Economic Survey: Municipal green bonds could unlock $2.5-6.9 bn for climate action over next 5-10 years

Municipal Bonds

Municipal green bonds have the potential to mobilise between $2.5-6.9 billion for local bodies driven climate action over the next 5-10 years, according to the Economic Survey tabled by finance minister Nirmala Sitharaman on January 29.

“Municipal green bonds can unlock $2.5–6.9 billion for local bodies driven climate action over the next 5–10 years,” Economic Survey noted.

Economic Survey showed that Vadodara Municipal Corporation, Ahmedabad Municipal Corporation, Indore Municipal Corporation and Ghaziabad Municipal Corporation, have issued green bonds in India.

The cumulative amount raised by these corporations are Rs 694 crore, between February 2024 and May 2025.

Besides, government of India has issued sovereign green bonds worth Rs 15,000 crore in FY26, with the cumulative issuance reaching Rs 72,697 crore since FY23.

During the year, the primary auctions for Government securities were largely conducted smoothly in line with the notified borrowing calendar. Nearly half of the issuances (about 47 per cent of total issuances) were concentrated in bonds maturing beyond 10 years. This provided the necessary support for managing rollover risk.

Overall, the weighted average maturity (WAM) of borrowings stood at about 19.14 years in FY26 so far, compared with 20.66 years in FY25. The weighted average coupon (WAC) of fresh issuances during FY26 (as on 19 January 2026) has declined to 6.65 per cent as compared to 7.11 per cent in FY25.

Over the longer term, the weighted average coupon on outstanding debt has fallen from 7.71 per cent in FY20 to 7.25 per cent in FY25.