Of the total, approximately USD 8 trillion must be front-loaded by 2050, including nearly USD 5 trillion in the power sector, given the capital-intensive nature of most low-carbon technologies.
New Delhi: India will need investments totalling USD 22.7 trillion to reduce greenhouse gas emissions and achieve the net zero target by 2070, a Niti Aayog study said on Monday outlining multiple development and energy scenarios, aimed at informing policy choices as India charts its path towards becoming one of the world’s largest economies while managing climate risks. Monday.
On an annualised basis, this cumulative requirement translates into average flows of approximately USD 500 billion per year, compared with actual annual investment of around USD 135 billion in 2024, of which only USD 70-80 billion currently supports clean energy, said the Niti Aayog’s study report on ‘Scenarios Towards Viksit Bharat and Net Zero: An Overview’.
Of the total, approximately USD 8 trillion must be front-loaded by 2050, including nearly USD 5 trillion in the power sector, given the capital-intensive nature of most low-carbon technologies.
The Net Zero Scenario reflects an ambitious pathway aligned with India’s commitment to achieve net zero GHG emissions by 2070.
With coordinated domestic and external reforms, India could credibly mobilise around USD 16.2 trillion towards its net zero transition by 2070 through a structural expansion in the scale, depth and efficiency of available capital, the study said.
Domestically, this entails deepening the corporate bond market, increasing the financialisation of household savings, and enabling institutional investors to invest in new areas, while safeguarding returns through diversified, high-quality corporate and green assets, the study said.
B.V.R Subrahmanyam, CEO, NITI Aayog, said “The Net Zero strategy is simple – first, electrify energy use. Two, green and clean electricity. Three, control demand through Mission LiFE. Four, focus on circularity and efficiency.
Last, cheaper external finance is needed.
“Clearly stated, India’s coal consumption will go up till 2047 even as energy intensity decreases and efficiency goes up, while meeting Net Zero goals. India can leapfrog to be a global leader in clean technologies. 85% of India of 2047 is yet to be built and can be built to be climate friendly,” said Subrahmanyam.
India’s biggest investment challenge in the coming decades will come from its delayed and large-scale urban transition rather than industrialisation, with city design and planning set to play a decisive role in shaping long-term energy demand and efficiency, NITI Aayog Vice Chairman Suman Bery said.
“It is not industrialisation that is investment-heavy, it is urbanisation,” Bery said while speaking at the launch of a NITI Aayog report on scenarios towards Viksit Bharat and India’s net zero emissions target for 2070, noting that India faces a “mammoth and delayed” urban transition that will require sustained investment well beyond climate-related spending.
Bery stressed on the need for integrated planning of cities, infrastructure and energy systems.
Bery said that India’s investment challenge is not limited to the energy transition, as rapid urbanisation will also require spending on housing, transport, water, sanitation and social infrastructure. These needs, he said, come at a time when global investment rates have not returned to the highs seen before the global financial crisis.
He cautioned that improving energy efficiency alone would not automatically reduce overall energy consumption, pointing to what economists call the “rebound effect”, where efficiency gains are offset by higher consumption as incomes rise.
Bery cited the experience of advanced economies, including the United States, where decades of fuel efficiency standards have coexisted with rising demand for energy-intensive goods, highlighting the limits of technology-led solutions in isolation.
“The solution is to bake energy efficiency into the system from the start,” Bery said, stressing that urban design, land use planning and transport systems would shape India’s energy consumption patterns for decades.
He said compact city layouts, efficient public transport and well-planned housing could lock in lower energy demand over the long term, reducing emissions without constraining growth.
Externally, scaling FDI (foreign direct investment) and FPI (foreign portfolio investment), supported by credible transition roadmaps, a strong pipeline of bankable projects and deeper financial markets, would anchor sustained foreign capital inflows.
“Against the Net Zero Scenario investment requirement of USD 22.7 trillion and estimated aggregate flows of USD 16.2 trillion, a financing gap of USD 6.53 trillion remains. Given domestic constraints and the risk of crowding out and higher interest rates, this gap is expected to be met largely through external sources, raising the share of international sources to 42 per cent of total capital needs by 2070, rising from 17 per cent in 2022â23,” it said.
International capital, particularly concessional finance and grants, will therefore be critical to supporting technologies essential for net zero that are not yet commercially viable.
“Realising India’s aspirations of becoming Viksit Bharat, i.e., a developed economy by 2047 and achieving the net zero goal by 2070 will require an enabling ecosystem that spans robust institutions, innovative finance, integrated data systems, and strategic planning,” the Niti study said.
The study also said the net-zero transition has a limited impact on long-term GDP growth but demands high investment.
“India’s GDP is projected to stay broadly resilient even in Net Zero scenarios, reaching USD 30 trillion by 2047, which is aligned to the Viksit Bharat goal,” it said.
While the transition demands massive capital mobilisation, scenarios with a higher share of foreign financing limit total GDP variations to about 0.5 per cent by 2050.
“This highlights the importance of the financing structure: mobilising external capital, such as FDI, prevents pressure on domestic savings and avoids crowding out private investment,” the Niti study said.
The study examines India’s transition through two principal scenarios: the Current Policy Scenario and the Net Zero Scenario.
The Current Policy Scenario represents a level of effort that is realistically achievable based on historical trends and continuation of current policies (as of 2023), thereby projecting ongoing trends in low-carbon technology deployment.
Total investment requirements are estimated at USD 14.7 trillion under the Current Policy Scenario.
The Net Zero scenario reflects an ambitious pathway aligned with India’s commitment to achieve net zero greenhouse gas (GHG) emissions by 2070.
It incorporates both existing and additional policy measures to accelerate demand electrification, enhance circularity, improve energy efficiency, promote the rapid development of low-carbon technologies/fuels and encourage behavioural shifts.