Mugdha Kinhikar, PhD student, IFMR GSB has successfully presented a research paper titled Does The Fiscal Position of States Matter in the Allocation of Climate Adaptation Funds in India, co-authored with Dr Soumya Pal, Assistant Professor, Economics, IFMR GSB at the 6th Annual Conference on Economics and Finance (ACEF 2025), hosted by Birla Institute of Technology and Sciences (BITS) Pilani, Hyderabad Campus held from 4 – 6 February, 2025.
Abstract of the paper:
Globally, financing for climate adaptation is switching to fund-based financing that follows the principle of competitive application and allocation. This funding mechanism aims to prioritise the most vulnerable countries. India, on a similar note, in 2015 adopted a National Adaptation Fund for Climate Change (NAFCC), the first-ever fund solely dedicated to climate adaptation for states. For developing countries like India that face resource constraints, parameters for the allocation of such funds within the country are of vital importance. The paper analyses whether the state’s fiscal position is associated with the funds allocated under NAFCC in India.
Further, the researchers study if the allocation of funds is associated with the climate adaptation capacity of the states. The results show a lower degree of correlation between the fiscal performance index of states and grants given under NAFCC. The result highlights that the presence of resource capacity within the states has a minimal role in deciding the allocation of grants to states. Further, the states with higher adaptation indexes receive higher amounts of grants. These results question the NAFCC framework’s logic, suggesting that priority might be given to states with lower adaptation capacities to facilitate their development and narrow the gap. Hence, this raises questions about the effectiveness of NAFCC in targeting the most vulnerable states and promoting equitable distribution of resources.