Experts speak: Implications of Budget ’25 for sustainable development

The Union Budget 2025-26 has signalled a boost to India’s ongoing efforts towards cleaner energy and transport systems. The Budget 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 Rs 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.

Focus on creating EV ecosystem

The EV industry, which was looking forward to a favourable tax structure that caters to different automotive technologies, did not find a mention.

But the Budget has prioritised 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.

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Promoting sustainable mobility

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.

‘More comprehensive roadmap needed’

Randheer Singh, the CEO of ForeSee Advisor, and former director (E-Mobility) of NITI Aayog, lauded the focus on expanding the EV ecosystem, strengthening domestic battery manufacturing, and supporting startups and alternative investment funds.

“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,” he said.

However, certain areas warrant further attention, he cautioned. “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, more focused initiatives in environmental sustainability measures could have further strengthened the vision for a cleaner and greener India,” he added.

Prof Sachchida Nand Tripathi, Dean, Kotak School of Sustainability, IIT Kanpur, seconded that. “The Budget has the theme of clean transition and sustainability embedded in it. The focus on clean-tech manufacturing, investments in PM Surya Ghar Yojana, etc., are signals that India is investing in a climate-friendly economy. However, focused 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,” he said.

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Focus on high-yielding seeds

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 Rs 3 lakh to Rs 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.

However, Devinder Sharma, an agriculture trade policy expert, is disappointed that the government did not talk about farmers’ income or agriculture income, which should be the prime concern. “If farmers do not have a stable income, they won’t be able to deal with the challenges posed by climate change. There will be no capacity to deal with extreme weather events,” he noted.

A missed opportunity

Also missing from the Budget was any mention of PM-KUSUM, pointed out Shruti Sharma, Lead Energy Program, International Institute for Sustainable Development. According to her, it was a “beacon for transforming agriculture” that now goes largely unnoticed.

“With farmers collectively pocketing nearly 75 per cent of all electricity subsidies, solar irrigation isn’t just a green initiative; it could shift demand to daylight hours and power our renewable future. Earlier last year, the scheme received an extension till 2026. But without a clear political push in the Budget, the signal to states and private developers remains dim.”

Jal Jeevan Mission

Nitin Bassi, Senior Programme Lead, Council for Energy Environment & Water, lauded the extension of Jal Jeevan Mission to 2028. “It is a big step to ensure the safety of domestic water supply services in rural India, which will also help cover the remaining 20 per cent of rural households (about 3.9 crores) with tap connections,” he said.

“Additionally, there should be a focus on ensuring the quality of supplied water and strengthening the data monitoring infrastructure,” he suggested.

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Boost to nuclear energy

Significantly, the announcement about renewed support for nuclear energy with the introduction of a Rs 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.

The China question

Sustainable finance specialist Labanya Jena said that 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?

“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?” she pointed out.

Jena also said that enhancing credit access for MSMEs is crucial, but it has to be directed towards energy efficiency and rooftop solar to reduce costs and align India’s small businesses with its climate ambitions.

Consumption subsidies

Shruti Sharma also drew attention to another unaddressed issue: Electricity consumption subsidies. “The 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,” she said.

“However, while measures like the Revamped Distribution Sector Scheme have already helped trim subsidies by about 3 per cent, we must urgently address the elephant in the room: consumption subsidies, which now represent over 93 per cent of total energy subsidies,” she added.

“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.”