{"id":70614,"date":"2026-04-01T15:38:44","date_gmt":"2026-04-01T10:08:44","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=70614"},"modified":"2026-04-01T16:14:52","modified_gmt":"2026-04-01T10:44:52","slug":"disaster-finance-india","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/editorial-analysis\/01-04-2026\/disaster-finance-india","title":{"rendered":"Disaster Finance in India: Counting People is Not Counting Disaster Risk"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Disaster Management; Climate Change<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Disaster funding under the <strong>16th Finance Commission (FC) <\/strong>raises critical concerns about the design of <strong>India\u2019s disaster finance framework, <\/strong>as 27 of 36 states\/UTs are exposed to recurrent disasters.<\/li>\n\n\n\n<li>Over 58% of the land is vulnerable to earthquakes, 12% to floods, 68% to drought, and 5,700 km of coastline is at risk from cyclones.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>About Disaster Finance in India<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It refers to the <strong>institutional and fiscal mechanisms<\/strong> for funding prevention, preparedness, response, and recovery from disasters. With increasing climate risks, it has become a core component of <strong>fiscal federalism and disaster governance<\/strong>.<\/li>\n\n\n\n<li>India follows a <strong>federal, rule-based financing system<\/strong>, largely guided by the <strong>Finance Commission (FC)<\/strong>.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Institutional Framework<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Constitutional &amp; Legal Basis<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Article 280:<\/strong> Finance Commission recommends disaster funding<\/li>\n\n\n\n<li><strong>Disaster Management Act, 2005<\/strong>: Establishes NDMA, SDMAs<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Key Funds:<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>State Disaster Response Fund (SDRF): <\/strong>Primary fund for <strong>immediate disaster response. <\/strong>Used for Relief, evacuation, temporary shelter, food, etc.\n<ul class=\"wp-block-list\">\n<li><strong>Funded by:<\/strong> Centre (75% for general states, 90% for special category states); and States (remaining share)<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>National Disaster Response Fund (NDRF): <\/strong>Supplementary fund for <strong>severe disasters; <\/strong>activated when SDRF is insufficient.<\/li>\n\n\n\n<li><strong>Mitigation Funds (Often Underutilized): National Disaster Mitigation Fund (NDMF) &amp; State Disaster Mitigation Fund (SDMF), <\/strong>these funds focus on long-term risk reduction (rarely operationalized effectively).<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Role of Finance Commission<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Each Finance Commission determines <strong>total allocation<\/strong>, and designs a <strong>distribution formula among states.<\/strong><\/li>\n\n\n\n<li><strong>Recent Trends:<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>15th FC:<\/strong> Additive approach<\/li>\n\n\n\n<li><strong>16th FC<\/strong>: Introduced <strong>Disaster Risk Index (DRI)<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Understanding the 16th FC\u2019s Approach<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Shift to a Multiplicative Disaster Risk Index (DRI): <\/strong>The 16th FC introduced a <strong>multiplicative model<\/strong>: <strong>DRI = Hazard \u00d7 Exposure \u00d7 Vulnerability<\/strong>\n<ul class=\"wp-block-list\">\n<li>It replaces the earlier <strong>additive approach<\/strong> of the 15th FC and aligns with global disaster risk theory.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Components of the DRI<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Hazard: <\/strong>The Commission expanded the hazard variable <strong>to include ten specific disasters:<\/strong> flood, drought, cyclone, earthquake, landslides, hailstorms, cold wave, cloud burst, lightning, and heatwave.<\/li>\n\n\n\n<li><strong>Exposure<\/strong>: It is measured u<strong>sing the projected population<\/strong> for October 2026. FC utilises <strong>population as a surrogate for exposure<\/strong> because it is<strong> highly correlated with the crops and infrastructure<\/strong> susceptible to damage.<\/li>\n\n\n\n<li><strong>Vulnerability<\/strong>: It is calculated <strong>using the per-capita income of States<\/strong>; Susceptibility to damage.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img data-dominant-color=\"beccd0\" data-has-transparency=\"false\" loading=\"lazy\" decoding=\"async\" width=\"713\" height=\"365\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/image-2.png\" alt=\"understanding the 16th fc\u2019s approach\" class=\"not-transparent wp-image-70615\" style=\"--dominant-color: #beccd0; width:575px;height:auto\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/image-2.png 713w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/image-2-300x154.png 300w\" sizes=\"auto, (max-width: 713px) 100vw, 713px\" \/><\/figure>\n<\/div>\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Structural Issues in the Current Formula<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Mis-measurement of Exposure: Current approach <\/strong>focuses on exposure that is the total<strong> population of the State.<\/strong>\n<ul class=\"wp-block-list\">\n<li>According to the <strong>IPCC Sixth Assessment Report<\/strong>, exposure refers to \u2018<em>presence of people in places that could be adversely affected\u2019.<\/em><\/li>\n\n\n\n<li>Thus, a large inland population is not high disaster exposure, and a smaller coastal population in hazard zones are higher real exposure.<\/li>\n\n\n\n<li><strong>Examples:<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Odisha: <\/strong>High hazard, low population score: Lower DRI<\/li>\n\n\n\n<li><strong>Uttar Pradesh &amp; Bihar: <\/strong>Lower hazard but high population: Higher DRI<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Inadequate Proxy for Vulnerability: Current approach focuses on v<\/strong>ulnerability that is i<strong>nverse of per capita NSDP. <\/strong>However, it has <strong>limitations<\/strong> like:\n<ul class=\"wp-block-list\">\n<li>Measures <strong>economic capacity<\/strong>, not disaster vulnerability; and ignores housing quality, health infrastructure, early warning systems, and localized inequalities.<\/li>\n\n\n\n<li><strong>Examples:<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Kerala floods (2018): \u20b931,000 crore damage: <\/strong>Low vulnerability score due to high income.<\/li>\n\n\n\n<li><strong>Jharkhand: <\/strong>High poverty but still loses funding share.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Broader Implications<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Distorted Allocation Outcomes:<\/strong> Almost 20 States lose funding share; common pattern includes smaller population, higher income, and better preparedness.<\/li>\n\n\n\n<li><strong>Undermining Risk-Based Governance: <\/strong>The framework unintentionally penalizes <strong>prepared States, <\/strong>rewards <strong>demographic size over disaster risk<\/strong>, and weakens incentives for long-term resilience building.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What Needs to Change?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Redefining Exposure: <\/strong>Exposure should reflect population in <strong>hazard-prone zones<\/strong>, not total population.\n<ul class=\"wp-block-list\">\n<li><strong>Data Sources: <\/strong>BMTPC Vulnerability Atlas; and Census block-level data.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Building a Composite Vulnerability Index: <\/strong>It includes kutcha housing share, agricultural labour dependence, health infrastructure density, insurance penetration (PMFBY), and early warning effectiveness.\n<ul class=\"wp-block-list\">\n<li><strong>Data Sources: <\/strong>NFHS-5; NHM surveys; and IMD records.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Institutional Reform: <\/strong>NDMA should publish an <strong>Annual State Disaster Vulnerability Index<\/strong>; and standardize methodology across Finance Commissions; and reduce arbitrariness and contestation.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Way Forward: Aligning Finance with Climate Reality<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Climate projections<\/strong> indicate intensifying cyclones (East &amp; West coasts), expanding drought zones, and increased extreme rainfall events.\n<ul class=\"wp-block-list\">\n<li>States like Odisha, Andhra Pradesh, Kerala, and Assam are likely to face <strong>greater future risks<\/strong>, but remain <strong>underserved<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Conclusion<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The current disaster finance formula is conceptually sound but operationally flawed.<\/li>\n\n\n\n<li>It reduces a complex risk landscape into a <strong>demographic headcount, <\/strong>by equating exposure with total population and vulnerability with income.<\/li>\n\n\n\n<li>For a climate-vulnerable country like India, disaster finance needs to reflect <strong>where risk actually exists<\/strong>, not just how many people live within political boundaries.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background has-fixed-layout\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>Daily Mains Practice Question<\/strong><br><strong>[Q]<\/strong> Examine the challenges in India\u2019s disaster finance architecture, and suggest measures to make disaster fund allocation more equitable and climate-resilient.&nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><a href=\"https:\/\/www.thehindu.com\/opinion\/op-ed\/counting-people-is-not-counting-disaster-risk\/article70808197.ece\" target=\"_blank\" rel=\"noopener\">Source: TH<\/a><\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.nextias.com\/ca\/wp-content\/uploads\/2026\/04\/Daily-Editorial-Analysis-1-04-2026.pdf\"><strong>Download PDF<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong>Published on:<\/strong> 01 April, 2026<\/p>\n<p>Disaster funding under the 16th Finance Commission (FC) raises critical concerns about the design of India\u2019s disaster finance framework, as 27 of 36 states\/UTs are exposed to recurrent disasters.<\/p>\n","protected":false},"author":15,"featured_media":70617,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-70614","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-editorial-analysis"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/disaster-finance-in-india.webp","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/70614","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=70614"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/70614\/revisions"}],"predecessor-version":[{"id":70621,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/70614\/revisions\/70621"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/70617"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=70614"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=70614"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=70614"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}