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India is preparing to hardwire disaster resilience into infrastructure contracts and financing systems as a new report calls for mandatory risk assessments, redesigned contracts and new financing instruments to address rising climate risks.
The report, “Mainstreaming Disaster Resilience into Infrastructure Projects,” by the Coalition for Disaster Resilient Infrastructure (CDRI), prepared with support from the Department of Economic Affairs (DEA), estimates that disasters cost India up to 2 per cent of gross domestic product annually while eroding government revenues by as much as 12 per cent. Globally, infrastructure losses are estimated at $732 billion to $845 billion annually, underscoring the scale of fiscal risk.
The study warns that climate and disaster risks could undermine India’s development trajectory, including its $4.51 trillion infrastructure investment pipeline by 2030 and its ambition to become a $30 trillion economy by 2047. It identifies roads, railways and power as among the most exposed sectors. Pilot applications of CDRI’s Resilience Cost-Benefit Analysis tool show returns of up to 12 times the investment, reinforcing the economic case for early intervention.
“Disaster resilience is about protecting public finances and securing development gains. Investing in resilient infrastructure today reduces fiscal shocks tomorrow and is one of the smartest investments governments can make,” said Amit Prothi, director general of CDRI.
At the core of the recommendations is a structural shift in how infrastructure risk is defined and managed. The report proposes embedding resilience clauses directly into engineering, procurement and construction contracts and public-private partnership agreements, moving resilience from a design consideration to a legally enforceable obligation. It also calls for redefining force majeure provisions by linking them to measurable hazard thresholds such as wind speeds and flood levels, enabling clearer allocation of risk between governments and private developers.
The push is backed by detailed evidence from a case study in Odisha, one of India’s most disaster-prone states. Ranked 90 out of 100 on the Fifteenth Finance Commission Disaster Risk Index, Odisha has faced repeated high-impact events, including damages of Rs 24,176 crore from Cyclone Fani in 2019 and Rs 8,902 crore from Cyclone Phailin in 2013, according to a PPT presentation by InRisk Labs based on its joint report ‘Insurance & risk finance facility’ with United Nations Development Programme (UNDP) and National Disaster Management Agency (NDMA). At least $318 million was raised through post-disaster borrowing for these events, according to the CDRI analysis based on government data.
Despite these losses, large segments of public infrastructure remain outside formal disaster financing systems. The report highlights that mechanisms such as the State Disaster Response Fund and National Disaster Response Fund are primarily designed for immediate relief and private losses, leaving government assets only partially covered or entirely excluded.
A comprehensive asset register developed for Odisha illustrates the scale of this gap. Using only publicly available data, the study estimates total public infrastructure exposure at Rs 1.81 lakh crore across 10 asset classes. State highways alone account for Rs 48,924 crore, followed by Rs 35,271 crore in major irrigation infrastructure and Rs 33,716 crore in primary schools. Hydropower assets are valued at Rs 24,410 crore, while secondary schools represent Rs 13,821 crore of exposure. Several critical categories including colleges, large dams, government buildings and renewable energy installations are either fully excluded or inadequately covered under existing disaster relief norms.
The report argues that this mismatch between risk exposure and financing capacity is forcing governments into reactive fiscal responses, often relying on borrowing and delayed reconstruction. To address this, it proposes the creation of an India Infrastructure Resilience Fund and a sovereign backed risk pooling mechanism to provide pre-arranged financing for disaster losses.
The Odisha model offers a potential template. A parametric insurance-based state risk pool designed under the study would trigger payouts within 14 days of a disaster without requiring damage assessments. The model estimates an average annual payout requirement of Rs 1,377 crore, with a pure risk cost of about 1.26 per cent of the insured value. Over a 20-year validation period from 2005 to 2024, the model shows about 86 per cent directional correlation with reported losses, suggesting a high degree of reliability.
Triggers are based on objective hazard data from the India Meteorological Department. For example, cyclone wind speeds of up to 250 kilometres per hour, as recorded during Cyclone Fani, would automatically activate payouts, while rainfall thresholds such as 300 millimetres over three days against a 250-millimetre trigger determine proportional compensation. This approach replaces post-disaster assessments with rules-based financing, significantly reducing delays and uncertainty.
The report emphasises that resilience investments, though increasing upfront costs, can substantially reduce long-term fiscal burdens. It calls for systematic use of resilience cost-benefit analysis tools to quantify avoided losses, noting that such benefits are currently under-assessed in project appraisals.
The urgency of reform is amplified by India’s ongoing infrastructure expansion. Officials indicated that sectors such as power transmission are already beginning to integrate resilience into planning and procurement. Sai Baba, additional secretary at the Union Ministry of Power, at a CDRI and DEA conference on ‘mobilising finance for resilience’ on April 22, said resilience elements are now being incorporated into requests for proposals under competitive bidding frameworks, reflecting a gradual shift toward standardisation.
India’s transmission network has doubled over the past decade, he noted, adding that it is expected to double again within five years, creating a critical window to integrate resilience into new assets. At the same time, rising land acquisition costs, particularly right-of-way expenses in urban areas, are putting pressure on tariffs, prompting a push for design innovations such as monopoles and compact structures to reduce land use.
From a financing perspective, the challenge is not capital availability but risk clarity. Kishore Kumbhare, chief risk officer at India Infrastructure Finance Company Limited, said the institution has financed more than 850 projects worth over Rs 9 trillion but faces constraints due to the absence of clearly defined resilience frameworks. He mentioned that infrastructure investment needs are expected to rise from about Rs 111 lakh crore to nearly Rs 200 lakh crore over five years, implying annual financing requirements of Rs 35 lakh crore to Rs 40 lakh crore.
Kumbhare said incorporating resilience could raise project costs by 10 per cent to 20 per cent, depending on the sector, but added that the impact on consumers would be limited. He pointed to renewable energy tariffs, which have declined from Rs 10 to Rs 11 per unit to around Rs 2.5 to Rs 3.5 even with storage, suggesting that a modest resilience premium would not significantly affect affordability.
The global financing gap is also another challenge. Uday Khemka, vice chairman of SUN Group and a representative of the Khemka Foundation, estimated a global climate infrastructure financing gap of about $1.4 trillion annually. He said capital from pension funds and sovereign wealth funds is available but not flowing at scale due to mismatches between project risk profiles and investor expectations.
They emphasised that unlocking this capital requires systemic reforms rather than isolated financial instruments. These include aligning regulatory frameworks, developing bankable project pipelines, and embedding risk considerations into project design. Blended finance, while useful, was described as insufficient on its own.
International perspectives reinforced the importance of early-stage integration of resilience. Nana Dwemoh Benneh, CEO of the Ghana Infrastructure Investment Fund, said all projects must meet climate and resilience criteria before entering the budget process, while Aneerood Sookhaarea, second-in-charge of National Disaster Risk Reduction and Management Centre, Mauritius, highlighted the existential risks posed by sea-level rise, with projections of coastline losses ranging from 50 metres to 200 metres.
Sectoral experts, multilateral development banks and stakeholders also underscored the need for layered risk financing approaches combining budgetary reserves, pre-arranged credit lines, insurance instruments and capital market solutions such as catastrophe bonds. They argued that no single instrument can address the full spectrum of disaster risks and that risk must be distributed across layers based on frequency and severity.
Aarti Mehra, deputy country director-India at the Asian Development Bank, said, “Low-impact disasters should be managed through budget contingencies, medium-scale events require pre-arranged liquidity, and large-scale shocks need insurance and capital market solutions. No single instrument can manage disaster risk financing; there has to be a layered approach.”
A key structural gap identified was the lack of reliable data on infrastructure losses. They highlighted that governments often underestimate the true cost of disasters, as losses are realised over long periods of 10 to 20 years. The report addresses this by advocating for standardised, interoperable data systems and asset registers built on public data, which can support both planning and financing decisions.
Referring to Odisha’s fiscal preparedness and long experience with disasters, Sanjeeb Kumar Mishra, principal secretary, finance department, Government of Odisha, said the state has built a budget stabilisation fund with a corpus of around Rs 25,000 crore to manage shocks arising from disasters and economic disruptions.
He said the fund enables the government to respond quickly without waiting for external assistance, providing immediate liquidity in times of crisis. However, he cautioned that such buffers alone are not sufficient given the scale and frequency of disasters, and emphasised the need to complement them with stronger risk transfer mechanisms, particularly insurance and market-based instruments.
Recalling the state’s policy shift after successive high-impact cyclones, he added, “That was a turning point, and since then, everything the Odisha government decided to build has incorporated disaster resilience.” He noted that despite these advances, risk coverage remains limited, stating that “the property insurance market in India remains very, very low, which leaves significant gaps in risk coverage.”
The UNDP, NDMA and InRisk Labs report, covering 30 districts and 476 sub-districts, demonstrates that such systems can be built without proprietary data and replicated across states. This creates the foundation for scaling risk assessment and financing mechanisms at the national level.
Across the discussions, a consistent message emerged. Resilience must be embedded at the planning stage, not added later. Financing systems must shift from reactive to pre-arranged models. Data systems must improve to enable accurate risk pricing. And institutions must coordinate across sectors to align incentives.
As climate risks intensify, the report concludes that resilience is no longer an optional add-on but a core requirement to ensure that infrastructure systems remain functional, financially viable, and sustainable over the long term.