How India can become the bank for the Global South
Today, India is poised at the moment and GDP that China was in in 2007. Does it have the same gumption?
In 2007, China’s GDP was about $3.6 trillion. Today, India’s GDP is $3.7 trillion — perhaps more. This parallel is crucial to understanding the big moment that Indian diplomacy, led by Prime Minister Narendra Modi, is recognising. A moment, if supported by India’s people, its companies and the state apparatus, will reshape the global order. An appreciation of this moment and putting its lessons into concrete actions is the big legacy of 2023 as India concludes a transformational diplomatic year — the year of its G20 stewardship.
Look back at history. In 2007, China was not yet the geoeconomic behemoth it is now. But with a GDP lower than India’s today, it became the go-to nation during the global financial crisis a year later. Every nation sought to deepen relations with Beijing, and to create a special place in their diplomacy for the People’s Republic. Its leaders were the toast of Davos and at business salons. China provided institutional and geoeconomic responses — a development bank, a cross-continental lending programme that galvanised infrastructure accretion without the legacy constraints of Western agencies, and a series of economic projects that eventually coalesced into the Belt and Road Initiative.
It is true that some of these have run into trouble. Nevertheless, the fact is China used its economic promise in 2008 to gain oversized economic and political influence that continues to stand it in good stead. It did this by offering itself as a vital additionality to the global order. At a time when the US was struggling to recover from the financial crisis and the Eurozone was tearing itself apart, it was China that promised stability and economic dynamism. The world wanted and needed an additional engine of growth and an additional source of investment. And so it also welcomed an additional centre of geopolitical power.
India is poised at a similar moment and with a similar GDP. Does it have the same gumption? As we enter 2024, this is the framework within which Indians must understand their place in the world today. The recent past teaches us that an India-sized economy of about $4 trillion can exert a huge influence. With vision and skilful diplomacy, it can carve a space for itself alongside economies that are four or five times large, like the United States, the European Union and China.
This is a real Indian opportunity in 2024, as Europe stagnates, the US turns inward and China deals with internal problems and its share of the global economy that is shrinking in nominal terms. The agenda for India’s next government must simply be this: Demonstrate India’s potential, and the additionality that it can provide for global growth, institutions, and security.
Additionality does not require extraordinariness. After all, China’s growth in recent years has not been extraordinary. But it had momentum, and that is what India has today. It has its own trajectory and the motive force, one better suited to a green and digital future. If China had mass manufacturing, the growth engine of the 2010s, India has its platform economy, the dynamo of the 2020s.
But additionality must have attributes. What Beijing offered 15 years ago was not an inchoate promise. There was a system, a schema, to the China proposition. This roadmap excited China’s partners. An entire future-focused architecture served as the loudest possible announcement that a $4-trillion economy would punch with the weight of a $15-trillion one.
Also, a new cooperation architecture needs to be put in place because India, in a very short while, will be spending serious money globally. The private sector is mobilising to support connectivity, supply chains, and resource resilience projects across the world. But public development finance will also grow alongside, and indeed, faster than India’s economy.
This is the substance behind India’s additionality. Even if we assume India grows at only 10 per cent a year in current dollars, below its recent benchmark, it will be a major new source of development finance. If India slowly but steadily raises its development cooperation budget to less than 0.5 per cent of its GDP by 2030, it will still have put around $70 billion into the global system. India is already the voice of the Global South; it will become the bank of the Global South.
This finance needs to be undergirded by India’s unique proposition, its own roadmap, and its own offering to the world. It urgently needs an outward-focused development finance corporation that can catalyse projects globally. It needs a bank, its own version of the China Development Bank, that will focus on global corporate needs beyond just trade finance. And it needs an imagery that is understood by others.
India’s government has shown this ambition at home. The prime minister’s Gati Shakti initiative links disparate infrastructure projects with a common vision. Similarly, we need an external engagement approach. Together with like-minded partners, India needs maps plotting priority infrastructure, connectivity routes, business and trading hubs and developmental projects. It needs to do this boldly and determinedly, identifying vital regions and sectors where it will resolutely plant the Tricolour. 2024 is the year for inking a world map described by India’s vision for its role in the world.
Source : Indian Express, December 13, 2023
Controversies aside, COP28 is a real chance to put Global South at centre
As the world reels from the impact of the hottest year on record in 2023, the attention of the global community turns to COP28 for solutions to the climate challenge. While the previous decades of the UN Framework Convention on Climate Change (UNFCCC) negotiations have failed to deliver effective and equitable climate action, this year’s COP in the UAE is a unique opportunity to move from empty promises to real action.
Real action on climate requires pragmatism. It would centre the specific needs of energy-poor countries in the Global South. It would recognise that the energy transition for much of the world is just that: a transition, in which legacy fuels are both rendered more efficient and used to finance the scale-up of renewables. Sermonising western COP presidencies have rarely understood the basic needs of the developing world.
While COP28 might have attracted concern for naming a president-designate who also runs a large fossil fuel company, the fact is that this is cause for optimism. Dr Sultan Al Jaber does indeed run Abu Dhabi’s national oil company — but he also founded the renewable energy giant Masdar, which pioneered efforts to spread green capital across multiple countries and geographies. A pragmatic climate solution for the Global South would similarly prioritise the spread of enterprise, of solutions, and of technology.
Dr Al Jaber and COP28 have a hard task ahead of them. Estimates indicate that nearly all developed nations, with only two exceptions, are significantly off-course in meeting their Nationally Determined Contributions (NDCs). This stark deviation stands as the primary obstacle preventing the realisation of the Paris Climate Goals. Those most culpable for the climate crisis persist in evading their responsibilities. Responsibility for climate finance is even more important. Developing economies will require around $2 trillion annually to meet emission targets and cope with the impact of climate change. In stark contrast, the world has fixated on bickering over a meagre $100 billion annual target for financing from the developed world. We are currently fighting over bicycles when what is required is a Mercedes.
The UAE COP is well placed to establish a new pathway that places the Global South at the centre. It also comes at a time when there is already momentum around Global South led multilateral cooperation. In particular, the Indian G20 Presidency has already demonstrated the ability to build consensus around such a climate agenda. Notably, the inclusion of the Green Development Pact in the New Delhi Leaders’ Declaration creates a cohesive narrative around climate action as a catalyst for sustainable and inclusive growth. India has highlighted a few priority action areas which must now be taken forward in the coming year, and COP28 is an ideal starting point.
First, reducing cost of green capital in the developing world is crucial, as these can be nearly seven times higher than in OECD countries. The IMF estimates that emerging and developing economies (EMDEs) have accounted for 80% of global growth since 2008. However, only 25% of climate finance has flowed to these geographies. By design, the current international financial architecture prevents growth from being green. It is imperative to create a global inventory of green projects with a guarantee that each project can access capital at a similar cost. This guarantee can be facilitated by a transnational institution similar to the Multilateral Investment Guarantee Agency (MIGA). Response to a planetary crisis must not be compromised by perceived political risks.
Second, COP28 must look to institutionalise climate action as an explicit mandate for Multilateral Development Banks, aligning with the MDB reform agenda put forward during the Indian G20 Presidency. The recently expanded BRICS grouping can also be utilised to further the reform agenda. The newer capital-rich members of the grouping should be galvanised to create a line of funds for Green Transitions within the New Development Bank. This can serve as a boutique model which can increase pressure on West-controlled institutions to accelerate their efforts.
Third, progress must be made on the Global Goal on Adaptation (GGA) with a focus on identifying concrete instruments to meet the distinct adaptation finance needs of different regions, particularly for the most vulnerable communities. Furthermore, the GGA should serve as a platform to underscore the repercussions of climate change on health and gender, identifying integrated strategies to tackle these interconnected crises. The Loss and Damage Fund must also be operationalised with concrete financing commitment from the developed world.
Fourth, innovation in climate technologies in the Global South must be encouraged. In particular, green startups should be supported by creating effective knowledge sharing mechanism within the UNFCCC and establishing a social impact fund to support promising green projects.
Finally, it is crucial to diversify and make green technology value chains accessible to all. Presently, China holds disproportionate control over the raw materials and technologies vital for green energy. It is critical to break free from this monopoly and ensure that Beijing does not wield a veto over our green future.
Source : Times of India, December 3, 2023
Samir Saran 