Budget 2026–27 frames climate action through development, prioritising growth, infrastructure, and mitigation, but adaptation remains implicit, risking insufficient protection for vulnerable populations amid mounting climate shocks
Departing from alarmist and noise-heavy climate narratives, the Economic Survey 2026 places development at the core of climate adaptation. It emphasises the role of societal resilience, instrumented through productivity enhancement, access to affordable and reliable energy, and strengthened institutional capacity. Climate change is framed as a development-linked challenge, where risks are best managed through growth, infrastructure, and welfare rather than through stand-alone climate action. The broader question is whether this approach is both optimal and sufficient, and where Budget 2026–27 stands on this.
Much of today’s climate debate originates in an earlier phase of environmental diplomacy that began in the West. The 1972 Stockholm Conference was an early turning point, as it integrated environmental issues into global diplomacy and led to the creation of the United Nations Environment Programme (UNEP). In the years that followed, climate concerns were first recognised and institutionalised mainly in advanced industrial economies, where the effects of rapid industrialisation were already visible. This gave Western countries a first-mover role in shaping how climate change was discussed and governed, not by design, but as a result of their earlier stage of development. The structure of the UN climate framework reflects this sequencing, with industrialised developed countries expected to take the lead and developing countries following suit. In this sense, the climate discourse evolved in line with economic history and growth, moving from industrial growth to environmental stress, and only then to global climate governance.
Climate change is framed as a development-linked challenge, where risks are best managed through growth, infrastructure, and welfare rather than through stand-alone climate action.
Taking note of recent experience in advanced economies, the Survey observes that the global climate agenda has reached a turning point. For instance, developments in parts of Europe demonstrate that rapid decarbonisation, when undertaken without adequate system readiness, can lead to grid stress, reliability issues, and higher balancing costs. This experience highlights that energy transitions are system-wide challenges, not simply a matter of adding renewable capacity. In this context, the Survey frames climate action for India as a development issue, where growth, energy security, and institutional capacity are essential for building resilience.
The message is straightforward. Climate action must be practical, well sequenced, and focused on improving human welfare rather than driven by targets and signalling. The real test now lies in assessing how the latest Budget 2026–27 addresses this.
Building on the identification of green growth in the Union Budget 2023–24, and the subsequent budgets that strengthened this narrative through deeper integration and expanded support for renewable energy, the Union Budget 2026–27 marks a clear shift towards climate–development action. The climate agenda is advanced through a development-first strategy, with the emphasis moving from broad frameworks to tangible fiscal measures, reflecting a transition from intent to implementation.
Most climate-relevant measures in the Budget are primarily mitigation-oriented, focusing on infrastructure and capacity expansion, with limited detail on expected outcomes and safeguards.
The budget situates India’s climate policy within a development-oriented fiscal framework, aligning traditional growth priorities with climate objectives. From a climate-mitigation perspective, this is reflected in dedicated allocations for Carbon Capture, Utilisation and Storage (CCUS), expanded support for clean energy supply chains and the integration of climate considerations across key infrastructure sectors. Specific measures include customs duty exemptions for solar inputs and critical minerals, increased budgetary allocations for the Ministry of New and Renewable Energy (MNRE)—up by 24 percent—excise duty reductions for biogas, and duty exemptions for nuclear power plant projects. From a development perspective, the budget allocates INR 12.2 lakh crore towards infrastructure capital expenditure, which, while not explicitly framed as climate adaptation, strengthens economic and physical resilience by improving connectivity, service delivery, and shock absorption. In terms of welfare, continued spending on housing, which is 7.7 percent higher than FY2025–26, along with investments in rural infrastructure, employment, and social protection programmes, enhances households’ capacity to cope with climate-related stresses. These interventions create indirect but important linkages to climate resilience by reducing vulnerability and improving adaptive capacity.
While the Budget’s development-oriented framing of climate and environmental policy is broadly sound and defensible, a key concern is whether this approach risks obscuring the actual priority and depth of climate policy by relying excessively on growth-led spillovers and assumed trickle-down benefits. Most climate-relevant measures in the Budget are primarily mitigation-oriented, focusing on infrastructure and capacity expansion, with limited detail on expected outcomes and safeguards. For instance, a) climate-related disasters are no longer abstract risks—floods, cyclones, heatwaves, and landslides are already imposing significant economic and social costs. Yet, responses to these risks are largely subsumed under aggregate infrastructure capital expenditure, rather than supported by a dedicated framework for adaptation finance or a clear strategy for climate-resilient infrastructure; and b) the issue of environmental and social externalities remains insufficiently addressed. Recent concerns over the potential opening of the Aravalli range for mining, alongside the Budget’s emphasis on rare-earth and critical mineral extraction, underscore the absence of explicit safeguards or accounting for ecological and social costs.
Adaptation continues to be treated implicitly, based on the assumption that growth and infrastructure expansion will automatically enhance resilience.
In practice, adaptation continues to be treated implicitly, based on the assumption that growth and infrastructure expansion will automatically enhance resilience. This approach benefits households and regions already better equipped to absorb shocks, while leaving vulnerable populations exposed. Although the Economic Survey notes progress on adaptation—including higher public spending in adaptation-related sectors and community-led initiatives—both the Survey and Budget 2026–27 place greater emphasis on mitigation through critical minerals, carbon markets, climate finance, and renewable energy. Consequently, adaptation remains secondary, receiving neither comparable policy clarity nor significant fiscal priority.
Ideally, adaptation must remain a central pillar of India’s climate discourse, alongside mitigation and the energy transition, which continue to receive greater attention due to their economic, industrial, and market appeal. Going forward, a truly development-oriented climate policy cannot rely on the assumption that climate outcomes will automatically improve through the trickle-down effects of growth or the gradual expansion of cleaner technologies alone. Instead, development must be deliberate and targeted, with explicit focus on national climate priorities, urban resilience and heat stress, food and water security, and the protection of vulnerable livelihoods. Addressing these challenges will require clear targets, dedicated financing, and, in some cases, standalone policy frameworks—rather than treating adaptation as an indirect by-product of growth.
Manish Vaidya is a Research Assistant at Observer Research Foundation.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Manish Vaidya is a Research Assistant with ORF’s Centre for New Economic Diplomacy. His work centres on research and active engagement in applied economics, with a ...
Read More +
PREV
