Despite Some Positives, Budget More Red Than Green

India’s Union Budget for 2025-2026 delivers a mixed verdict on environmental sustainability. While there are commendable initiatives, the overarching narrative reflects a lack of ambition in tackling the country’s escalating ecological crises. The Budget nods to renewable energy, clean-tech manufacturing, and water resource management, but the financial allocations and policy depth fall short of what’s needed to combat climate change and promote sustainable development.

One of the standout elements is the focus on nuclear energy, with plans to develop 100 GW of capacity by 2047. This ambitious target, supported by increased private sector involvement and the development of small modular reactors, promises to deliver round-the-clock clean power, reducing reliance on energy storage for intermittent renewable sources. The Budget also boosts clean-tech manufacturing, particularly in solar cells and grid-scale batteries, enhancing energy security. However, it misses an opportunity to expand the solar power value chain to upstream components like polysilicon, ingots, and wafers—critical for a self-reliant solar ecosystem.

Water resource management received notable attention. The Jal Jeevan Mission’s timeline has been extended to 2028 to achieve 100% water access in rural households, aligning with the United Nations Sustainable Development Goal 6.1. This is a positive step towards addressing water scarcity. The Budget also aims to bolster agricultural resilience through investments in research and development, connectivity, and micro, small, and medium enterprises . Yet, the target of integrating just 30,000 farmers into sustainable practices seems inadequate for a nation with millions of cultivators facing climate-related challenges.

The Budget introduces measures to encourage a circular economy, such as credit notes for ship-breaking activities and exemptions from import taxes on critical raw materials and waste products. These initiatives could enhance domestic recycling efforts and make India’s ship-breaking industry more globally competitive. However, ship-breaking remains a highly polluting industry, raising questions about environmental safeguards. In the electric vehicle  sector, customs duty exemptions on materials used in battery manufacturing are expected to support growth, though a more comprehensive strategy could have accelerated the EV transition.

Weak Commitment
Despite these positives, the Budget falters where it matters most: funding. The allocation for the Ministry of Environment, Forest and Climate Change is just ₹34.1 billion, a marginal rise from ₹33.3 billion in 2024-2025 and ₹32.3 billion in 2023-2024. This modest increase pales compared to the overall budget growth of over 7%, signalling a weak commitment to climate goals amidst escalating environmental threats.

The Output-Outcome Framework for 2025-2026 omits critical sustainability indicators such as waste management, coastal resilience, and biodiversity. This gap underscores a lack of comprehensive planning essential for addressing India’s multifaceted environmental challenges.

While renewable energy initiatives are present, the absence of a clear strategy to phase out coal and other fossil fuels contradicts India’s low-carbon commitments. This dual approach sustains reliance on polluting industries, undermining efforts towards a cleaner energy future.

Green finance remains an underwhelming area. Although the Budget mentions green bonds and sustainable investment frameworks, mechanisms to mobilise private capital for environmental projects are underdeveloped. A robust green finance ecosystem is vital for funding India’s low-carbon transition, but the Budget offers little clarity on realising this objective.

In essence, the Union Budget 2025-2026 makes some strides in promoting renewable energy, clean-tech manufacturing, and water resource management. However, the lack of substantial funding, a cohesive climate strategy, and the integration of sustainability into broader economic policies marks a missed opportunity. The Budget, despite its green undertones, leans more towards red when it comes to genuine environmental commitment.