India must clearly link its climate goals to public spending

Posted on by harshita

The latest Union Budget has drawn mixed reactions to the government’s climate actions. Some applaud the proposed investments in mitigation, while others argue that climate adaptation measures are insufficient. Such contentions partly stem from limited clarity on how the government is spending on climate change across its myriad schemes and ministries. An annual climate budget statement, based on a common national framework, would bring needed transparency by classifying, tracking, and reporting on the government’s climate-related spending.

A climate budget shows how and where public money is spent towards climate change. It identifies which schemes contribute to climate goals, whether to curb emissions or adapt to heatwaves, and to what extent. This approach, also known as “climate budget tagging” (CBT), is recognized as a global best practice by organizations such as the International Monetary Fund and has been adopted by over 60 countries. The World Bank has shown that CBT increases institutional focus on climate risks while improving fiscal transparency and accountability.

Although the central government has not introduced a climate budget, eighty-eight states and union territories have pioneered the practice. While each of these states follows a slightly different approach to climate budgeting, they provide useful lessons for the country.

Odisha’s Climate Budget outlines its key climate objectives and assesses two aspects: the extent to which a scheme contributes to climate resilience, and its vulnerability to climate risks. For example, the soil conservation and watershed management scheme contributes 70% of its budget toward climate resilience, but 50% of its expected impact is vulnerable to climate risks. Odisha’s climate budget attempts to show how it is responding to and affected by climate change, but does not explain how these judgments are determined.

Bihar’s Green Budget does not measure vulnerability, but it does importantly explain how each scheme contributes to climate goals. It also links scheme contributions to the Sustainable Development Goals (SDGs). This approach, developed by the UN Environment Programme (UNEP), clearly shows how schemes affect climate change and align with international goals.

Finally, Kerala’s Environment Budget, beyond summarizing climate objectives and spending, discusses how the annual budget is linked to key state development plans, such as the Kerala Perspective Plan 2030, and the SDGs. This uniquely shows how Kerala is advancing its long-term climate goals.

Overall, these States show strong initiative to track climate spending. However, the different methods limit comparison between States. There could also be more details, such as on whether a scheme supports mitigation or adaptation, and what this spending aims to achieve.

Leveraging this momentum and lessons from exiting state budgets, the union government must develop a national framework for climate budgeting to guide implementation at the central and state levels. Recognizing each government’s unique policy priorities, this framework should outline the essential components for tagging expenditures while allowing flexibility to add other aspects, like vulnerability. Based on national best practices and global standards like the Public Expenditure and Financial Accountability program, the national framework should emphasize three key aspects.

First, a climate budget should have a clear tagging protocol that identifies overall climate expenditure and its specific areas. To track overall spending, programs should be tagged as “completely” or “partially” relevant to climate (e.g., 50%) to reach a precise figure, as some States already do. To track spending on specific themes, there should be a minimum filter to view spending on climate adaptation and mitigation. This would allow a comprehensive picture of climate spending. The Ministry of Finance (MoF) has already provided a useful starting point through its draft framework on climate finance taxonomy, which offers a common system for the private sector to classify investments as “climate supportive” or “transition supportive”. This could be applied to climate budgets.

Second, the climate budget should align with major state, national, and international strategies, as Kerala does. India has outlined ambitious goals to achieve a sustainable and resilient economy, like the Long-Term Low-Carbon Development Strategy, Nationally Determined Contributions, and the forthcoming National Adaptation Plan. Union and state budgets should clearly link to these strategies to ensure that spending advances longer-term climate goals.

Third, the climate budget should report what outputs and outcomes will result from climate spending. For instance, Kerala spends on forest regeneration but does not specify a goal on restored forests. States like Odisha already produce “outcome budgets” that capture program goals, which could be integrated into climate budgets. The Output-Outcome Monitoring Framework does this for central schemes. A climate budget should set measurable goals to track impact.

Altogether, these principles would ensure climate budgets in India are comprehensive, aligned with broader development strategies, and actionable.

Moving forward, MoF should form a committee with the Ministry of Environment, Forest and Climate Change, States, and the 16th Finance Commission to spearhead the framework development. This national framework would provide clear guidance to governments on embedding climate priorities across planning and budgeting. Amidst serious climate risks, the union and state governments must clearly demonstrate how they are investing in a resilient future through climate budgets.

This was published in “Et Edge Insights” on 26th February 2026.

Healthcare Sector Key Announcements and Implications – Union Budget 2026–27

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Biopharma Shakti initiative marks a strategic push toward self-reliance in high-value pharmaceutical manufacturing

Union Finance Minister Nirmala Sitharaman presented the Union Budget 2026–27 with a strong focus on strengthening India’s healthcare ecosystem. The announcements emphasise biopharma manufacturing, medical and allied health education, regional access to care, traditional medicine systems, and mental health as an emerging national priority.

Key Announcements

Biopharma Shakti Initiative:
An outlay of Rs 10,000 crore over five years has been proposed to position India as a global biopharma manufacturing hub. The initiative aims to accelerate domestic capabilities in biologics, biosimilars, and advanced pharmaceutical production, reinforcing supply resilience and global competitiveness.

Biopharma-Focused Institutional Strengthening:
Three new National Institutes of Pharmaceutical Education and Research (NIPERs) will be established and seven existing ones upgraded to support biologics production, pharmaceutical research, and regulatory capacity.

Expansion of Allied Health Education:
Institutions for allied health professionals (AHPs) will be upgraded and expanded across ten disciplines, including optometry, radiology, anaesthesia, and applied psychology. The target is to train one lakh AHPs over five years to address systemic workforce gaps.

Regional Medical Hubs:
Five regional medical hubs will be developed in partnership with states to improve access to advanced healthcare infrastructure and reduce geographic disparities.

Strengthening Traditional Medicine Systems:
The government announced three new All India Institutes of Ayurveda, upgrades to Ayush pharmacies and drug testing laboratories, and continued support for the WHO Global Traditional Medicine Centre in Jamnagar.

Mental Health as a National Priority:
A new National Mental Health Institute, “NIMHANS 2,” will be established to address evolving mental health challenges, including those faced by digital professionals and content creators.

Implications for the Healthcare Sector

The Biopharma Shakti initiative marks a strategic push toward self-reliance in high-value pharmaceutical manufacturing, with potential to improve affordability and availability of advanced therapies, particularly in oncology, immunology, and rare diseases.

Expansion of NIPERs strengthens India’s pharmaceutical research and talent pipeline. Its long-term success will depend on effective industry collaboration, curriculum modernisation, and regulatory alignment.

Investment in allied health capacity addresses critical non-physician workforce shortages, improving hospital efficiency, diagnostics, surgical support, and mental healthcare delivery.

Regional medical hubs can ease pressure on metropolitan tertiary centres and strengthen secondary care systems, provided implementation and financing frameworks are robust.

The expansion of traditional medicine infrastructure signals continued policy commitment, though evidence generation and regulatory harmonisation remain essential for global credibility.

Finally, elevating mental health through institutional expansion reflects growing recognition of digital-era psychological stressors and the need for accessible, stigma-free care within India’s broader public health framework.

This was first published in “Bio Spectrum” on 24th February 2026.

Protecting climate-vulnerable: How microloans and microinsurance can build systemic disaster resilience

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Repeated climate shocks are pushing Bangladeshi households to the edge, exposing gaps in the financial support they rely on. While MFIs provide critical relief, evidence shows that proactive, anticipatory finance and scalable solutions could help communities absorb shocks and adapt sustainably

Bangladesh faces a climate reality that our current financial systems struggle to withstand. We are at the frontline of climate change as recurring disasters, such as cyclones, floods, droughts, and salinity intrusion, erode livelihoods and financial stability. The impact is more profound for low-income households, as climate shocks disrupt their incomes and the financial tools they depend on, which span savings, loans, and informal support networks.

In our work across districts, such as Satkhira and Rangpur, we have seen how households navigate pressures. Our findings, published in “Building the resilience of BURO Bangladesh’s customers to the impacts of climate change,” reveal behavior patterns that vary entirely with the timing of climate events.

When climate disasters strike, households rely primarily on savings as their first line of defense. They withdraw deposits or sell small assets to cover food and medical needs. The initial income shocks suppress borrowing, but demand for credit rebounds once reconstruction begins. As savings dry up and formal loans face delays, many households turn to informal lenders. Women face additional barriers because limited mobility restricts their access to timely finance. These behaviors align with the BRACED 3A framework of anticipation, absorption, and adaptation. Yet, we believe, coping strategies remain fragile. Without quick financial support, households spiral deeper into debt.

Microfinance institutions (MFIs) provide essential support, but remain constrained by market realities. BURO Bangladesh offers repayment deferrals and temporarily pauses disbursements to protect liquidity and ease the pressures of default. Emergency loans help families meet basic needs, although loan sizes often fall short of actual losses. Flexible policies allow clients to withdraw savings for repairs or food purchases. Field staff also shift from regular operations to relief efforts during extreme events to help households regain stability.

These responses remain largely reactive because they activate only after damage occurs. MFIs face mounting risk of customers’ over-indebtedness, delayed repayment that hurts liquidity, and increased provisioning requirements. Operational disruptions, such as damaged roads and power outages, further restrict service delivery. These barriers highlight a critical gap in our current system. MFIs help households absorb shocks, but they do not yet enable them to anticipate or adapt effectively.

Global experience shows how inclusive finance can evolve from reactive relief to proactive resilience. Insurance represents one major gap. The Microinsurance Network’s 2023 report shows that while approximately 330 million people across 36 countries now have some form of inclusive insurance, nearly 88% of vulnerable households worldwide still lack coverage. Another example is the InsuResilience Global Partnership, which reported that 319 million people benefited from climate and disaster risk finance in 2024, while micro-level beneficiaries in low-income countries almost doubled year-over-year. This momentum could be harnessed more effectively in Bangladesh through MFIs and their agent networks to extend protection to those most exposed.

Evidence shows that anticipatory action works best when finance follows pre-arranged triggers. The International Federation of Red Cross uses thresholds to unlock funds before disasters strike. BRAC tested this approach in Bangladesh and found that pre-approved loans helped households maintain higher consumption levels. New initiatives, such as Atram.ai, are further advancing this logic through AI-driven models that trigger financing for households and small businesses before climate shocks occur.

Finally, capital must be scaled to create systemic resilience. Small, fragmented loans need to be aggregated into investable pools. Regulators and supervisors have started to recognize this. The Network for Greening the Financial System (NGFS) has urged the integration of climate adaptation into financial supervision to create structures that enable microloans to be bundled, de-risked, and financed at scale. Such approaches could help bridge the protection gap and give MFIs the resources they need to serve clients in increasingly volatile conditions. The message is clear. Proactive finance reduces losses and strengthens resilience far more than reactive aid.

The experience of BURO Bangladesh and its clients shows both resilience and strain. Families often rely on savings, loans, and informal networks to make ends meet. Meanwhile, MFIs provide lifelines through repayment deferrals, emergency loans, and flexible withdrawals, which are primarily reactive measures to help people survive rather than prepare them for the future.

As climate risks intensify, Bangladesh needs to redesign its financial systems to ensure that vulnerable households go beyond survival in the face of shocks and build the capacity to anticipate and adapt. This shift from reactive coping to adaptive resilience is no longer optional. It is essential to protect Bangladesh’s most climate-exposed communities and ensure long-term financial security.

This was first published in “The Business Standard” on 2nd February 2026.

What to watch for if AI is to strengthen state capacity?

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In a public hospital, the hardest part is often not the treatment itself, but the administrative hurdles around it in the form of paperwork, eligibility checks, approvals, delays, and repeated visits. For citizens, this is what the state feels like in practice: not policy intent, but the ability to deliver services reliably and correct errors quickly. AI can help administrations spot bottlenecks early, route grievances faster, and reduce avoidable delays so delivery improves without reducing accountability. This is not about automating entitlements; it is about strengthening the administrative systems around them. This is why the AI debate in India needs to be anchored in state capacity, not just innovation.

Union Budget 2026–27 is an opportunity to make that shift concrete. India has already signalled intent through the IndiaAI Mission, approved by the Union Cabinet with an outlay of ₹10,372 crore over five years, spanning shared compute, datasets, skilling, applications, and safe and trusted AI. The Budget will now be judged on whether it strengthens this mission in ways that improve real public services and whether it funds the guardrails that prevent predictable harms.

First, watch for continuity in IndiaAI funding and if it is designed for sustained use.

AI systems require reliable shared computing capacity and secure environments for public applications. The clearest signal will be whether allocations support this as an ongoing public capability, not a one-time asset so public-interest deployments can move beyond pilots without duplicating tools across departments. Experience from World Bank supported open digital networks (ONS-style) suggests that shared rails and good data systems matter more than one-off pilots.

Second, watch whether AI is being funded as governance improvement. IndiaAI’s impact will depend on adoption inside large programmes, where administrative delays and grievances accumulate. The Budget can signal seriousness by creating a modest, explicit window for programme-linked deployments and independent evaluation, tying spending to measurable administrative outcomes rather than fragmented demonstrations. A serious AI push in government is ultimately a people-capacity push. Budget 2026–27 will be judged on whether it finances the human capability to deploy and govern these systems, programme managers, data stewards, and evaluation capacity rather than assuming technology alone will improve administrative performance.

Third, watch how IndiaAI will reach the states. Since many flagship welfare programmes run through state departments and district administrations, uneven adoption will translate into uneven outcomes. A key budget expectation is therefore targeted support for state readiness not through state-wise AI handouts, but through funded enablers such as training roles, data stewardship capacity, and procurement standards that embed transparency and auditability. Since state budgets follow soon after the Union Budget, the Centre’s choices on IndiaAI can act as a template for states encouraging them to invest not just in pilots, but in the people, data systems, and evaluation capacity needed to deploy AI responsibly in public programmes.

The Budget’s AI story should be read through outcomes. The strongest signal will be whether IndiaAI funding builds shared capability that departments can actually use, whether adoption is tied to measurable improvements in programme performance, and whether states are equipped to deploy AI transparently and safely. With India’s strong foundations on digital public infrastructure, AI can strengthen public services and expand inclusion but only if guardrails are financed early, from independent evaluation and audits to grievance redress, and human oversight.

If this is done right, IndiaAI can become a durable investment in state capacity, not just another technology push.

This was first published in “Express computer” on 25th January 2026.

The microfinance bank ordinance: a blueprint for social ownership or tokenistic theater?

Posted on by harshita

The transition from the draft “Microcredit Bank” to the final Microfinance Bank Ordinance of 2026 represents a significant hardening of the regulatory floor. While the previous draft felt like an experimental foray into parallel banking, the final ordinance anchors these new entities firmly within the central banking system, albeit with a rigid social cage that may redefine the very meaning of an “investor.”

This evolution marks a shift from a “regulatory island” to a bridge overseen by the Bangladesh Bank. By placing these entities under the prudential rigors of the Bank-Company Act, 1991 and the Bangladesh Bank Order, 1972, the state has effectively ended the era of microfinance as a separate, light-touch domain.

This regulatory tightening is accompanied by a steep escalation in financial requirements. The bar for entry has been raised significantly, with authorised capital now set at Tk 500 crore and minimum paid-up capital at Tk 200 crore—doubling the requirements of the original draft. Yet, the most radical pivot lies in how the law treats profit. In a move that prioritises borrower-centricity over market returns, general investors are capped at recovering only their initial investment, while borrower-shareholders are exempt from this limitation. This strategy is clearly designed to incentivise ownership among the poor rather than the private elite, but it creates what might be called the “uninvestable paradox.”

By doubling down on this “social business” mandate, the ordinance essentially shuts the door on traditional private capital. No rational entrepreneur will deploy risk capital into a Tk 200-crore venture where the potential upside is legally capped at zero. This creates a deliberate systemic push: by making the bank uninvestable for the general market, the law effectively forces these institutions toward a Grameen-style structure, where borrower-shareholders must become the true owners. Indeed, the law mandates that this group must hold at least 60 percent of the capital. However, this noble philosophy faces a historical and practical hurdle: the risk of ownership without power.

The precedent of Grameen Bank offers a sobering lesson in this regard. The bank’s governing “Sixteen Decisions” emerged not from a top-down mandate, but from intensive dialogues held by borrower-leaders in the early 1980s.

This grassroots codification of social policy—abolishing dowry and mandating child education—forced the bank to operate as a development agency. We see the fruits of this influence in the push for non-traditional products like housing loans, which saw Tk 280 crore disbursed for rural homes by 2022. Yet, researchers note a persistent “literacy chasm.” Because a vast majority of borrower-directors have historically lacked formal education, their influence often remains concentrated on social policy rather than financial auditing. While they “own” the bank, professional staff continue to operate the complex financial levers, leaving the owners to influence the soul of the institution but rarely its spreadsheets.

The 2026 Ordinance risks codifying this disparity. While it grants borrower-shareholders the right to elect four out of nine directors, it remains dangerously silent on mandated financial literacy. Without a rigorous framework to equip a rural borrower to oversee capital adequacy ratios or liquidity management, their 60 percent majority ownership risks becoming a legal fiction.

In the absence of true decision-imposing power, authority will inevitably consolidate in the hands of the managing director and nominee directors from the institutional side. The borrower-directors may find themselves reduced to “token” representatives—present for compliance, but silent during the complex maneuvers of fractional-reserve banking. Perhaps most concerning is the “capital squeeze” inherent in this model. If a liquidity crisis hits, the borrower-shareholders—the “true owners”—lack the personal wealth to provide emergency equity support.

By alienating general investors through the dividend cap, the bank loses its natural “lender of last resort” at the shareholder level, leaving it vulnerable to systemic shocks that the poor cannot buffer. Ultimately, the Microfinance Bank Ordinance is a bold attempt to institutionalize social equity, but it builds a boardroom where the majority owners are structurally positioned to be the least heard.

Unless forthcoming rules mandate aggressive governance training and simplified reporting, these banks will not be instruments of empowerment but sophisticated pieces of tokenistic theater.

This was first published in “The Daily Star” on 17th February 2026.

Scaling trust: A transaction-level observability framework for national ID programs

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Like every week, Rakesh Sengar arrived at his neighborhood ration shop just after it opened. For years, he used his national ID to get staple foods from the same shop. Yet, the authentication failed this time. The operator retried, but an error code flashed on the device, which is one of thousands generated across the system each hour. Rakesh had to leave and was asked to return later.  

At the national level, the identity platform reports strong performance. It records Rakesh’s failed attempt, but as one among millions of daily transactions, it disappears into averages that suggest everything is working as intended. 

National ID systems have become the primary gateway to both public and private services worldwide. India’s Aadhaar system has processed more than 150 billion authentication transactions with nearly 550 entities, which span banking, telecom, and government services that rely on it daily. On average, more than 90 million authentications occur each day. The World Bank reports that digital identity enables individuals to securely authenticate themselves remotely, which is essential as services move online. The World Economic Forum describes national ID as part of the shared infrastructure that enables economic and social activity at scale. Yet, this centrality creates a vulnerability: when national ID authentication fails, citizens lose access to essential services. 

Global attention centered on enrollment during the past decade. Enrollment is essential, but this is no longer sufficient. Today, exclusion most often occurs during authentication and use, not at enrollment. In a country that processes 100 million transactions monthly, an authentication system with 90% accuracy would still produce around 10 million false matches in a comprehensive search. These systems also erroneously deny essential services to potentially several million individuals. 

Privacy International documents how national ID systems, designed for efficiency and fraud prevention, are often riddled with logistical failures that exclude vulnerable populations. The World Bank acknowledges that failures in biometric authentication mechanisms can lead to people being excluded from access to related services. Without transaction-level visibility, these failures remain invisible. 

This blog proposes a novel transaction-level observability framework for national ID programs. This framework is a governance architecture that enables authorities to see, diagnose, and act on authentication failures at the point where inclusion or exclusion occurs. The transaction-level observability framework is more than a dashboard or a reporting tool. It serves as a governance capability enabled by data architecture, institutional workflows, and decision rights, which can be visualized as dashboards at an interface layer.

The framework: Eight layers of observability 

Figure 1: Stages of the proposed transaction-level observability framework 

We can understand the transaction-level observability framework as eight interlinked layers that run from the point of use to the point of accountability. At the base is the citizen experience, where real inclusion or exclusion unfolds. Whether a farmer seeks an agricultural subsidy, a patient accesses a health clinic, or a person buys food at a ration shop. Above this lies the core identity infrastructure, such as India’s Aadhaar Central Identities Data Repository (CIDR), with its massive daily transaction volumes and decentralized systems, or Estonia’s X-Road, which links hundreds of institutions.  

These systems store transaction data that form raw observability signals, which are then analyzed to generate diagnostics and actionable insights. Visual decision interfaces translate patterns and trends for human understanding, while decision and escalation workflows connect insights to actions. At higher governance levels, institutional ownership determines who responds and how, while an overarching layer of risk, rights, and accountability ensures that differential impact is recognized and addressed rather than hidden behind averages, especially among vulnerable groups. 

Each layer exists because a framework must address all dimensions of system success and failure. Citizen experience without verified data lacks accountability, data without analysis obscures root causes, analytics without workflows fail to change outcomes, and workflows without governance can be ignored or misused. Estonia’s digital ID ecosystem shows how decentralized exchanges and logged access contribute to public trust by enabling citizens to track who accesses their data. Conversely, large centralized systems, such as India’s Aadhaar, have revealed profound exclusion risks when authentication failures result in denied benefits or service delays, which highlights why rights and risk governance must cap any observability architecture. 

For implementors, this framework is a lens for interpretation and action. It asks where failures occur, what patterns they reveal, who is responsible, and what corrective pathways exist. It also means to embed real escalation pathways that connect frontline feedback to policy review and institutional oversight. This framework is more than a roadmap to dashboards as it is a blueprint for people, processes, and policies that ensure observability drives equitable outcomes. 

Dashboards as the interface layer 

Visualizations appear at the interface layer, as a bridge between complex systems and human decision-makers. Dashboards can expose patterns, establish benchmarks at the national, regional, or institutional level, and help decision-makers move from symptoms to root causes. Below, we present an illustrative architecture to show how transaction-level observability can support data-driven interventions, drawn from our work with a national ID authority.

This overview represents only the architecture of the visual layer. In the next blog, we explore detailed analytical views that start from the overview to individual merchant performance and error analysis dashboards to enable drill-down diagnosis and evidence-based intervention. Together, these frameworks and architecture enable transaction-level observability to transform national ID governance from reactive oversight to proactive, accountable stewardship of digital identity infrastructure.