Financing Climate Change by Indian States: Progress and Prospects

Atri Mukherjee, Samir Ranjan Behera, Kovuri Akash Yadav and Debapriya Saha

MPRA Paper from University Library of Munich, Germany

Abstract: Climate change presents a growing threat to India's macro-financial outlook, with significant implications at the subnational level. This study compiles the data on climate-related expenditure by 31 Indian States and Union Territories from 2004-05 to 2022-23. The State governments, on an average, spend 1.1 per cent of their GSDP and 7.3 per cent of total expenditure on climate-related activities. A dynamic panel regression identifies fiscal capacity, intergovernmental transfers, and expenditure persistence as key determinants of climate spending of States, whereas climate vulnerability plays a limited role. The paper also reviews the current sources of climate financing of the States and explores the opportunities to scale up financing through various alternative channels. It underscores the need for strengthening institutional capacity and use of strategic fiscal tools to enhance climate responsiveness of States.

Keywords: Green budgeting; Climate budget tagging; Climate expenditure; Climate finance; Environmental transfers; Fiscal decentralization; Indian States (search for similar items in EconPapers)
JEL-codes: H7 H72 H76 H77 Q54 Q58 (search for similar items in EconPapers)
Date: 2025-10-09
New Economics Papers: this item is included in nep-env and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:126438

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