India has surpassed China as a source of clean technology finance in recent months, as attempts to bolster domestic green manufacturing attract investors.

Deals worth over $2.4 billion were executed in the third quarter, more than four times the size of those in China and the second-highest total globally behind the United States, according to BloombergNEF statistics.

India's push to expand local sustainable energy capacity to reduce dependency on China, as well as the chance of becoming a technology exporter, are driving the momentum, according to Raj Pai, founding partner of GEF Capital Partners, a climate-focused private equity fund.

"The attractiveness of the climate sector for both public and private capital is very high," the politician stated.

A series of policy efforts by Prime Minister Narendra Modi's government are promoting the clean energy sector in particular, and the International Energy Agency predicts that India will have the highest pace of renewables increase among large nations for the rest of the decade.

This year, more than a dozen renewable energy and electric vehicle companies went public, including solar panel producer Waaree Energies Ltd. and scooter manufacturer Ola Electric Mobility Ltd. NTPC Green Energy Ltd. shares have risen more than 30% since trading began last month.

"Climate is the hottest topic for venture capital right now" in India, says Abhinav Sinha, head of technology and telecoms at British International Investment Plc, the UK government's development finance arm. BII, which has invested more in India than any other country, has pledged to spend at least $1 billion on climate-related initiatives by 2026.

According to Sinha, around a quarter of all seed stage investments in India by venture capital groups are currently directed toward climate-related enterprises.

Though India competed with China for green technology funding in the third quarter, the $3.6 billion raised this year is less than China's total of $5.6 billion, according to BNEF data. According to BNEF, accelerating India's route to net zero would require an investment of up to $12.4 trillion, 20 years ahead of the current 2070 objective.

"We are not even in a pond, we are in a puddle where we need an ocean of capital," said Dhanpal Jhaveri, CEO of Eversource Capital, which closed India's largest climate impact fund in 2022 and is presently spending more than $125 million in energy demand services.

Only a quarter of India's roughly 800 climate-focused startups have raised capital in the last decade, and the total of about $3.6 billion is far lower than the more than $19 billion attracted by fintech firms during the same period, according to a September report by IIMA Ventures and Mitsubishi UFJ Financial Group Inc.

Green firms have traditionally failed to secure growth-stage funding, according to the report.

"You need to keep showing traction, that you have larger customers, and that you are building something," said Akshay Shekhar, CEO of Kazam, a Bengaluru-based firm that provides EV charging software and hardware.

Nonetheless, the climate technology industry is expected to grow quickly as companies discover ways to reduce pollution in India, the world's third-largest emitter of greenhouse gases.

Avaana Capital, a Mumbai-based early-stage investor that has previously funded electric mobility, solar financing, and agriculture startups, received $135 million in October to invest in energy and supply chains.

According to founding partner Anjali Bansal, family offices and other investors are increasingly investing in the industry. "We are very optimistic because we see all of this development," she added.