India’s emergence as the world’s fourth-largest economy reflects strong domestic demand and a rapidly growing entrepreneurial landscape. However, this growth is occurring against a backdrop of mounting environmental pressures. Air pollution levels in major cities routinely exceed safe limits, over 3,500 landfills dot urban India (CPCB, 2022), and increasingly erratic climate events threaten food and water security. The need to transition to a more resource-efficient, low-carbon economy is no longer a matter of debate, but of urgency.
A critical step
India’s emergence as the world’s fourth-largest economy reflects strong domestic demand and a rapidly growing entrepreneurial landscape. However, this growth is occurring against a backdrop of mounting environmental pressures. Air pollution levels in major cities routinely exceed safe limits, over 3,500 landfills dot urban India (CPCB, 2022), and increasingly erratic climate events threaten food and water security. The need to transition to a more resource-efficient, low-carbon economy is no longer a matter of debate, but of urgency.
A critical step in that direction is mainstreaming the circular economy, and aligning capital flows to support this transformation. It calls for a strategic rethinking of how sustainability is financed, particularly in the climate-tech space. As a regenerative model, the circular economy stands in contrast to the traditional take-make-dispose model that underpins most industrial processes. By prioritising reuse, recycling, and resource efficiency, circularity can mitigate environmental degradation while unlocking new economic value. In fact, according to a NITI Aayog–UNEP report (2021), transitioning to a circular economy could generate annual benefits of ₹40 lakh crore by 2050, which is almost 30% of India’s current GDP, while reducing greenhouse gas emissions by 44%. While India has made progress through Extended Producer Responsibility (EPR) norms, bio-energy missions, and initiatives like the India Plastics Pact, implementation remains fragmented, particularly across sectors like textiles, construction, and agri-waste.
Tech-led innovation will be central to India’s circular transition. From alternative materials and clean manufacturing to waste-to-value solutions, climate-tech solutions offer scalable pathways to decarbonise industries and strengthen climate resilience. However, many of these innovations do not conform to conventional investment frameworks. Traditional ROI models prioritise near-term financial returns and proven markets. In contrast, climate-tech ventures often require longer gestation periods, operate in nascent ecosystems, and deliver multi-dimensional returns--economic, environmental and social.
To bridge the gap between innovation and implementation, India needs more catalytic capital; funding that is flexible, risk-tolerant, and impact-oriented. This is especially critical for early-stage climate-tech enterprises that operate in complex, unstructured markets. Consider Brisil Technologies, which upcycles rice husk ash, an agri-waste by-product known for exacerbating atmospheric PM levels into high-purity green silica for use in rubber and paints. Or Indra Water, which uses a decentralised electrocoagulation technology to treat and recover 99% of industrial wastewater for reuse, decreasing reliance on freshwater. Another case in point is MiniMines, whose recycling technology can recover critical metals like lithium, nickel and cobalt at 96% purity from Li-ion battery waste for reuse, reducing the reliance on mining and imports.
While the markets that these innovations operate in are still maturing, the long-term environmental value is significant. These are compelling business models that solve for national priorities while representing the frontier of India’s circular economy, and investors backing such ventures must be prepared for non-linear growth trajectories and long-term capital commitment. Beyond just venture capital, blended finance models, milestone-based grants, and anchor investments from development finance institutions (DFIs) can help unlock scale.
To accelerate India’s circular economy transition, capital allocation must evolve along five key lines:
- Redefining risk and returns: Investors, particularly family offices, CSR arms, and climate-focused funds, must recalibrate how they assess impact. Risk-adjusted returns should incorporate environmental externalities avoided, ecosystem resilience improved, and social outcomes delivered.
- Bridging the missing middle: Many start-ups struggle to raise capital between proof-of-concept and scale. Targeted catalytic finance such as concessional debt, first-loss capital, or recoverable/non-dilutive grants can fill this gap and bring in private co-investors.
- Building regional innovation ecosystems: Climate-tech often depends on localised conditions like monsoons, agricultural patterns, urban waste systems. Investment in regional R&D hubs, incubation platforms, and procurement pathways can help solutions scale contextually.
- Strengthening policy-capital alignment: Public policies like the National Green Hydrogen Mission or EPR mandates should be backed by financing mechanisms to support implementation; such as green innovation funds, viability gap funding, and fast-track approvals.
- Unlocking adoption through incentive-linked disclosure: India’s BRSR framework has laid the groundwork for greater transparency around emissions and circularity and yet, the adoption of sustainable technologies is still viewed as a cost centre rather than a strategic investment. Incentive-linked mechanisms, such as tax offsets, preferential procurement, or ESG-tied financing, can bridge this gap.
India’s path to net-zero by 2070 will require more than technology; it will require an investment architecture that recognises and rewards circular, regenerative models. The circular economy is not just an environmental imperative, it is an economic one. Bringing circularity into the mainstream isn’t just about cutting emissions or reducing waste, it’s about reshaping India’s growth trajectory. According to the MoEFCC, a circular economy could unlock a market opportunity exceeding $2 trillion by 2050 and create ~10 million additional jobs.
India has both the entrepreneurial depth and the developmental urgency to lead this shift. What is needed now is a more adaptive approach to capital--one that nurtures innovation over time, values resilience alongside growth, and sees sustainability not as a constraint but as a driver of future competitiveness. By rethinking how and where we invest, we can ensure that India’s growth story is also a sustainability story.
This article is authored by Alankrita Khera, director, and Sruthi Shanmugam, lead, ACT For Environment.
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