India to Fund ₹31,000 Crore Projects Through Green Bonds in FY27

The Indian government has earmarked projects worth around ₹31,000 crore to be primarily financed using sovereign green bond proceeds in the fiscal year 2026–27 (FY27), reflecting a roughly one-third increase compared to the revised estimates for the current fiscal year.

Green bonds are part of the government’s strategy to boost sustainable financing and support environmentally beneficial initiatives. While the exact size of the green bond issuance for FY27 will be finalized in March as part of the Centre’s overall borrowing plan, the project pipeline is already in place. If green bond proceeds fall short, the government may use its general resources to cover the funding gap.

Key sectors and allocations identified for green bond funding include:

• New and renewable energy projects worth approximately ₹11,700 crore - more than four times the allocation in the current fiscal. • Indian Railways projects totaling around ₹15,000 crore, making railways the largest single beneficiary of green bond financing. • Metro rail projects with an estimated value of around ₹4,069 crore proposed for green bond funding.

Since the sovereign green bond programme started in FY23, the government has raised significant funds through this route, but the “greenium” (a premium or lower cost investors accept for green bonds over regular bonds) has remained minimal, reducing the cost advantage typically expected from green bond issuances.

This push toward financing via green bonds aligns with India’s broader goals on climate action, environmental sustainability, and achieving net-zero emissions by 2070.

A ₹31,000-crore sovereign green-bond programme is a meaningful signal for how India intends to unlock institutional capital into public-sector clean projects, and it deepens the domestic sustainable-finance market for corporates issuing alongside. Our responsible-investment and ESG-strategy teams help issuers and investors evaluate what this pipeline means for pricing, use-of-proceeds credibility and disclosure alignment with ICMA and ISSB frameworks.