India’s annual budget for 2025 tried to revive the country’s slowing growth by tinkering with the income tax slabs. The presumption is that surplus money available in the hands of the middle class will spur more spending, which will eventually catalyze otherwise stagnating GDP growth.
For regimes in New Delhi, avoiding populism has always been a challenge. The same sensitivity appeared to have shaped the sluggish approach of the budget to climate action, environmental, social, and governance (ESG) concerns, sustainability, and decarbonization. The budget’s provisions fell drastically short of the transformation needed to steer the country toward a greener future. The commitment to climate change mitigation and sustainable development appears to have been relegated to the background and the gap between ambition and action has become more evident.
New Delhi missed the February 10 deadline to submit an updated version of its climate targets for 2035, known as Nationally Determined Contributions under the Paris Agreement. The document is still in the works and may not be submitted until the second half of 2025. Although India isn’t the only country to have missed the deadline, its decision appears to have been influenced by the experience in the Baku COP29 summit where the rich nations failed to commit adequate finance for developing nations. Previously, India skipped the December 31, 2024 deadline for the submission of the first Biennial Transparency Report (BTR) as well. The BTR is a new format in which a country needs to report its detailed inventory of emissions.
In January 2025, India’s reliance on coal continued to soar. The Ministry of Coal opened bids for 27 new mines, of which 20 received bids. The same month, the country’s coal production stood at 104.43 million tons, an increase of 4.38 percent over figures recorded in January 2024. This offsets the gradual decrease in India’s import of coal. The primary reasons for the decrease – for the second year in a row – are slowing economic activity and record high inventories. Higher domestic production by Coal India, the world’s largest coal miner, has helped the country decrease import dependence by 5.5 percentage points over a decade to 20.5 percent in 2024.
Also last month, India issued 21 renewable energy (RE) tenders with a cumulative capacity of 4,419 MW. By December 2024, India’s RE installed capacity, mostly solar and wind, had reached 209.4 GW. The budget also contained a proposal to amend the country’s Atomic Energy Act, which will invite private players to set up small nuclear reactors. It’s a continuation of the trend witnessed in the 2024 budget and aligns with India’s broader energy strategy. However, the goals identified for the nuclear sector are long-term and aren’t expected to impact the energy portfolio, which remains overtly fossil fuel-centric.
Worse still, the fact remains that India, a mega voice for climate financing abroad and equally forceful in articulating its lofty ambitions, has persistently failed to script a fiscal approach to sustainability. This is evident in the previous two budgets, for 2023 and 2024. The 2025 budget’s transition strategy from fossil fuel to RE relies predominantly on solar energy and electric vehicles, and with little focus on decarbonizing the high-carbon industries such as steel, cement, and manufacturing. There is little evidence that India’s financial ecosystem is ready to incentivize large-scale decarbonization, by preparing a road map for capital outflow towards transition finance and green investments. There is no government support whatsoever for supporting the high-emission industries in their proposed or ambitious shift towards low-carbon alternatives.
For many years, experts have bemoaned the lack of a unified approach across government ministries and state governments towards climate action. Different central ministries and separate state governments have divergent and sometimes conflicting priorities about their own independent sustainability goals. No overarching body exists to coagulate and establish synergy among these various approaches. The 2025 budget overlooked this issue of fragmentation.
Budget 2025 was expected to take a firm position on ESG accountability. However, none of the provisions that have so far allowed listed companies to turn a blind eye to meaningful climate disclosures were tinkered with. “Greenwashing” remains widespread in India and the focus on manufacturing, job creation, and growth appear to have taken a precedence over provisions that enforce ESG norms and promote accountability of decarbonization efforts of the public and private sectors.
The outcomes of COP29 in Baku did not meet the expectations of developing countries. Additionally, the decision by the U.S. President Donald Trump to again withdraw from the Paris Agreement presents a significant challenge for the less developed nations. However, this unique geopolitical situation also provides an opportunity for India to collaborate with European nations that are firmly committed to climate action. To effectively navigate this landscape, India must engage in climate diplomacy while simultaneously making consistent and meaningful efforts at home. This includes addressing the on-going challenges of decarbonization, and integrating sustainability and ESG principles into official policies.