Financing Adaptation in India – Report by Climate Policy Initiati

Dr. Seema Javed

India is exceptionally vulnerable to the adverse consequences of climate change,
given its diverse geo-climatic features and socioeconomic conditions. These adverse
consequences are already affecting the country’s economy and livelihoods and could
undermine progress made on development and poverty alleviation. Heat exposure in 2021
led to approximate losses of 167 billion potential labor hours in India, resulting in income
loss of about USD 159 billion, or 5.4% of the country’s GDP (Climate Transparency Report
2022).

Estimates indicate that by 2040, India’s national poverty rate could increase by
3.5% due to declining agricultural productivity and rising cereal prices alone, pushing an
additional 50 million people below the poverty line, as compared to a zero-warming scenario
(Picciariello et al. 2021).

To ensure economic growth and sustain development progress, India urgently requires
investment in climate adaptation. Development and growth form the bedrock of India’s
approach to climate adaptation and resilience (MoEFCC 2022). While the government
has made sustained efforts to finance adaptation action, available estimates indicate that
investment needs at the national level are large and will likely increase in the future (MoEFCC
2015; DEA 2020).

This report reviews India’s approach to climate adaptation, outlinesthe related policy
environment, assesses adaptation investment needs and funding gaps at the state level, and
explores the possibility of bridging the funding gap through public and private finance.

Key findings

India has a common framework for climate vulnerability assessments but has not yet
established one for climate risk, which focuses on future climate projections and the
dynamic interplay between hazards, exposure, and vulnerability (DST 2020). As multiple
assessments have been conducted based on different methodologies, their harmonization
can lay the foundation for a consistent approach to climate risk and inform adaptation
investment decisions (Comte 2021; Arora 2023).

India also lacks a systematic methodology for evaluating the extent to which development
programs address climate risk and vulnerability, making it difficult to distinguish between
adaptation and development, and to track funding specifically for adaptation measures
(Jogesh and Paul 2020).

Despite some of these systemic issues, the growing drive for action on climate adaptation
has resulted in relevant plans, policies, institutions, and schemes at national and state levels.
However, the progress and focus of policies and schemes vary at the state level.
States in India have substantial adaptation investment needs. Based on the updated
State Action Plans on Climate Change (SAPCCs), CPI analysis identifies that the collective
annual investment needs of six states alone amount to INR 444.7 billion (USD 5.5