Hon’ble Finance Minister Nirmala Sitharaman presented her ninth consecutive budget in Parliament. The Budget places more emphasis on India’s green transition than its speech, but the direction of travel is clear. Clean energy is no longer positioned solely as a climate agenda, but as a major driver of industrial competitiveness, energy security and long-term economic resilience.
Overall, the budget balances short-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 shared responsibility 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.
Highlights of the Union Budget 2026
1. Self-sufficiency in production and critical minerals
A distinctive feature of this budget is its emphasis on domestic capacity building. India’s clean energy ambitions – whether 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 production, proposed by the finance minister, will help domestic manufacturers get the inputs and machinery they need at lower costs. This is critical for long-term cost competitiveness, especially as global supply chains remain volatile. Applying the same lens to nuclear power is also a good move, as nuclear power adds a layer of long-term net baseload to India’s electricity system and boosts grid reliability as renewables expand.
The budget also takes a broader view of energy security by prioritizing the development and processing of critical minerals. Import duty exemptions for equipment used in the extraction of minerals and efforts to develop rare earth corridors in key countries will support India’s emergence as a competitive player in the materials needed to make wind turbines, advanced batteries, electric vehicles and magnets.
Union Budget 2026-27 Papers
By linking production incentives to the minerals strategy, the budget recognizes that the green transition is not just about production – it requires securing the resources that support clean technologies.
2. Funding as a silent enabler
The large-scale deployment of clean energy ultimately depends on stable, long-term financing and a robust grid infrastructure.
Restructuring and strengthening of institutions like Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) is on the cards, although details are yet to emerge. The increased capital support for Power Grid Corporation of India Limited (PGCIL) underscores a key reality: renewable capacity cannot scale unless the transmission grid, i.e. the highways that carry electricity, is expanded quickly and reliably. PGCIL is best positioned to rapidly build strategic transmission lines, given the land acquisition privileges it enjoys as a public sector undertaking.
A new infrastructure risk guarantee fund was also proposed in the budget to de-risk projects in the construction phase, reduce the cost of capital and leverage private investment. This is as important for solar and wind projects as it is for newer segments such as storage and hydrogen. Coupled with public capex of ₹12.2 crore for FY27, these measures signal confidence in India’s infrastructure pipeline.
The budget’s emphasis on deepening domestic bond markets and mobilizing long-term pools of capital is well aligned with the multi-year life cycles of renewable and grid assets. Large investors – pension funds, insurance companies, sovereign wealth funds – need predictable macro conditions. The predicted decrease in the fiscal deficit to 4.3% of GDP sends exactly this signal. India’s strong fiscal record is expected to translate into lower project capital costs, but is yet to materialize.
3. Support for the introduction and storage of renewable energy
Renewable energy remains the anchor of India’s clean energy strategy. A 30% higher allocation for solar, India’s most affordable and scalable source of clean energy, ensures that capacity additions continue apace even as new technologies such as hydrogen and storage expand. Lower tariffs on key solar components and capital equipment will help reduce project costs and strengthen domestic supply chains.
The main signal in this year’s budget is the increased importance of battery storage. Combined viability gap funding allocations across ministries now stand at ₹ 2,000 crore, one of the strongest push for battery energy storage systems (BESS) in any Indian budget so far. As the penetration of renewables increases, storage becomes critical for grid stability, peak management and the delivery of solid, uninterrupted power. Duty exemptions for lithium-ion and sodium-ion inputs further support cost reduction and domestic production.
The message is clear: storage has gone from being an optional extra to the essential infrastructure of the energy system.
4. Industrial decarbonisation: the next frontier
While the energy sector has already been reshaped by renewables, India’s next challenge lies in hard-to-digest 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, utilization and storage (CCUS). This is the first serious, programmatic and technological commitment to managing industrial emissions on a large scale.
Doubling allocations under the National Green Hydrogen Mission strengthens India’s multi-track approach to industrial decarbonisation. Green hydrogen can replace fossil fuel-based feedstocks in refining, reduce emissions from steelmaking and open up new export opportunities as global markets demand cleaner materials. CCUS complements this by providing decarbonisation pathways where hydrogen or electrification may not be immediately viable.
It’s strategically aligned for renewable developers. As industry transitions to cleaner fuels and greater electrification, the demand for reliable, continuous green energy will grow, boosting opportunities in hybrid, storage and fixed renewable energy solutions.
Conclusion: Laying the foundations of a green industrial economy
This budget does not rely on dramatic announcements. Instead, it is methodically strengthening the pillars of India’s green transition. If the last decade focused on building renewable capacities, the next one will focus on building an integrated green industrial economy. This is the practical meaning of kartyvya: to invest responsibly today so that India can lead tomorrow.
Published – 01 Feb 2026 19:14 IST
