India is working on a taxonomy for climate finance, and it should be ready in the next six months, according to Economic Affairs Secretary Ajay Seth.
Climate Finance Taxonomy in Progress
Seth confirmed that progress is being made on developing a clear framework for climate finance. “Work is happening, and in fact, the steel ministry has completed their work. They have issued their taxonomy for the steel sector,” he told PTI in an interview.
However, he explained that a more comprehensive framework is being developed. This will cover all sectors of the economy. A concept paper has already been shared with key stakeholders, and their feedback has been collected.
“Various committees have been formed, one for each sector. We expect that this work will be completed within six months,” he added.
Government’s Climate Finance Initiative
Finance Minister Nirmala Sitharaman had announced this initiative in Budget 2024-25. She said that India would create a taxonomy for climate finance to improve the availability of capital for climate adaptation and mitigation.
“This will support our country’s climate goals and green transition,” she stated.
Impact on Government Borrowing
Seth also spoke about India’s fiscal management. He said that responsible government spending may help reduce government securities (G-sec) yields, making more funds available for private companies.
“We will borrow less in FY26 than we plan to borrow in the current year. Even gross borrowings will be slightly higher than before, showing that the government will leave enough room in the market for private investments,” Seth explained.
Borrowing Estimates for the Next Year
The government has lowered its borrowing estimate for the next financial year to ₹11.54 trillion on a net basis. This is due to expected tax collection improvements. However, gross borrowings have been revised upward to ₹14.82 trillion, compared to ₹14.01 trillion estimated for the current financial year.
The government borrows money by issuing dated securities to cover its fiscal deficit.
Softening Government Bond Yields
Seth believes that fiscal consolidation this year and next year should help reduce yields on G-secs. Lower yields mean the government pays less interest on borrowed money.
The yield on 10-year government bonds is now around 6.7%. Government data shows that the weighted average yield dropped to 6.94% in the second quarter. This is lower than 7.14% in the first quarter of 2024-25.
Lower yields help the government reduce interest costs, freeing up more resources for infrastructure and development projects.
Lower Fiscal Deficit Target
The government has also lowered its fiscal deficit target to 4.8% of GDP for the current financial year. This is an improvement from the previous estimate of 4.9%.
A lower fiscal deficit means better economic stability and stronger investor confidence.
India is moving forward with its climate finance taxonomy, which will be ready within six months. This framework will help fund climate projects and support the country’s green transition.
At the same time, the government’s responsible fiscal policies may help lower borrowing costs. With lower yields on government bonds, more funds will be available for private sector investment and economic growth.
