Union Budget 2026: Building India’s green capacity for the next decade

Hon’ble Finance Minister Nirmala Sitharaman presented her ninth consecutive budget in Parliament. The Budget places stronger emphasis on India’s green transition than her speech, but the direction of travel is unambiguous. Clean energy is no longer positioned as a climate agenda alone, but as a core driver of industrial competitiveness, energy security and long-term economic resilience.

Overall, the Budget balances near-term macro stability with long-term strategic direction. Growth and job creation remain central, but without compromising fiscal discipline. The Finance Minister framed the Budget around ‘kartavya’, our collective duty to build a more resilient India. In practice, this means building the industrial, financial and resource capacity needed for India’s green economy over the next decade.

Union Budget 2026 highlights

1. Self-Reliance in manufacturing and critical minerals

A defining feature of this Budget is its emphasis on domestic capability building. India’s clean energy ambitions — whether in solar, wind, batteries or electric mobility — depend on resilient supply chains and secure access to critical minerals. Exemptions from import duties on capital goods and inputs for strategic clean energy manufacturing, that the Finance Minister proposed, will help domestic manufacturers to procure the inputs and machinery they need at lower costs. This is crucial for long-term cost competitiveness, especially as global supply chains remain volatile. Applying the same lens to nuclear energy is a good step too, as nuclear energy adds a layer of long-term clean baseload to India’s electricity system, strengthening grid reliability as renewables expand.

The Budget also takes a wider view of energy security by prioritising the development and processing of critical minerals. Import duty exemptions for equipment used in mineral beneficiation and efforts to develop rare-earth corridors in key States will support India’s emergence as a competitive player in materials that are essential to manufacture wind turbines, advanced batteries, electric vehicles and magnets.

Union Budget 2026-27 documents

By linking manufacturing incentives with minerals strategy, the Budget acknowledges that the green transition is not only about generation — it requires securing the upstream resources that support clean technologies.

2. Financing as the quiet enabler

Large-scale clean energy deployment ultimately depends on stable, long-term financing and robust grid infrastructure.

The restructuring and strengthening of institutions such as Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) is timely, though details are yet to emerge. Increased capital support for the Power Grid Corporation of India Limited (PGCIL) underscores a key reality: renewable capacity cannot scale unless the transmission network, i.e. the highways that transport electricity, expands rapidly and reliably. PGCIL is best placed to build strategic transmission lines at pace, given the privileges it enjoys in land acquisition by virtue of being a public sector enterprise.

A new Infrastructure Risk Guarantee Fund has been proposed in the Budget too, with an aim to de-risk construction-stage projects, lower the cost of capital and crowd-in private investment. This is as important for solar and wind power projects as for newer segments such as storage and hydrogen. Coupled with a public capital expenditure outlay of ₹12.2 lakh crore for FY27, these measures signal confidence in India’s infrastructure pipeline.

The Budget’s emphasis on deepening domestic bond markets and mobilising long-term pools of capital aligns well with the multi-decade lifecycles of renewable and grid assets. Big investors — pension funds, insurance companies, sovereign wealth funds — need predictable macro conditions. The projected fiscal deficit decline to 4.3% of GDP sends precisely that signal. India’s strong fiscal record translating into lower cost of capital for projects is expected, but is yet to be seen.

3. Support for renewable energy deployment and storage

Renewable energy remains the anchor of India’s clean energy strategy. The 30% increased allocation for solar energy, India’s most affordable and scalable clean power source, ensures that capacity addition continues at pace even as new technologies such as hydrogen and storage scale up. Lower customs duties on key solar components and capital equipment will help reduce project costs and strengthen domestic supply chains.

A central signal in this year’s Budget is the elevated importance of battery storage. Combined Viability Gap Funding allocations across Ministries now total ₹2,000 crore, marking one of the strongest pushes for Battery Energy Storage Systems (BESS) in any Indian Budget so far. As renewable penetration rises, storage becomes critical for grid stability, peak management and delivering firm, round-the-clock power. Duty exemptions for lithium-ion and sodium-ion inputs further support cost reduction and domestic manufacturing.

The message is unambiguous: storage has moved from being an optional add-on to becoming core power system infrastructure.

4. Industrial decarbonisation: the next frontier

While the power sector has already been reshaped by renewables, India’s next challenge lies in hard-to-abate industries such as steel, cement, refineries and chemicals. The Budget signals a structural shift by allocating ₹20,000 crore over five years to Carbon Capture, Utilisation and Storage (CCUS). This marks the first serious, programmatic and technological commitment to managing industrial emissions at scale.

The doubling of allocations under the National Green Hydrogen Mission reinforces India’s multi-pathway approach to industrial decarbonisation. Green hydrogen can replace fossil-based feedstocks in refining, reduce emissions from steelmaking and unlock new export opportunities as global markets impose cleaner-materials requirements. CCUS complements this by providing decarbonisation routes where hydrogen or electrification may not be immediately viable.

For renewable developers, this is strategically aligned. As industry transitions to cleaner fuels and greater electrification, demand for reliable, round-the-clock green power will rise— driving opportunities in hybrid, storage-backed and firm renewable power solutions.

Conclusion: Laying the foundations of a green industrial economy

This Budget does not rely on dramatic announcements. Instead, it methodically strengthens the pillars of India’s green transition. If the last decade focused on building renewable capacity, the next will focus on building an integrated green industrial economy. That is the practical meaning of kartavya: investing responsibly today so that India can lead tomorrow.

Published – February 01, 2026 07:14 pm IST