Examine how India’s external sector is affected by the increasing focus on climate-friendly and sustainable development, especially with regard to international trade agreements, export diversification, and foreign investment. You should also assess the government’s response to these new issues.
The World Bank has defined the absolute poverty line as the percentage of the population of a country living on less than $1.90 a day (PPP) at constant prices at 2011 price levels. It can be measured either in absolute terms or in relative terms. In 1962, the Planning Commission constituted a workinRead more
The World Bank has defined the absolute poverty line as the percentage of the population of a country living on less than $1.90 a day (PPP) at constant prices at 2011 price levels. It can be measured either in absolute terms or in relative terms. In 1962, the Planning Commission constituted a working group to estimate poverty nationally, and it formulated separate poverty lines for rural and urban areas of Rs 20 and Rs 25 per capita per year, respectively. This early estimate was followed by the following Committees in India:
- VM Dandekar and N Rath: They made the first systematic assessment of poverty in India in 1971, based on National Sample Survey (NSS) data from 1960-61.
- They suggested minimum calorie consumption norms i.e., 2250 calories per day in both rural and urban areas.
- Alagh Committee (1979): Chaired by YK Alagh, this Committee, set up by the Planning Commission, constructed a poverty line for rural and urban areas on the basis of nutritional requirements.
- Lakdawala Committee (1993): According to the Committee, consumption expenditure should be calculated based on calorie consumption as earlier. Further, state specific poverty lines and should be updated using CPI-IW in urban areas and CPI-AL in rural areas.
- Tendulkar Committee (2009): The Planning Commission appointed Committee, chaired by Suresh Tendulkar, recommended major changes in poverty estimation, such as:
- Using mixed reference period (MRP)-based estimates, as opposed to earlier uniform reference period (URP).
- A uniform poverty line basket (PLB) across rural and urban India.
- A change in the price adjustment procedure.
- Incorporation of private expenditure on health and education while estimating poverty.
- Based on these recommendations, poverty line was pegged at Rs 446.68 per capita per month in rural areas and Rs 578.80 per capita per month in urban areas in 2004-05.
- Rangarajan Committee (2012): Constituted by the Planning Commission, the Committee took an estimation based on an independent large survey of households by the Centre for Monitoring Indian Economy (CMIE). Recommendations were based on households’ inability to save, normative as well as behavioural levels, and ICMR norms related to calories, protein, and fat.
- According to the report of the Committee, the new poverty line was set at Rs. 32 in rural areas and Rs. 47 in urban areas. The earlier poverty line figure was Rs. 27 for rural India and Rs. 33 for urban India.
- Hashim Committee (2012): To capture residential, social, and occupational vulnerabilities, the Committee, in its report, recommended a three-stage identification process to identify the families living below the poverty line in urban areas which include automatic exclusion, automatic inclusion and scoring index of the remaining urban families in this order.
Currently, poverty estimation in India is carried out by NITI Aayog’s task force through the calculation of poverty line based on the data captured by the National Sample Survey Office under the Ministry of Statistics and Programme Implementation (MOSPI). Based on this, in 2011-12, the poverty line was defined for rural areas as consumption worth Rs 816 per person a month and for urban areas it was Rs 1,000 per person per month. Thus, the government uses Monthly Per Capita Expenditure (MPCE) as a proxy for income of households to identify the poor.
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Implications of Growing Emphasis on Sustainable and Climate-Friendly Development on India's External Sector Introduction The global shift towards sustainable and climate-friendly development is reshaping various facets of India's external sector. This emphasis impacts India's export diversification,Read more
Implications of Growing Emphasis on Sustainable and Climate-Friendly Development on India’s External Sector
Introduction
The global shift towards sustainable and climate-friendly development is reshaping various facets of India’s external sector. This emphasis impacts India’s export diversification, foreign investment flows, and international trade agreements. This analysis explores these implications and evaluates the government’s policies to navigate these emerging challenges.
Implications on Export Diversification
Shift in Export Demand: As countries commit to climate goals, there is an increasing demand for sustainable and green products. India’s export sector must adapt to these changing preferences by diversifying into eco-friendly goods and services. For example, India’s exports of organic and certified sustainable products have seen growth as global consumers prioritize sustainability.
Increased Competitiveness: Emphasizing sustainability can enhance India’s competitiveness in global markets. The Gujarat-based solar panel manufacturer, Waaree Energies, has successfully tapped into international markets by producing green energy solutions, aligning with global demand for renewable energy products.
Challenges: Transitioning to sustainable practices poses challenges such as higher production costs, certification requirements, and investment in green technologies. Indian firms, especially in sectors like textiles and chemicals, face difficulties in meeting international sustainability standards, which could affect their export performance.
Implications on Foreign Investment Flows
Increased Foreign Investment in Green Projects: There is a growing interest in investing in India’s green infrastructure and sustainable development projects. Initiatives like the National Investment and Infrastructure Fund (NIIF) are attracting foreign investments into renewable energy and green infrastructure. For example, Global Infrastructure Partners has invested in India’s green energy sector, reflecting a shift towards sustainability-focused investments.
Regulatory Challenges: Foreign investors are increasingly focusing on ESG (Environmental, Social, and Governance) criteria when making investment decisions. Indian policies need to align with these criteria to attract investment. The Securities and Exchange Board of India (SEBI) has introduced regulations requiring listed companies to disclose their ESG performance, which could affect foreign investment flows.
Investment in Technology and Innovation: To attract foreign investment, India needs to enhance its technology infrastructure and innovation capacity in green technologies. The Startup India Initiative supports innovation in sustainable technologies, positioning India as a hub for green tech investments.
Implications on International Trade Agreements
Negotiation of Trade Agreements: Sustainable development goals are increasingly becoming a component of international trade agreements. India must navigate trade agreements that include sustainability clauses and environmental standards. For instance, the EU-India Trade and Technology Council (TTC) discusses sustainability and digital trade, affecting how India negotiates and implements trade deals.
Compliance with Global Standards: India must ensure that its industries comply with international environmental standards to avoid trade barriers. For example, the EU’s Carbon Border Adjustment Mechanism (CBAM) imposes carbon tariffs on imports from countries with less stringent climate policies, impacting Indian exports in sectors like steel and cement.
Opportunities for Green Trade: India can leverage international trade agreements to promote its sustainable products and technologies. The India-UK Free Trade Agreement (FTA) is expected to include provisions for promoting trade in green goods and services, providing opportunities for Indian companies in the renewable energy sector.
Government Policies to Address Emerging Challenges
Promotion of Green Technologies: The government has launched several initiatives to support green technology and sustainable development. The National Clean Air Programme (NCAP) and Atal Mission for Rejuvenation and Urban Transformation (AMRUT) focus on improving environmental quality and infrastructure, attracting foreign investment and enhancing export potential in green sectors.
Support for Export Diversification: The Foreign Trade Policy (FTP) 2023-28 emphasizes the promotion of sustainable exports and diversification into high-value, eco-friendly products. The Development Commissioner (DC) of Special Economic Zones (SEZs) supports companies in adopting green practices and technologies to meet international standards.
Enhancing Compliance with International Standards: The Bureau of Indian Standards (BIS) and the Department for Promotion of Industry and Internal Trade (DPIIT) work towards aligning domestic regulations with international standards. The National Action Plan on Climate Change outlines strategies for improving compliance with global environmental standards, which helps in reducing trade barriers and enhancing competitiveness.
Strengthening Trade Diplomacy: The government is actively engaged in trade diplomacy to incorporate sustainability clauses into trade agreements and negotiate terms that align with India’s development goals. Participation in global forums such as the UNFCCC and World Trade Organization (WTO) helps India address trade-related environmental challenges.
Conclusion
The growing emphasis on sustainable and climate-friendly development significantly impacts India’s external sector, influencing export diversification, foreign investment flows, and international trade agreements. While these changes present challenges, they also offer opportunities for growth in green sectors and sustainable technologies. The government’s policies to promote green technologies, support export diversification, ensure compliance with international standards, and strengthen trade diplomacy are crucial in addressing these emerging challenges and positioning India as a leader in sustainable development on the global stage.
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