Financing Adaptation in India

India faces significant climate vulnerability, with adaptation investment needs estimated between USD 14 billion and USD 67 billion annually for 2015-2030. While the government utilizes a 'co-benefits' approach—integrating adaptation into broader development goals—this makes it difficult to track specific adaptation funding. Analysis of six states' updated State Action Plans on Climate Change (SAPCCs) reveals a collective annual investment need of INR 444.7 billion (USD 5.5 billion) for 2021-30. State governments are the primary drivers of adaptation finance, but their capacity is constrained by high debt levels and strict borrowing limits under the Fiscal Responsibility and Budget Management (FRBM) Act. The report recommends that the 16th Finance Commission include adaptation variables in fund devolution and suggests using Public-Private Partnerships (PPPs) and blended finance to attract private capital, which is currently limited by data gaps and uncertain returns.

• India lacks a systematic methodology to distinguish between adaptation and general development programs, which hinders the ability to track specific funding for adaptation measures.
• India has a framework for vulnerability assessments but lacks one for climate risk that incorporates future projections and the interaction between hazards, exposure, and vulnerability.
• National annual adaptation investment needs for 2015-2030 are estimated to range from USD 14 billion to USD 67 billion, with some estimates suggesting a cumulative need of approximately USD 1 trillion by 2030.
• Analysis of six states' updated SAPCCs shows a collective annual adaptation investment need of INR 444.7 billion (USD 5.5 billion) for the 2021-30 period.
• Only Odisha and Tamil Nadu provided specific adaptation funding gap data among the analyzed SAPCCs; their combined annual funding gap is approximately USD 600 million.
• State governments are the primary providers of adaptation finance, but their fiscal capacity is limited by borrowing constraints under the FRBM Act and high outstanding debt.
• New central government rules requiring off-budget borrowing by state PSUs and SPVs to be included in state liabilities further reduce the fiscal space for states to fund adaptation.
• Private finance for adaptation is limited by several barriers, including a lack of bankable projects, uncertain investment returns, and a mismatch between long-term climate impacts and short-to-mid-term investment horizons.
• The report recommends that the 16th Finance Commission incorporate adaptation-related interventions as a variable for the devolution of funds to states.
• To mobilize private capital, the report suggests using PPP models, such as annuity or design-build-finance-operate (DBFO) models, and establishing project preparation facilities.

APA

Chakravarty, M., Pal, U., Sikka, A., & Jena, L. P. (2024). Financing Adaptation in India. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2024/02/Financing-Adaptation-India_reportannexes.pdf

Chicago

Chakravarty, Malini, Uma Pal, Aanandita Sikka, and Labanya Prakash Jena. Financing Adaptation in India. Climate Policy Initiative, 2024. https://www.climatepolicyinitiative.org/wp-content/uploads/2024/02/Financing-Adaptation-India_reportannexes.pdf.

Wikipedia

{{cite report |last1=Chakravarty |first1=Malini |last2=Pal |first2=Uma |last3=Sikka |first3=Aanandita |last4=Jena |first4=Labanya Prakash |title=Financing Adaptation in India |publisher=Climate Policy Initiative |date=February 2024 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2024/02/Financing-Adaptation-India_reportannexes.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{chakravarty2024financing, author = {Chakravarty, Malini and Pal, Uma and Sikka, Aanandita and Jena, Labanya Prakash}, title = {{Financing Adaptation in India}}, institution = {Climate Policy Initiative}, year = {2024}, month = feb, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2024/02/Financing-Adaptation-India_reportannexes.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }