India’s 16th Finance Commission and Budget 2026 signal a decisive shift in how the country funds disaster management—moving away from post-crisis relief towards data-driven prevention, AI-enabled risk intelligence, and climate-resilient development.
For decades, disaster management in India followed a familiar script: calamity strikes, relief is mobilised, compensation is disbursed, and attention soon shifts elsewhere.
That approach—while essential in emergencies—is no longer sufficient in a climate-altered world where disasters are more frequent, more intense, and more systemic.
India is now witnessing a decisive shift. The 16th Finance Commission’s recommendations on financing disaster management, reinforced by the Union Budget 2026, mark a transition from reactive relief to proactive resilience—anchored in data, technology, and prevention.
This is not a marginal reform. It is a structural reset of India’s disaster funding architecture.
A smarter Centre–State compact
At the heart of the Finance Commission’s vision lies a recalibrated Centre–State partnership. The proposed 80:20 sharing arrangement between the Centre and States reflects both realism and responsibility—recognising that disaster risks are national in scale but local in impact.
Equally important is the clear functional distinction between the State Disaster Response Fund (SDRF) and the State Disaster Mitigation Fund (SDMF).
While the former ensures rapid response and relief, the latter institutionalises long-term investments in prevention—early warning systems, resilient infrastructure, ecosystem restoration, and risk-informed planning.
This separation matters. It ensures that immediate response needs do not crowd out investments that reduce future losses. In fiscal terms, it signals a move from expenditure after damage to investment before damage—arguably the most cost-effective public spending choice governments can make.
Recognising India’s changing risk profile
One of the most welcome steps is the inclusion of heatwaves and lightning as notified disasters. This reflects the lived reality of millions of Indians.
Heatwaves are now among the most lethal climate hazards in the country, quietly eroding labour productivity, overwhelming health systems, and disproportionately affecting informal workers, the elderly, and the urban poor.
Lightning, meanwhile, has emerged as a major cause of disaster-related fatalities, particularly in rural and tribal areas.
Formal recognition enables better tracking, funding access, and preparedness planning. More importantly, it acknowledges that climate risk in India is no longer limited to floods and cyclones—it is expanding, intensifying, and often invisible.
From paperwork to predictive intelligence
Perhaps the most transformative recommendation is the introduction of the National Disaster Management Information System (NDMIS).
This signals a profound governance shift.
For the first time, disaster financing is explicitly linked to data quality, transparency, and outcomes.
The message is clear: data is a precondition for fiscal support, including future State Finance Commission grants.
Indonesia, for example, uses a Disaster Risk Index to determine funding allocations for disaster preparedness, with high-risk local governments receiving prioritised financial support for response, public services, and infrastructure.
This, in conjunction with the National Disaster Risk Finance and Insurance Strategy, aims to reduce fiscal dependency on emergency funds and enhance resilience across its archipelago.
NDMIS has the potential to integrate hazard data, loss and damage assessments, fund utilisation, and recovery outcomes into a single, verifiable system.
When combined with satellite observations, geospatial platforms, and real-time weather data, it can enable AI-driven predictive risk intelligence—shifting governance from hindsight to foresight.
This opens pathways for anticipatory action, parametric triggers, and early release of funds before disasters strike—saving lives, livelihoods, and public money.
Budget 2026: Mainstreaming resilience
Union Budget 2026 reinforces this trajectory by embedding climate adaptation and disaster risk reduction across major sectors.
Increased allocations for disaster management are complemented by risk-informed investments in infrastructure, agriculture, urban development, water systems, and coastal protection.
This mainstreaming is critical. Disasters exploit development gaps—poor drainage, fragile housing, degraded ecosystems. Addressing risk therefore requires integrating resilience into everyday development decisions, not treating disasters as exceptional events.
Equally important is the budget’s emphasis on technology-enabled governance—from AI-supported forecasting and geotagged asset monitoring to digital benefit transfers. These tools enhance efficiency, reduce leakages, and ensure that public funds reach those most at risk.
A maturing disaster finance ecosystem
Taken together, the Finance Commission’s recommendations and Budget 2026 point to a more mature disaster finance system defined by five shifts:
- From response alone to response plus prevention
- From discretionary allocations to rules-based funding
- From analogue reporting to digital and AI-enabled intelligence
- From narrow hazard lists to evolving climate risks
- From siloed schemes to integrated development finance
This is not incremental reform—it is institutional transformation.
Lessons for India’s AI moment
As India prepares for the upcoming AI Impact Summit, disaster management offers one of the clearest demonstrations of AI’s public value.
First, AI must be framed as a tool for risk reduction and public good, not just productivity gains.
Second, investments in data systems like NDMIS should be recognised as foundational AI infrastructure.
Third, India has an opportunity to lead globally by linking AI-enabled risk intelligence directly to public finance and governance.
Fourth, ethical and inclusive design must remain central—early warnings and risk models must reach the last mile.
The road ahead
India’s disaster risks are growing—but so is its capacity to manage them intelligently.
By moving from relief to resilience, from discretion to data, and from reaction to anticipation, India is building a disaster finance system fit for a climate-changed future.
The challenge now is execution. But the direction is unmistakable—and promising.
Disclaimer
Views expressed above are the author’s own.
END OF ARTICLE
