COP30 and Fiscal Policy Analysis for Climate Adaptation in an Emerging Economy, India

Against the backdrop of the 30th United Nations Climate Change Conference (COP30), this paper analyzes the fiscal commitments in an emerging economy, India towards the National Adaptation Communication, contributing to the requirement of measuring progress on the Global Goal of Adaptation (GGA). Utilizing the Public Financial Management (PFM) tools, we examine the fiscal commitments across sectors related to key components of adaptation in the Detailed Demand for Grants. Our analysis reveals that public expenditure on adaptation in India, particularly in climate-resilient infrastructure, disaster management, and climate risk financing, has gained momentum and exhibits an upward trend at the Union Government level. However, budget credibility analysis through fiscal marksmanship and PEFA scores indicates that forest conservation-related spending requires relatively more fiscal commitments at the Union level, due to significant deviations between Budget Estimates and Actual Spending. The relatively lower spending on forests at the national level is consistent with the principle of subsidiarity, which suggests that spending on forests is optimal at the level of subnational governments. Ecological fiscal transfers to subnational governments, facilitated through tax transfers by the Finance Commissions that incorporate net forest cover, address this requirement within the general government framework, and the 16th Finance Commission is expected to retain the climate change criterion in unconditional fiscal transfers in India.