Assessing India’s Enabling Framework Conditions for Subnational Climate Finance

The report evaluates India's readiness to scale subnational climate finance across four categories: climate policy, budget and finance, climate data, and coordination. It finds that while India has strong national commitments and policies, urban local bodies (ULBs) lack institutional mandates for climate action, suffer from limited fiscal autonomy and poor financial management, and have minimal access to climate-specific data. The analysis highlights a heavy reliance on intergovernmental transfers and a significant gap in private investment and municipal bond issuance. Key recommendations include amending state municipal acts to incorporate climate functions, expanding the scope of Central Finance Commission grants to include climate action, and strengthening the capacity of ULBs to conduct green budgeting and issue municipal bonds.

• India has a strong national commitment to climate action through policies like the National Action Plan on Climate Change (NAPCC) and the 2022 updated Nationally Determined Contribution (NDC), but urban local bodies (ULBs) lack institutional mandates to collect greenhouse gas (GHG) data or conduct vulnerability assessments.
• ULBs have very limited capacity to generate own-source revenue (OSR), which typically accounts for only 34% of their total revenue, and they lack autonomy as state governments generally control tax rates and exemptions.
• Intergovernmental transfers (IGTs) are the primary funding source for ULBs, but these mechanisms generally do not account for climate risk or specific mitigation potential in their allocations.
• Access to capital markets and private investment is severely limited for Indian cities due to poor fiscal management and financial transparency, with municipal borrowings constituting less than 0.05% of India's GDP in 2021.
• Municipal bond issuance is rare in India; only 41 municipal bonds and one municipal climate bond (issued by Vadodara) have been released, partly because national program funds often crowd out the incentive to borrow.
• City-level climate data collection is fragmented and voluntary; while the Ministry of Housing and Urban Affairs (MoHUA) has the ClimateSmart Cities Assessment Framework (CSCAF) and AMPLIFI database, there is no national mandate for ULBs to maintain GHG inventories.
• Vertical coordination between the national government and states is established, but coordination between states and ULBs is inconsistent, and horizontal coordination between cities is in a nascent stage, with a few exceptions like Tamil Nadu.

APA

Sikka, A., Krishnan, A., Masale, E., & Press-Williams, J. (2024). Assessing India’s Enabling Framework Conditions for Subnational Climate Finance. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2024/08/Assessing-Indias-Enabling-Framework-Conditions-for-Subnational-Climate-Finance.pdf

Chicago

Sikka, Aanandita, Arun Krishnan, Eyerusalem Masale, and Jessie Press-Williams. Assessing India’s Enabling Framework Conditions for Subnational Climate Finance. Climate Policy Initiative, 2024. https://www.climatepolicyinitiative.org/wp-content/uploads/2024/08/Assessing-Indias-Enabling-Framework-Conditions-for-Subnational-Climate-Finance.pdf.

Wikipedia

{{cite report |last1=Sikka |first1=Aanandita |last2=Krishnan |first2=Arun |last3=Masale |first3=Eyerusalem |last4=Press-Williams |first4=Jessie |title=Assessing India’s Enabling Framework Conditions for Subnational Climate Finance |publisher=Climate Policy Initiative |date=July 2024 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2024/08/Assessing-Indias-Enabling-Framework-Conditions-for-Subnational-Climate-Finance.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sikka2024assessing, author = {Sikka, Aanandita and Krishnan, Arun and Masale, Eyerusalem and Press-Williams, Jessie}, title = {{Assessing India’s Enabling Framework Conditions for Subnational Climate Finance}}, institution = {Climate Policy Initiative}, year = {2024}, month = jul, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2024/08/Assessing-Indias-Enabling-Framework-Conditions-for-Subnational-Climate-Finance.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }