States are laying out innovative green pathways but India needs a national masterplan

To weave these successes into a coherent national fabric, India needs a federal framework that links state innovation and local participation with fiscal accountability across the federation.

State innovation led by fiscal and policy leadership: States are pioneering fiscal tools that integrate climate into public financial management. Odisha has institutionalized climate-budget tagging and annual statements, which has made its coastal-resilience spending transparent.

Tamil Nadu coordinates action through the Tamil Nadu Green Climate Company, bridging renewables and water management. Kerala’s budget has rolled in climate and sustainable development goal (SDG)-tagging, even as the state screens major projects for related risks.

Meanwhile, industrial states like Gujarat and Maharashtra are coupling advanced renewable energy portfolios with decarbonization initiatives. Karnataka, Himachal Pradesh and Uttarakhand are advancing electric vehicle infrastructure, hydropower and also payments for ecological services. These examples show that climate governance is getting embedded in state-level planning.

Community-led governance: Community partnerships are providing the social depth needed to make climate policies durable. In Maharashtra, a project on climate-resilient agriculture has trained farmers in drought-tolerance practices, while community-managed solar mini-grids have expanded access to energy.

Tamil Nadu’s climate-smart villages and Kerala’s decentralized waste and flood-management systems demonstrate how municipal-community partnerships could deliver benefits.

Also, Sikkim’s organic farming mission and Rajasthan’s revival of traditional johads (water harvesting structures) show that India’s most useful interventions are often those that blend state support with local knowledge, thus ensuring community ownership.

Map state readiness and vulnerability: A realistic view of India’s climate challenge requires us to assess states by their institutional capacity (readiness) and exposure to physical and economic risks (vulnerability). Drawing from government reports and analyses, four distinct groups of states emerge:

High readiness, high urgency: Maharashtra, Gujarat, Tamil Nadu and Karnataka have strong fiscal capacity, but face severe risks from urban heat, industrial emissions and coastal or drought stress.

Medium readiness, high urgency: Odisha, West Bengal, Bihar, Assam, Andhra Pradesh, Uttar Pradesh, Punjab and Haryana face intense pressure from cyclones, floods and groundwater depletion, but have stiff fiscal constraints to go with high agrarian dependence.

Low readiness, high urgency: Jharkhand, Chhattisgarh and Madhya Pradesh are heavily exposed to heatwaves and livelihood loss, and their economies remain tied to coal, mining and rain-fed agriculture, making a resilience transition both urgent and difficult.

High/medium readiness, medium urgency: Kerala and Himachal Pradesh have strong institutional capability but face localized disasters like floods and landslides.

This distribution reveals India’s central climate paradox: states most exposed to risk often have the least capacity to respond. Despite enthusiastic local action, climate spending is fragmented across departments without uniform classifications or audit standards.

High-capacity states can mobilize private finance—like Pimpri Chinchwad’s municipal green bond—while low-capacity states often underuse funds. The absence of consistent climate-budget tagging and performance-linked transfers limits transparency and accountability. India’s fiscal federalism is thus ambitious in pockets but uneven in execution.

A coordinated model would align incentives while preserving state autonomy. Its key pillars should include nationwide climate-budget tagging that uses uniform definitions; performance-based climate grants that link central transfers to verified outcomes; green public-investment management that requires climate-risk screening for all major infrastructure projects; and independent climate audits by the Comptroller and Auditor General (CAG) and institutions like the Institute for Climate Economics and Development.

To ensure consistency and comparability, India needs a framework national climate law—not to centralize power, but to codify cooperation.

As underscored by the Supreme Court’s 2024 ruling recognizing the right to freedom from the adverse effects of climate change, a legislative foundation is crucial.

Such a law could establish a national climate council, chaired by the prime minister and including chief ministers, to coordinate policy; mandate annual climate-budget statements and climate-fiscal risk disclosures for all states; empower the CAG to conduct independent green-performance audits; and guide the Finance Commission to integrate climate vulnerability and readiness indicators into its devolution formula.

A framework climate law, anchored in transparent public finance and cooperative federalism, is an essential bridge to connect local innovation with a unified, equitable and effective national pathway.

The author is distinguished fellow at the Centre for Social and Economic Progress (CSEP) and former member of the 15th Finance Commission.