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Developing flood resilience in India – Financial tools and infrastructural assistance from developed countries (such as UK, USA)

India ranks first among flood-prone nations in Asia, with over 622.1 million people exposed to flood risks. More than 40 million hectares of land—over 12% of the country’s total geographical area—is vulnerable to flooding. With climate change intensifying extreme weather events, floods are becoming more frequent and severe, causing extensive damage to life, livelihoods, and infrastructure. In economic terms, floods account for nearly 68% of the total disaster-induced economic losses in India, making them the costliest natural disasters the country faces.

Investment in climate adaptation infrastructure is widely recognized as a global priority. International frameworks such as the Sendai Framework for Disaster Risk Reduction (DRR), the Copenhagen Accord at Conference of Parties (COP, 2009) , the Green Climate Fund (2010), and the Kumamoto Declaration in 2022 emphasise the need for climate-resilient development. India through its Disaster Response and Mitigation Funds (2005) and National Adaptation Fund for Climate Change (2015), has taken steps toward flood risk reduction. India estimates it will need approximately US $680 billion for climate adaptation by 2030 under a business-as-usual scenario. Despite increasing adaptation-related expenditure to 5.6% of GDP in 2021–22 from 3.7% in 2015–16, a significant funding gap remains. The UNEP Adaptation Gap Report 2024 notes that doubling adaptation finance to developing nations, as per the Glasgow Climate Pact, would only slightly reduce the global adaptation finance gap of US $187–359 billion per year. This highlights the urgent need for enhanced financial commitments to effectively address climate adaptation challenges.

While India’s overall climate finance need stands at approximately US $170 billion annually, the country raised only US $44 billion in green finance in 2019–2020, covering just 25% of the requirement. India is estimated to require US $1 trillion for climate-resilient infrastructure between 2015 and 2030, yet investments in flood mitigation remain critically insufficient. In India more than 7 million hectares are affected by floods, annually with average damages amounting to US $700 million each year. In August 2024, the Indian government announced plans to invest nearly US $300 million over two years to mitigate urban flooding in seven major cities, including Mumbai, Chennai and Bengaluru, indicating a substantial financial gap in developing India’s flood resilience.

Key challenges hindering flood resilience
There are multiple financial and technological barriers hindering flood resilience and thereby, adaptation investments in India.

  1. Financial constraints and high risks in flood investments: Investments in flood-resilient infrastructure require large upfront costs, while returns on investment (ROI) are long-term and uncertain. The private sector is often reluctant to invest in flood resilience due to the high risks associated with extreme weather events. Additionally, insurance costs for flood-prone areas are high, further deterring investments
  2. Limited access to advanced flood-resilient technologies: Flood management requires cutting-edge solutions such as predictive modelling, satellite-based monitoring, early warning systems, and flood-resistant construction materials. However, these technologies are expensive and not widely accessible to developing nations. For example, installing landslide early warning system sensors in vulnerable areas has been estimated to cost between EUR 5 to EUR 41 per person. While this investment can enhance resilience for over 190,000 exposed individuals, the initial financial outlay can be prohibitive for many developing nations

Given these vulnerabilities, building flood-resilient infrastructure—designed to withstand, respond to, and recover rapidly from flood-related disruptions—is a critical priority. However, this requires significant financial investments, advanced technology, and capacity-building support, which many developing countries, including India, struggle to afford. Although public finance plays a crucial role in the initial phases, long-term resilience depends on unlocking private capital through innovative financing mechanisms.

Takeaways from developed nations

Developed nations such as the United Kingdom (UK), which has developed a strong ecosystem for climate finance and flood risk management, can help India bridge this financing gap through knowledge-sharing, technology transfers, and financial assistance.

Financial tools for flood resilience:
1. Resilience bonds: Resilience bonds are an innovative climate finance mechanism that incentivises investments in flood risk reduction. The UK has explored these bonds under its National Infrastructure Strategy, allowing governments and private investors to fund flood defense projects upfront while reducing long-term disaster recovery costs

2. Catastrophe bonds (CAT bonds): CAT bonds allow risk transfer to investors, ensuring that funds are available for disaster response without straining government budgets. Catastrophe bonds (CAT bonds) are innovative financial instruments intended to shift the risk of catastrophic occurrences, including natural catastrophes, from reinsurers and insurers to capital market investors. The UK has successfully issued CAT bonds for flood risk management, particularly in partnership with Lloyd’s of London. Introducing CAT bonds in India—with UK technical assistance—can help mobilise private capital for flood resilience

3. Climate finance grants: The Global Facility for Disaster Reduction and Recovery (GFDRR), backed by the UK and other developed nations, provides grants to climate-vulnerable countries. India has previously accessed GFDRR funds to improve flood resilience in Surat and Chennai. Strengthening India-UK collaboration under GFDRR could scale up flood adaptation projects across vulnerable Indian states

4. Green bonds & concessional loans: The UK has one of the most developed green bond markets and is home to the London Stock Exchange Green Bond Segment. India has issued green bonds worth US $19 billion, but their uptake for flood resilience projects has been limited. UK-backed concessional loans from institutions such as the World Bank and IMF can help fund large-scale flood mitigation projects in India

5. Climate risk insurance & crisis modifiers: The InsuResilience Global Partnership, launched at COP23, aims to provide post-disaster liquidity through climate insurance mechanisms. The UK has been a major contributor to climate risk insurance programs, and collaborating with India to introduce Climate Insurance-Linked Resilient Infrastructure Financing could enhance flood preparedness in urban areas

 

Infrastructural assistance for flood resilience:
1. Nature-based flood mitigation strategies: Nature-based solutions (NBS) combine traditional engineering with ecological approaches to manage floods. Research shows that NBS can reduce flood management costs by up to 22% compared to purely engineered solutions. New York City’s hybrid flood resilience model, which integrates wetlands restoration with flood walls, serves as a successful example

2. Public-private partnerships (PPPs) in flood infrastructure: Japan’s retardation basins in Tokyo, developed through private sector collaboration, have proven effective in controlling urban flooding

3. Early warning systems & satellite-based monitoring: The UK’s Met Office, USA’ NOAA ( National Oceanic and Atmospheric Administration), the European Centre for Medium-Range Weather Forecasts (ECMWF) have some of the most advanced flood forecasting technologies. Partnering with India’s IMD (Indian Meteorological Department) and ISRO can enhance real-time flood warnings and predictive analytics, reducing loss of life and property

With climate change intensifying flood risks, India urgently needs to scale up investments in flood resilience infrastructure. However, given financial constraints, technological barriers, and governance challenges, achieving this goal requires strong international collaboration. The UK has enhanced expertise in disaster risk management, innovative climate finance, and advanced flood mitigation technologies. This along with insights from other developed regions can play a crucial role in helping India close its flood resilience gap and help India build sustainable and resilient flood infrastructure, ensuring long-term socio-economic stability in the face of escalating climate threats.

 

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