India urgently requires substantial investment for climate adaptation: Report

States face borrowing constraints under new fiscal rules and pressure to reduce existing debt burdens, which further restrict their ability to bridge the adaptation funding gap, finds the study

Upon studying some of the updated State Action Plan on Climate Change (SAPCC), a new study has found that adaptation funding gaps for Indian states are substantial. The report called Financing Adaptation in India by Climate Policy Initiative (CPI) found considerable adaptation investment needs at the national and subnational levels when it examined India’s approach to adaptation, related investment needs, and funding gaps. 

To understand subnational investment needs, the study assessed the updated SAPCCs of six states, including Goa, Haryana, Himachal Pradesh, Kerala, Odisha, and Tamil Nadu and delved into three (for Himachal Pradesh, Odisha, and Tamil Nadu) to identify funding gaps.

Big investments needed for adaptation

The analysis identified that collective annual investment needs of these six states alone amounted to ₹444.7 billion ($5.5 billion) from 2021 to 2030. States hold the primary responsibility for adaptation-related interventions, given the local nature of adaptation.

However, it is a challenge for many states to finance their adaptation investment needs. Over the last few years, the report said, state finances have been stressed by factors including the economic slowdown in 2019-20 and the COVID-19 pandemic, constraining their ability to invest in climate adaptation. States also face borrowing constraints under new fiscal rules and pressure to reduce existing debt burdens, which further restrict their ability to bridge the adaptation funding gap.

For instance, Karnataka’s SAPCC noted that climate financing in the state is highly scattered and based on central and state level schemes and programs, with no fixed percentage of assured finance allocated or earmarked in the state budget for adaptation (and mitigation) programs. Similarly, Kerala’s SAPCC pointed out that limited resources are a barrier to the implementation of sectoral adaptation actions. Goa’s SAPCC listed several activities in the tourism sector but notes that these require funding from state/central schemes.

Lack of a common framework to assess climate risk

While India has a common framework for climate vulnerability assessments, it has not yet established one for climate risk, which focuses on future climate projections and the dynamic interplay between hazards, exposure, and vulnerability. The country also is yet to establish a systematic methodology for evaluating the extent to which development programs address climate risk and vulnerability. This makes it difficult to distinguish between adaptation and development, and to track funding specifically for adaptation measures.

Need to bolster state fiscal capacity

The study recommended strategic interventions to bolster state fiscal capacity and mobilise private finance for climate adaptation-related efforts, as crucial steps to bridge the funding gap. 

This can be done by including adaptation-related interventions in the upcoming deliberations of India’s Finance Commission to inform the allocation of funds to state governments. The study added that to facilitate increased access to finance for climate-vulnerable states, mechanisms like time-bound, climate-incentivized borrowing ceilings tailored to state-specific vulnerabilities should be built. 

Additionally, a robust green finance data infrastructure should be developed to inform investment decisions and enhance transparency. Lastly, financial mechanisms such as public-private partnerships and blended financing should be promoted to catalyse private-sector investment.

About The Author

Editorial Team

A team of handpicked and dedicated writers committed to fact check each climate-related statement. Go to the roots and intent of each policy implemented, internationally and at home to help you understand climate better

See author's posts