India’s clean energy progress is accelerating rapidly. In 2024, it added 24.5 gigawatts (GW) of solar capacity, ranking third globally after China and the United States. The United Nations Secretary-General’s 2025 Climate Report marks India as a leading developing nation in solar and wind energy expansion. The renewable sector employed over one million people in 2023 and contributed 5% to GDP growth. India’s role in founding the International Solar Alliance (ISA) further cements its global leadership in clean energy. Yet, financial gap threatens to slow this momentum.
Solar and Renewable Energy Expansion
India’s solar capacity surged to 24.5 GW in 2024. This growth places India among the top three solar energy producers worldwide. Wind energy and off-grid solar also contribute substantially. The renewable sector’s employment exceeds one million, with off-grid solar alone employing 80,000 people by 2021. These developments support economic growth and energy security.
Climate Finance Gap and Economic Impact
India faces a large climate finance gap essential to sustain its clean energy growth. Estimates suggest $1.5 to $2.5 trillion is needed by 2030 to meet climate targets. This funding is critical for expanding renewables, upgrading grids, battery storage, green hydrogen, and sustainable transport. Without sufficient finance, India risks missing its 1.5°C-aligned climate goals. According to the International Renewable Energy Agency (IRENA), following this pathway could double India’s GDP growth rate to 2.8% annually through 2050.
Green Bonds and Private Sector Role
Green bonds are a major source of climate finance in India. By December 2024, India’s green, social, and sustainability-linked debt issuance reached $55.9 billion, a 186% rise since 2021. Green bonds accounted for 83% of this amount. Private sector participation is strong, responsible for 84% of green bond issuance. However, access remains limited for small enterprises, agri-tech innovators, and local infrastructure developers. Initiatives like the Solar Park Scheme and sovereign green bonds are helping attract private capital.
Diversifying Climate Finance Strategies
India needs to deepen and diversify its climate finance approach. Public finance must play a larger role in attracting private investments. Tools like blended finance, concessional loans, and risk-sharing mechanisms can reduce investment risks. Credit enhancement instruments such as partial guarantees and subordinated debt can improve project bankability. Unlocking domestic institutional capital from pension funds and insurers is vital. Regulatory reforms are needed to enable these investors to channel funds into green projects.
Carbon Markets and Innovation
India’s Carbon Credit Trading Scheme offers potential to unlock new climate finance streams. Its success depends on transparency, regulation, and fairness. Financing adaptation and loss and damage is equally urgent. India can lead in climate finance innovation using technologies like blockchain for tracking funds and AI for risk assessment. Tailored blended finance models can address India’s unique social and economic challenges.
Questions for UPSC:
- Point out the challenges and opportunities in India’s renewable energy sector and their impact on economic growth.
- Critically analyse the role of green bonds and private sector participation in financing India’s clean energy transition with suitable examples.
- Estimate the significance of blended finance and public policy reforms in bridging the climate finance gap in developing countries.
- Underline the importance of carbon markets and technological innovations in advancing global climate finance mechanisms and their potential impact on sustainable development.
