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Currently, around 30 per cent of the funding for clean energy is raised through equity, with significant FDI and private capital inflow
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AMIT DAVE
India’s ambitious target of adding 500 gigawatts (GW) of non-fossil fuel capacity requires a whopping ₹17.5 lakh crore every year, which experts and analysts feel can be partly leveraged through the country’s large household savings base besides other financial instruments.
This was discussed at the Petroleum Planning & Analysis Cell’s (PPAC) 24th foundation day event in April 2025 by a panel of IREDA CMD P K Das, Environment Ministry Economic Advisor Rajasree Ray, IEEEA Director South Asia Vibhuti Garg and MCX MD & CEO Pravina Rai.
The panellists agreed that to achieve this ambitious target, India needs to mobilise an estimated $200 billion every year, which is roughly 5-6 per cent of the country’s GDP. However, this amount far exceeds traditional public funding avenues and must be complemented through private investments, institutional capital, and international financing.
Currently, around 30 per cent of the funding for clean energy is raised through equity, with significant FDI and private capital inflow.
The remaining 70 per cent finances are raised through debt, sourced from NBFCs (largest share), Bond markets (including masala, and transition bonds) and Banks (surprisingly, only about 14 per cent share).
Household Savings
Interestingly, India’s household savings (around $200 billion/year) are of a similar scale, highlighting the importance of creating mechanisms that attract and redirect domestic savings toward green investments.
India’s net financial savings of the household sector rose by more than 16.5 per cent Y-o-Y to ₹15.52 lakh crore in FY24.
According to the Statistics Ministry, net household financial savings have been almost flat during the five-year period beginning FY20. However, it recorded a growth of over 16 per cent at the end of FY 24 as compared to FY23.
Trends also reveal that households are putting more and more money in shares and debentures.
Meanwhile, the RBI’s annual report showed that gross saving of households has come down to 17.9 per cent of Gross National Disposable Income (GNDI) at the end of FY24 from 22.4 per cent in FY21. During this period, net financial savings came down to 5.1 per cent from 11.6 per cent.
Green Economy
A senior government official said that solar and wind energy are mature technologies with decreasing investment risk. This is a space where households can invest.
For instance, PM Surya Ghar Yojana has immense potential in the 1 kw and 2 kw installations, which will largely be installed in low income households. If funding can be diverted to this segment, the benefits that can accrue in the medium to long term are immense. This will not only help Discoms in terms of power theft and revenue loss, but also reduce pressure on the grid.
Besides, the yojna can also benefit small and medium enterprises (MSMEs), who can have higher savings by replacing costly commercial electricity with solar power that is produced on their rooftops.
Besides, innovative instruments such as sovereign green bonds, sustainability-linked loans, blended finance, and concessional capital are increasingly being utilised to de-risk projects.
A senior executive with a power sector lender pointed out that India’s image as the fastest growing emerging market and its position in the renewables sector is gaining traction.
“The right policy mix and push can help India project a strong image as an investment destination for green energy attracting both foreign and domestic capital including from households. The key is to de-risk it,” the official added.
According to LSEG’s (London Stock Exchange Group) report, Investing in the Green Economy 2025–Navigating Volatility and Disruption, the global green economy has reached a total value of $7.9 trillion, accounting for 8.6 per cent of global listed equities in the first quarter of 2025. In terms of revenues, the sector exceeded $5.1 trillion in 2024, growing at a CAGR of 8 per cent over the past decade.
Within Asia, India ranks 5th by green market capitalisation and 6th by green revenue. It contributes 4 per cent of Asia’s green revenues, placing it behind China, Japan, Hong Kong, South Korea and Taiwan in the region.
India accounts for 1.2 per cent of the global green economy by market capitalisation. India’s green economy is still emerging but shows steady growth in green revenue.
“The green economy in emerging markets is growing at nearly twice the rate of developed ones,” it added.
Published on June 1, 2025
This article first appeared on The Hindu Business Line
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