary allocation. Climate Adaptation is not an option—it is an imperative. The world is facing unprecedented geopolitical pushback on the climate agenda, and India should have ensured that its fiscal policies reflect this reality through an enhanced budgetary allocation.”
On Jal Jeevan Mission
Nitin Bassi, Senior Programme Lead, Council for Energy Environment & Water
“The extension of Jal Jeevan Mission to 2028 is a big step to ensure the safety of domestic water supply services in rural India, which will also help cover the remaining 20% of the rural households (about 3.9 crores) with tap connections. CEEW research highlights, there is a need to ensure the reliability and potability of water supply as well, in addition to creating infrastructure. This extension will work towards that by focusing on the quality of water supply infrastructure, and efficient operations and maintenance through community participation. Additionally, there should be a focus on ensuring the quality of supplied water and strengthening the data monitoring infrastructure.”
On Agriculture
Devinder Sharma, Agriculture Trade Policy Expert
“The government has kept agriculture as one of the top priorities, but this has been the case for the last eight years. However, the government has not talked about farmers’ income or agriculture income, which should be the prime concern. Without considering this, just keeping it as a top priority wouldn’t make any difference because if farmers do not have a stable income, they will not be able to deal with the challenges posed by climate change. There will be no capacity to deal with extreme weather events. I believe that we need to work on this and the same should have been included in the budget which is missing.”
On Sustainable Cities
Prof Anjal Prakash, Clinical Associate Professor (Research) and Research Director, Bharti Institute of Public Policy. Prof Prakash has just been nominated as lead author of IPCC AR7’s upcoming report on Cities and Climate Change.
"The Economic Survey 2025 highlights the commitment to fostering sustainable urban growth through strategic infrastructure development. The government’s initiatives, including the expansion of metro rail networks and the transformative effects of the Swachh Bharat Abhiyan, illustrate significant advancements in urban mobility and sanitation. With projects like the Pradhan Mantri Awas Yojana - Urban aimed at providing housing for millions and the Smart Cities Mission, the focus is on creating liveable, connected, and environmentally friendly urban spaces. The integration of vertical gardens, exemplified in various initiatives, underscores the importance of innovative, eco-conscious practices that enhance urban aesthetics and improve air quality. These efforts ensure that India is not only building infrastructure but also investing in the well-being of its citizens, paving the way for a resilient and sustainable urban future."