“Mitigating Carbon Emissions in India: The Case for Green Financial Instruments”

New Delhi, 18th of February 2013
Please find here the link to download the report.

Executive Summary
With the sun gradually setting on the Kyoto Protocol (Phase One), it has become quite apparent that the global response to resource scarcity and climate change is going to be variable and disaggregated. Increasingly, countries and businesses across the globe are adopting various financial mechanisms and policies in order to manage such challenges. However, many such responses are restricted to advanced, developed countries, whereas the effects of climate change and the increasing cost of resources such as fossil fuels are likely to be more severe for developing countries. This dichotomy in response measures needs to be urgently addressed, and this report is an attempt to highlight the benefits of an inclusive growth oriented financial response mechanism with particular focus on India.

In its first chapter the report briefly outlines the relevance of GHG emissions mitigation through in- clusive market based mechanisms in India. With shifting patterns of economic growth and increased global demand volatility companies and investors in emerging economies, such as India, need to rec- ognise the value created through the supply chain of business deliverables by mitigating emissions. Mechanisms which exclude companies that do not meet global benchmarks, whether by way of share- holder advocacy and investment exclusion, or regulatory policies, will have a significant impact on the way that these companies choose to grow.

Low carbon strategies can only be implemented if the emissions landscape and its effects on sustainable growth are clearly defined and understood. The second chapter outlines emissions trends in India in order to map the carbon landscape and set the context for the rest of the discourse. Chapter 3 examines the trends of energy consumption and emissions at a sector specific and firm specific level (within the assessed sector). It is found that firms in the assessed sector (cement) are operating in sub optimal con- ditions, along with a lack of policy frameworks and market based emissions reduction incentives – there are no indigenous market based mechanisms to incentivise and stimulate change.
A firm level case study of one of the bigger private players in the Indian cement sector has revealed that the firm’s financial performance could have been better. At the same time, capacity additions and increased output have caused the total emissions of the company to increase, which is not sufficiently offset by the revenue gains. As a result, the firm’s emissions intensity has been rising consistently for clinker production. However, enhanced use of additives has kept the overall GHG intensity of cement based revenue lower. The average emissions intensity of the company was higher for three years than the sector average for the same period. The high correlation between the firm’s environmental perfor- mance and its financial performance has been highlighted.
The results of chapter 3 are aligned with the philosophy that environmental performance must not be excluded from the range of parameters that are used by investors while choosing a stock, especially a long term investment. This is true since the two concepts are inherently interlinked under the overall aegis of sustainable growth. It highlights the need for developing market based mechanisms to signal investment opportunities based upon carbon efficiency and financial performance, as both tend to complement each other in the medium to long term.

Chapter four concludes that; companies preparing for risk are not risk averse, but rather are risk prepared. The difference is subtle but important. Market based mechanisms which incentivise good performance by channelling investments to firms that respond to risk better than their competitors in a given environment, help investors realise this distinction clearly. For “green” market mechanisms and investment vehicles to be viable and effective, they must efficiently ensure that the transmission mecha- nism works and only performance based, credible signals are relayed to the open markets. This becomes even more important in the context of a developing country due to the nascent capital markets, and urgent need for scaling up sustainability initiatives – both at the firm and policy levels.

Capital generation should not be looked at as the problem. Rather, redirecting existing and planned capital flows from traditional high-carbon to low-emission; resilient investment is the key challenge of financing transition to a low-emission economy. In order to facilitate such transitions, a universally replicable model will be used – a multipronged approach to achieve the above objectives. This would involve creation of innovative financial products based on purely quantitative data, create and publish sector wise and cross sectoral market reports, and facilitate progressive policy advocacy in order to en- able market realisation for its products. It will further seek to replicate the model in other developing countries through a hub and spoke approach to expansion.

BRICS, Columns/Op-Eds

Column in SAFPI: More than just a catchy acronym: six reasons why BRICS matters

by Samir Saran and Vivan Sharan
Please find here the link to the original article.

New Delhi: There have been heated discussions over the role of BRICS recently. Ian Bremmer, President of the Eurasia Group, a political risk consulting firm, wrote an eye-catching article in the New York Times in late November, proclaiming that BRICS is nothing more than a catchy acronym. The BRICS nations represent over 43 percent of the global population that is likely to account for over 50 percent of global consumption by the middle class – those earning between $16 and $50 per day – by 2050. On the other hand, they also collectively account for around half of global poverty calculated at the World Bank’s $1.25 a day poverty line. What, then, is the mortar that unites these BRICS?

First, unlike NATO, BRICS is not posturing as a global security group; unlike ASEAN or MERCOSUR, BRICS is not an archetypal regional trading bloc; and unlike the G7, BRICS is not a conglomerate of Western economies laying bets at the global governance high table. BRICS is, instead, a 21st-century arrangement for the global managers of tomorrow.

At the end of World War II, the Atlantic countries rallied around ideological constructs in an attempt to create a peaceful global order. Now, with the shifts in economic weights, adherence to ideologies no longer determines interactions among nations.

BRICS members are aware that they must collaborate on issues of common interest rather than common ideologies in what is now a near “G-0 world,” to borrow Bremmer’s own terminology. Second, size does not matter and it never has. Interests do and they always will. Intriguingly, Bremmer expresses his concern over China being a dominant member within BRICS. Clearly, Bremmer has chosen to ignore the fact that the US accounts for about 70 percent of the total defense expenditure of NATO countries or that it contributes nearly 45 percent of the G7’s collective GDP.

Third, BRICS is a flexible group in which cooperation is based on consensus. Issues of common concern include creating more efficient markets and generating sustained growth; generating employment; facilitating access to resources and services; addressing healthcare concerns and urbanization pressures; and seeking a stable external environment not periodically punctuated with violence arising out of a whim of a country with means.
Fourth, it is useful to remember that the world is still in the middle of a serious recession emanating from the West. As Bremmer himself points out, systemic dependence on Western demand is a critical challenge for BRICS nations. Indeed, it is no surprise that they have begun to create hedges. The proposal to institute a BRICS-led Development Bank, instruments to incentivize trade and investments, as well as mechanisms to integrate financial markets and stock exchanges are a few examples.

Fifth, through the war on Iraq, some countries undermined the UN framework. The interventions in Libya reaffirmed that sovereignty is neither sacrosanct nor a universal right. While imposing significant economic costs on the world, they failed to produce the desired political outcome. By maintaining the centrality of the UN framework in international relations, BRICS is attempting to pose a counter-narrative.
Sixth, in the post-Washington Consensus era, financial institutions such as the IMF and the World Bank are struggling to articulate a coherent development discourse. BRICS nations are at a stage where they can collectively craft a viable alternative development agenda.

In the Fourth BRICS Summit in New Delhi in March 2012, there was clear emphasis on sharing development knowledge and further democratizing institutions of global financial governance within the cooperative framework. BRICS is a transcontinental grouping that seeks to shape the environment within which the member countries exist. While countries across the globe share a number of common interests, the order of priorities differs. Today, BRICS nations find that their order of priorities on a number of external and internal issues which affect their domestic environments is relatively similar.

BRICS is pursuing an evolving and well thought out agenda based on this premise. And unlike Bremmer, we are not convinced that they are destined to fail.

* Samir Saran is vice president and Vivan Sharan an associate fellow at the Observer Research Foundation, New Delhi.

BRICS, Columns/Op-Eds

Article in ‘Global Times’: More than just a catchy acronym – six reasons why BRICS matters

by Samir Saran and Vivan Sharan
Please find here the link to the original article.

There have been heated discussions over the role of BRICS recently. Ian Bremmer, President of the Eurasia Group, a political risk consulting firm, wrote an eye-catching article in the New York Times in late November, proclaiming that BRICS is nothing more than a catchy acronym.

The BRICS nations represent over 43 percent of the global population that is likely to account for over 50 percent of global consumption by the middle class – those earning between $16 and $50 per day – by 2050. On the other hand, they also collectively account for around half of global poverty calculated at the World Bank’s $1.25 a day poverty line.

What, then, is the mortar that unites these BRICS?

First, unlike NATO, BRICS is not posturing as a global security group; unlike ASEAN or MERCOSUR, BRICS is not an archetypal regional trading bloc; and unlike the G7, BRICS is not a conglomerate of Western economies laying bets at the global governance high table. BRICS is, instead, a 21st-century arrangement for the global managers of tomorrow.

At the end of World War II, the Atlantic countries rallied around ideological constructs in an attempt to create a peaceful global order. Now, with the shifts in economic weights, adherence to ideologies no longer determines interactions among nations.

BRICS members are aware that they must collaborate on issues of common interest rather than common ideologies in what is now a near “G-0 world,” to borrow Bremmer’s own terminology.

Second, size does not matter and it never has. Interests do and they always will. Intriguingly, Bremmer expresses his concern over China being a dominant member within BRICS.

Clearly, Bremmer has chosen to ignore the fact that the US accounts for about 70 percent of the total defense expenditure of NATO countries or that it contributes nearly 45 percent of the G7’s collective GDP.

Third, BRICS is a flexible group in which cooperation is based on consensus. Issues of common concern include creating more efficient markets and generating sustained growth; generating employment; facilitating access to resources and services; addressing healthcare concerns and urbanization pressures; and seeking a stable external environment not periodically punctuated with violence arising out of a whim of a country with means.

Fourth, it is useful to remember that the world is still in the middle of a serious recession emanating from the West. As Bremmer himself points out, systemic dependence on Western demand is a critical challenge for BRICS nations. Indeed, it is no surprise that they have begun to create hedges. The proposal to institute a BRICS-led Development Bank, instruments to incentivize trade and investments, as well as mechanisms to integrate financial markets and stock exchanges are a few examples.

Fifth, through the war on Iraq, some countries undermined the UN framework. The interventions in Libya reaffirmed that sovereignty is neither sacrosanct nor a universal right. While imposing significant economic costs on the world, they failed to produce the desired political outcome. By maintaining the centrality of the UN framework in international relations, BRICS is attempting to pose a counter-narrative.

Sixth, in the post-Washington Consensus era, financial institutions such as the IMF and the World Bank are struggling to articulate a coherent development discourse. BRICS nations are at a stage where they can collectively craft a viable alternative development agenda.

In the Fourth BRICS Summit in New Delhi in March 2012, there was clear emphasis on sharing development knowledge and further democratizing institutions of global financial governance within the cooperative framework.

BRICS is a transcontinental grouping that seeks to shape the environment within which the member countries exist.

While countries across the globe share a number of common interests, the order of priorities differs. Today, BRICS nations find that their order of priorities on a number of external and internal issues which affect their domestic environments is relatively similar.

BRICS is pursuing an evolving and well thought out agenda based on this premise. And unlike Bremmer, we are not convinced that they are destined to fail.

Samir Saran is vice president and Vivan Sharan an associate fellow at the Observer Research Foundation, New Delhi. opinion@globaltimes.com.cn

Columns/Op-Eds, Water / Climate

Column in DNA INDIA: “Climate change meets global hypocrisy”

by Samir Saran and Vivan Sharan
Mumbai, 2nd of July 2012
Please find here the link to the original article

And so the saga concludes. A tired, weather-beaten group of States have retreated from Rio de Janeiro after a half-hearted attempt to rescue the world from a host of unsolved problems including climate change and unsustainable development. What unfolded was largely predictable. The Rio+20 declaration, ‘The Future We Want,’ is punctuated with old rhetoric around action and responsibility, laden with sweet murmurings on change, some affectionate recognition of imminent apocalypse and defined by absence of commitment.

The highly contested Kyoto Protocol remains the last substantial effort at the global level on environment. With developed countries lacking resolve to agree and/or act to achieve the set of common goals at the recent Durban Summit, and now, at Rio+20, it is becoming clear that global action is illusory, utopian and certainly less efficient.

It is ironic that at the same time as we dither on committing finance and technology to save the Earth, nations have, with great alacrity and commitment, pumped in trillions of dollars in concert to save wanton banks and financial entities that have failed to meet even basic regulatory and supervisory norms. The US alone has doled out $1.5 trillion to save its financial institutions following the financial crisis created by the same entities, while the developed world collectively put forth around $3 trillion for the same.

In stark contrast, the mightiest leaders of the world gathered at Copenhagen nearly three years ago and pledged, very proudly, a meagre $100 billion a year from 2020 as a collective financial response to climate change. A commitment to provide ‘new and additional’ resources approaching $30 billion for 2010-2012 was also made as part of a ‘fast start’ process. As of now, the fund has still not been capitalised and even the physical location where the fund will be hosted remains uncertain.

The message for Joe the plumber and the aam admi is unambiguous. Saving the banks is a multi-trillion dollar effort requiring action today. Saving the planet will cost only a fraction and can wait for 10 years. So it is hardly surprising when surveys reveal significant decline in interest on matters climate.

And the hypocrisy continues. Most recently, at the G20 Summit at Mexico, BRICS nations, including India, collectively pledged $75 billion through the IMF, to save the failing Eurozone economy from imminent collapse. That developing nations’ policymakers and economists rely on the unsustainable consumption of the western economies for their own obsession with perverse growth makes us willing accomplices. India, Russia, Brazil, South Africa, China are no victims, they just seem eager to sustain the lifestyles of the rich. Lifestyle emissions today account for nearly two thirds of total emissions.

According to the seminal Stern Review on ‘The Economics of Climate Change,’ global atmospheric levels of carbon dioxide equivalent gases must stabilise in the range 450-550 parts per million (ppm) by 2050. Anything higher would ‘substantially increase risks of very harmful impacts.’ Arctic monitoring stations reported this year that the concentration of these gases has already reached 400 ppm and the global average is predicted to reach this level in a few years (2016).

Developed countries currently occupy approximately 80% of the greenhouse gas (carbon) stocks. Developing countries like India need room to grow and per capita energy consumption will have to rise to enable this economic growth and development. Even to rise above the energy poverty level prescribed by the UN, India and Africa will need to increase their energy production by at least three times.

Carbon space will be a natural requirement. This space is now being denied. Hypocrisy becomes malafide now.
The alchemists of capitalism have turned the sparse carbon into ‘carbon real estate,’ available for sale to the highest bidder. The weak and poor have been priced out. And at the G20, we have just offered to subsidise the rich to buy more.
The core issue of equity still eludes all debates and was missing at Rio+20 as well. Mitigation commitments being discussed are just not enough; they are deceitful as they undermine the sovereign rights of other nations. Developed countries will need to vacate their holding of carbon stocks.

One sixth of humanity cannot continue to hold 80% of the total carbon space that is available if western science is to be believed. This is what needs to be negotiated. The time lines and specific action by which these countries have carbon negative footprints must be sought.

It is unfortunate at the very least, if not downright conspiratorial, that countries like China and India have not been able to see through the haze created by the multilateral discourse and identify the real priority: to evict the developed countries who are squatting on carbon real estate that does not belong to them rather than negotiating the partaking of what is left.

Samir Saran is a vice president and Vivan Sharan an associate fellow at the Observer Research Foundation, New Delhi.

Books / Papers, Water / Climate

Identity and Energy Access in India – Setting contexts for Rio+20

by Samir Saran and Vivan Sharan

Please find here the original article as pdf file (starting from page 14): TERI Energy Security Insights.

In the two decades following the Rio Earth Summit of 1992, India has changed dramatically. It has transformed from a closed economy with empty coffers to one that is now far more integrated with the world and is widely viewed as one of the most important ’emerging economies’ that are shaping the 21st century. This year in June, stakeholders from across the globe will convene in Rio once again to discuss what is destined to be amongst the most important contemporary theme-sustainable development. The Rio+20 Summit, otherwise known as the United Nations Conference on Sustainable Development (UNCSD), will serve as an introspective pause, a chance to review development trajectories, and to realign priorities with reality and ambitions. India will find itself in the uncomfortable position of demanding greater development space and equity as a nation from the developed world, while having to reconcile stark domestic inequities amongst different social groups and income classes.
India’s views on the priorities outlined by the UNCSD were communicated in an official submission sent to the UNCSD Secretariat on 28th October, 2011. According to the document, India views universal access to modern energy¹ as “essential for improving the quality of life of the poor”. Yet the nation’s achievements in building capacities to generate or distribute energy in its various forms have been far from remarkable, and indeed far from what is needed to ensure universal access.

India produced around 811 billion units of electricity in 2010-2011,² with about 300 million people with no access to electricity³ and many more with only notional access. The per capita energy consumption in the country remained around 500 kilograms of oil equivalent, compared with a global average of 1800 (MoEF 2007).

India’s National Electricity Policy, which was notified in 2005, outlined the objective of ensuring “power for all” by 2012, an ambition which still remains far from fulfilled. The fact that only about half of the planned 78,577 megawatts of capacity additions took place over the course of the 11th Five Year Plan,⁴ exemplified an abject failure in implementation of transformational energy sector projects.

Such failures in implementing capacity-addition programmes, alongside attracting sufficient domestic and foreign private sector investments in the energy sector, are indicative of a larger political failure. The policy deadlocks that result in the lack of progressive reforms on land use and acquisition, foreign capital flows, and environmental norms have created an uncertainty that adversely affects investment decisions. This uncertainty, coupled with bureaucratic hurdles and the threat of disruptive regulatory and tariff policies, has managed to keep both local and international investors away from large scale, capitalintensive energy projects. This economic environment is also keeping away investments into smaller, off-grid solutions, which already suffer from an inherent lack of scalability and from the weak absorptive capacities within local communities.

This capability gap (in execution), due to a variety of reasons, is also why India is unable to commit to timelines and sought development space (read ‘time’) at the most recent international forum. The virtual deadlock at the Durban Climate Change Conference⁵ is, in part, a result of the inability of India to commit (or even envision) timelines to peak energy emissions, even for achieving global energy poverty thresholds.⁶ This is the real and hidden story of ‘Emerging India’. Perhaps it is time that this is placed on the table at Rio+20 and beyond, and that Indian positions on mitigation and capping of emissions are understood in this light.

The emphasis on universal access to ‘modern energy’ is an important aspect of the Rio+20 agenda, and it may be useful to understand the Indian landscape. According to 2009-10 Indian National Sample Survey (NSS) data from households, 75 per cent of rural India still relies on traditional energy, such as firewood, for cooking fuel; while over 33 per cent in the same category rely on kerosene for lighting (as a substitute for electricity).⁷

Over the period 2004-05 to 2009-10, as a result of focused rural electrification programmes such as the Rajiv Gandhi Vidyutikaran Yojna, access to electricity in rural areas did increase by over 10 per cent; and over the same period, access to LPG (for cooking) in urban areas has also shown significant improvement.⁸
While such numbers indicate that efforts to transform the energy demography have not completely stalled, the dependence on traditional and inefficient forms of fuels has not shown substantial decline. A case in point is the minimal 1.85 per cent decrease in dependence on firewood for cooking across India over the five-year period as shown in Table 1.

Yet these numbers only convey a macro position on energy access. Even cursory examinations of some of the surveys and reports suggest that there are deep and complex socio-economic issues at play that must be addressed and resolved by the policymaking apparatus in order to achieve real progress.

Identity and Access

India is a diverse country, with multiple identities gleaned through the prisms of religion, social groups, regions, language, ethnicity, economic capability, and many more. For the purpose of this paper, it is our intention to examine the state of energy access across social groups and economic classes: the two most prominent identities of modern India.

Even as India aspires to work within a more balanced and stable multilateral framework, and seeks the enhancement of local institutional capacities and capabilities, these alone are unlikely to address the fundamental causes of lack of energy access, and will require substantial levels of organic social transformation through local and national programs. These would need to focus on means of delinking energy access from income class so as to offer a modest quantum of modern energy as a universal right alongside food and education. This may allow certain transformations in the causal relationship that exists today between social groups and income classes (Table 2) and could potentially assist in bridging the socio-economic wedge between marginalized groups and the rest.

On studying the patterns of energy access in Table 3, it is quite apparent that Scheduled Castes (SCs), Scheduled Tribes (STs), and Other Ba ckward Classes (OBCs)¹⁰ in rural areas are more reliant on firewood-a traditional cooking fuel, than ‘other’ social groups who increasingly use modern fuels such as LPG. Firewood has low cooking efficiency, and its use has detrimental effects on health (due to the proximate smoke that is generated) and environment (owing to deforestation and greenhouse gas emissions). The average dependency on firewood is between 76 and 88 per cent across the aforementioned disadvantaged groups, compared to close to 66 per cent for all ‘other’ groups¹¹ in rural areas. The data shows (Table 3) that the dependency on firewood has only increased over time¹² (between 2004-05 and 2009-10) in rural areas amongst the disadvantaged groups, while it has simultaneously shown a marginal decrease for ‘other’ groups.

Alongside the divergences amongst social groups, the difference in energy access across income groups also becomes instructive. The lowest income class is as reliant on firewood in urban areas as it is in rural areas. The startling fact is that the inequity in the urban areas has become more pronounced over the five-year period for the lowest income group shown in Table 4, with reliance on firewood increasing from around 69 per cent to around 76 per cent, and access to LPG decreasing from 5.8 to 1.83 per cent. Although absolute numbers in the lowest income groups have decreased significantly,¹³ affordability is still a key challenge.

Asymmetric patterns of access to electricity are also prevalent in the country. The percentage of households still using kerosene for lighting in rural areas averages between 30 to 40 per cent for disadvantaged groups-a striking figure considering that typical kerosene lamps deliver between 1 and 6 lumens per square meter (lux) of useful light, as opposed to typical western standards of 300 lux for basic tasks such as reading (Mills 2003).

A pronounced inequity of access among social groups is also observable across rural-urban areas in Table

5. While approximately 60 per cent of STs have access to electricity in rural areas (lower than the rural average as given in Table 1), around 87 per cent within the same social group have access to electricity in urban areas. The electricity access divide between the SCs, which are a significant social group in terms of urban population (Table 2), and the ‘others’ is around 9 per cent.

It is interesting to note that the level of access to electricity for SCs in urban areas is roughly equivalent to level of access for urban citizens in the MPCE bracket of INR 675 – INR 790 per month (Table 6), which is representative of a level much below even the conservative World Bank extreme poverty threshold (defined at US$ 1.25 a day).

In terms of energy access, the statistics suggest that SCs are pegged at a level of access for income classes below the average income of this social group. The share of kerosene for lighting has reduced significantly amongst the lowest income classes in rural areas over 2004-05 to 2009-10 (Table 6).

Meanwhile this trend is not witnessed in urban areas, where the inequity is starker over the same period with an increase in dependency on this fuel by 16.32 percentage points. Access to electricity for the lowest income class in urban areas has decreased from 62.1 to 44.56 per cent. This mirrors the trends in cooking fuels and is indicative of inherent inequities in the provision of access to modern energy in urban areas, alongside the implications of price rise and inflation.

While rural areas tend to suffer from an overall lack of access to modern energy, poor inhabitants in urban areas experience discriminatory barriers usually based on economic capacity. Such trends would challenge policies in the context of a sustainable development agenda, as India is likely to witness sustained and rapid urbanization in this current decade and beyond.

According to the provisional numbers released by the Census of India last year, 90,986,070 people were added to the urban population of the country,¹⁴ more than the number added to the rural population. The pace of movement to cities in India is unprecedented, and is on a scale that, outside of China, is unparalleled; with over 30 per cent of the total population already living in urban agglomerations. Our estimates suggest that around 44.5 per cent of the total decadal increase in urban population was a result of migration.¹⁵

Urban centres in India are veritable microcosms of the entire country-with a diverse mix of communities, cultures, and income classes ranging from the marginalized, disadvantaged classes to the expanding middle class-which is the primary driver of consumption and economic growth. Table 7 suggests that the share of OBCs in the overall urban population mix has increased substantially over the previous decade, while the proportions of the rest of the disadvantaged groups has almost remained the same, and ‘others’ have shown a marked decrease.¹⁶ The way that the various sections of society interact with each other, and perceive each other’s spaces and priorities would be an essential ingredient in India’s growth story going forward.

Conclusion

The trends highlighted in this paper demonstrate that existing inequities in access to modern energy amongst the lowest income classes and the disadvantaged groups tend to reinforce each other. The causal relationship between income classes and social groups acts as a self-fulfilling spiral, breeding inter-generational infirmities. Our analysis suggests that this is particularly true in urban areas. Given the fact that India will add over 200 million urban citizens over the next twenty years,¹⁷ increased policy emphasis must be given to urban areas by creating new ways to allow access to energy, especially for those who cannot afford it. The Rio Earth Summit of 1992 coincided with the beginning of India’s increased engagements with the international community. This current decade is likely to determine whether or not the country will succeed in narrowing income gaps, overcoming socio-economic inequities, and reducing poverty through decisive domestic actions. An economy and country which uses a majority of its scarce resources and limited infrastructure to serve only a minority of its people will find it increasingly hard to deflect arguments which suggest that its elite hide behind its poverty. India’s macro position on equity at international fora such as Rio +20 must be reflected in its domestic resolve to offer energy equitably to its diverse population. The imperatives of creating a ‘green economy’ must only follow and complement such efforts.

References

MoEF (2007) India: addressing energy security and climate change. Available at
http://www.moef.nic.in/divisions/ccd/

Addressing_CC_09-10-07.pdf.

IEA (2010) World Energy Outlook, Paris: International Energy Agency. Mills E (2003) Technical and Economic Performance Analysis of Kerosene Lamps and Alternative Approaches to Illumination in Developing Countries, California: Lawrence Berkley National Laboratory.

(Samir Saran is a Vice President and Vivan Sharan an Associate Fellow at Observer Research Foundation)

Courtesy: Energy Security Insights, TERI (January-March 2012)

¹ The International Energy Agency describes modern energy access as “a household having reliable and affordable access to clean cooking facilities, a first connection to electricity and then an increasing level of electricity consumption over time to reach the regional average”. The initial threshold level of electricity for rural households is assumed to be 250 kWh, while urban households are assumed to use 500 kWh per year on average. For more information, see
http://www.iea.org/papers/2011/weo2011_energy_for_all.pdf

² According to the Central Electricity Authority:
http://www.cea.nic.in/reports/yearly/energy_generation_10_11.pdf

³ The latest figure for the number of people without access to electricity is 272 million. This is calculated from the 66th round of the National Sample Survey.

⁴ 34,462 megawatts were added by the end of FY 2011.

⁵ The 17th Conference of Parties held in November, 2011, in Durban, South Africa.

⁶ The 2010 edition of the “World Energy Outlook” published by the International Energy Agency assesses two primary indicators of energy poverty at the household level-the lack of access to electricity and the reliance on the traditional use of biomass for cooking. As is highlighted in this report, India fares badly across both the indicators.

⁷ Data obtained from ‘India Data Labs’ at the Observer Research Foundation.

⁸ Throughout the paper we make the assumption that electrification is the closest available proxy for access to electricity and we acknowledge that access to the grid may not necessarily imply access to energy. In this context, we make conservative estimates of the overall lack of access to electricity.

⁹ The Government of India uses MPCE as proxy for income for households to identify the poor (who tend to have minimal savings).The proxy works well given that expenditure= income – savings. Similarly, we use MPCE throughout this paper to define income classes.

¹⁰ To be referred to as “disadvantaged groups” henceforth.

¹¹ 2010 Data obtained from ‘India Data Labs’ at the Observer Research Foundation

¹² Given that LPG use has increased in rural and urban areas, the simultaneous increase in the use of firewood can also be attributed to the substitution of other low efficiency cooking fuels such as dung cake. It is instructive to note that according to NSS data, the use of dung cake for cooking (all India) has decreased significantly over the discussed five year period amongst SCs and OBCs showing a 3.1 per cent and 5.51 per cent decline in each of the respective social groups.

¹³ According to NSS data

¹⁴ Provisional Population Tools, Census of India
http://censusindia.gov.in/2011census/censusinfodashboard/index.html

¹⁵ According to Census 2011, total decadal growth rate of population is 17.64 per cent. Using this conservative benchmark (urban decadal growth rate is 31.8 per cent); the total population increase in urban areas should have equalled 50,471,513, whereas the figure stands at 90,986,071.

¹⁶ It is important to note the caveat that the NSS relies on self-reporting of people about their Other Backward Classes (OBC).

¹⁷ According to the United Nation’s World Urbanization Prospects, 2009.

BRICS, In the News

Article “BRICS Vision: Making BRICS Development Bank work” in New Themes of Russian-Indian Affairs

by Samir Saran and Vivan Sharan

Please find here the link to the PDF-version of the article: ria novosti article

BRICS, Columns/Op-Eds

Article in “Russia & India Report”: Putin 3.0: Creating hedges for the next decade?

Is Putin going to lessen the Russian dependence on stagnant European demand for oil and gas despite the favourable terms of trade and rely on the hard-bargaining China?

May 17th 2012, New Delhi
Please find here the link to the original publication

The Kremlin has recently announced that Vladimir Putin will be skipping the upcoming G8 meeting in the US sighting domestic concerns and will be visiting China on June 5-7 as his first foreign trip since being inaugurated as President. It is clear that Putin views Chinese demand for Russian oil and gas as a hedge against stagnant Western demand, particularly European demand for Russian exports which showed a huge 47% negative year on year variation in 2009 and is unlikely to grow at rates that will sustain the Russian economy for too long. However, China drives a hard bargain and its quest for energy security through import diversification and oil equity means that it will not accommodate for more than a minimum amount of dependence on Russian raw material linkages.

While his predecessor and protégé Dmitry Medvedev repeatedly emphasised the need for Russia to diversify away from its “primitive” focus on the oil and gas sector, Putin seems to be doggedly set on continuing his outlined profit maximisation doctrine by largely relying on the sector to fulfil social spending promises made during his election campaign. Russia recently surpassed Saudi Arabia as the largest producer of crude oil, and holds the world’s largest natural gas reserves. Approximately 40 percent of the Russian Government’s tax comes from oil and gas related businesses. While Putin has been able to successfully leverage Russia’s natural resource endowments in the past, he is now faced with burgeoning structural problems including huge manufacturing sector inefficiencies, negative demographic trends, deepened socio-economic inequities and populist rebuttals to alleged systemic corruption under his oversight.

The European Union (EU) is Russia’s biggest market and the EU also accounts for around 75 percent of FDI into Russia. According to the European Commission, Russia accounted for 47 percent of overall trade turnover in 2010; a trend which has normalised after the brief disruptions caused by the global financial crisis. However Russia’s competitive advantage with the EU is largely restricted to the trade of fuels and minerals. Even with its massive oil reserves, Russia has lagged behind in the production of petrochemicals and refined oil. While the margins earned on refined oil based products in a globally integrated oil market may not justify expansion of production facilities and there is a distinct competitive advantage in favour of the “Global South” in terms of labour costs and environmental tariffs there are few explanations for the lack of emphasis on developing a profitable export oriented petrochemicals sector in the country. It doesn’t help that the recent socio-political turmoil adds to the disincentives created for any FDI investment flowing into the country.

Indeed Russia exhibits many of the symptoms of the “Dutch Disease”, a term that broadly refers to the deleterious effects of large asymmetric increases in a country’s income, most commonly associated with discovery of natural resources such as crude oil. While there is no consensus about whether the country suffers this affliction and indeed there have been significant per capita income gains as a result of exploitation of raw material wealth, there are real and palpable threats to sustained growth that need to be proactively mitigated by the establishment. A 2007 IMF Working Paper found that some of the exhibited symptoms included a slowdown in the manufacturing sector, an expansion of the services sector and high real wage growth in all sectors. Simultaneously, oil exports have increased by close to 70 percent over the last decade and the value of exports has gone up by around 620 percent during the same time span. Russian crude oil production recently hit an all time high, and Putin is determined to maintain production levels above 10 million barrels per day (about a third of OPEC’s total production) for a “fairly long time”.

In many ways, resource based linkages have guided and defined Russian foreign policy since the disintegration of the Soviet Union. Resources have also dictated Russia’s economic fortunes, which have traditionally fluctuated with the price of crude oil. Crude oil has quadrupled in value since the early 2000s, and at the same time, Russia has transitioned into becoming a Middle Income Economy with an incredible number of super–rich. It is interesting to note however, that despite the asymmetric dependence on raw material exports, Russia’s currency has been depreciating. Due to the underinvestment in the manufacturing sector and the overall lack of competitiveness of the domestic goods, import growth has tended to outpace export growth. The current account balance as a percentage of GDP has declined substantially since the mid 2000s and with structural production ceilings being hit in the oil and gas industry, there is uncertainty about where the additional export growth is going to be generated. Putin seems certain that recently announced tax breaks for upstream oil and gas exploration projects and fiscal incentives for M&A activities will help fuel this production growth. Tax breaks have been provided for offshore energy projects with Western companies including Exxon Mobil Corp., Eni SpA and Statoil ASA. Simultaneously he also plans to raise extra revenues from the resources sector to pacify some of the populist anger that is brewing through increased government spending, in particular by significantly increase extraction tax on gas suppliers.

Putin has an uphill task, to reassure foreign institutional investors of the legitimacy and stability of his political apparatus. In order to achieve competitive advantage in the export of petroleum related products, the Russian Government has ambitious goals to create six regional clusters of world class ethylene (the world’s most widely produced organic compound) production facilities and expects production capacity to reach 11.5 million tonnes per annum by 2030. This projection assumes a fundamental amount of investments and supporting infrastructure capacity building in the form of product pipelines, road and rail links. Distribution and feedstock concerns already plague the industry.

The seemingly irreversible economic meltdown in Europe must act as a trigger to stimulate new ideas and a break out of the traditional resource centric growth mindset in the Kremlin. Developing and emerging countries account for around 50 percent of global GDP in purchasing power parity terms and Russia must look to deepen integration through trade with these markets. China is but one of these and its sino-centric economic startegy may soon be an albatross around its neck. Moreover trade must be on the basis of a diversified basket of products on offer with emphasis on value addition.

The East Siberia-Pacific Ocean (ESPO) oil pipeline which is now operational has enabled Russia to bring oil to its remote eastern coast, from where it supplies to China, Japan and South Korea. The Chinese have been actively lobbying to get all of the oil transported through the ESPO, but Russian oil companies are naturally hesitant as they are unwilling to forgo the higher margins they receive by selling to Western countries. The Russian experience with the hard bargaining Chinese must not colour their prospective engagements with other emerging and developing countries. In the next few decades, global growth will be a function of how such economies in Asia and Africa perform, and in turn, so will Russia’s economic fortunes. Putin would do well to hedge away from dependence on European demand even though terms of trade may be favourable and fall in the comforting squeeze of the Chinese option.

Samir Saran is Vice-President and Vivan Sharan an Associate Fellow at the Observer Research Foundation, New Delhi.

BRICS, Columns/Op-Eds

BRICS, Steel, Mortar….and Money – Analysis of the 4th BRICS Summit in New Delhi

by Samir Saran and Vivan Sharan
4th of April 2012
Please find here the original link to the article.

With the Delhi Declaration, BRICS nations, which met recently in the Indian capital, have shown that they have the steel to stand up to traditional power structures, a cohesive vision to jointly respond to development challenges through institutionalisation of concrete mechanisms, and the determination to channel monetary power to strengthen markets, businesses and trade. The Declaration indeed gives insight into the gradual transformation of BRICS, from essentially a response mechanism crafted to address the various development challenges posed by the global financial crisis, to a forward looking entity seeking to enact and enable real global transformation.

The Delhi Declaration extends over 50 paragraphs which are all encompassing in some sense and address many relevant themes for BRICS countries and the developing world at large. The Declaration is significantly more impressive and comprehensive than the 16 paragraph Joint Statement of the BRICS Leaders at the first summit held at Yekaterinburg in 2009 and the sketchy and macro statement of purpose at Sanya last year. The Action Plan within the Delhi Declaration consists of 17 steps which will deepen intra-BRICS engagements. There are three prominent narratives that define the Delhi Declaration – reaffirmation of the UN framework for global governance, disappointment with financial regimes shaped in the mid 20th century and a confidence to tap into economic opportunities that exist within BRICS.

The Delhi Declaration has stamped the intent of BRICS nations to coordinate and collectively respond to global security challenges within appropriate frameworks that give precedence to fundamental principles such as international law, transparency and sovereignty. BRICS members have recognised and re-emphasised the centrality of the UN in dealing with regional tensions and they have explicitly outlined this for specific cases including the Arab-Israeli conflict, the Syrian imbroglio and the contentious Iranian nuclear programme.

The Declaration unambiguously states that “plurilateral initiatives” that go against the fundamental principles outlined earlier, will not be supported by BRICS. The Declaration is clearly against actions such as asymmetric trade protectionism, unilaterally imposed sanctions and taxes imposed on businesses. The EU’s Aviation Tax is one such example from contemporary policymaking. In terms of trade, there is strong emphasis on operating within legal instruments such as the WTO and institutions such as the UNCTAD for furthering the inclusive development efforts through consensus and technical cooperation.

The aftershocks from the financial crisis are still a cause of concern to the BRICS nations. The pre-occupation with Europe has distracted attention from the social transformation programmes and poverty alleviation efforts among BRICS members. The Delhi Declaration has spelt out the “immediate priority” of restoring market confidence and getting global growth back on track. The steps to address such concerns will include attempts to rebalance global savings and consumption, furthering of regulatory and supervisory oversight in the financial markets, increasing the voice of developing and emerging nations in global financial governance and the institutionalisation of financial mechanisms to redirect existing capital to tackle development imperatives.

The BRICS members have therefore announced a working group led by the Finance Ministers of the individual nations, in order to examine the “feasibility and viability” of a BRICS Development Bank. When formed, such an institution will likely be able to shift and contextualise the development discourse within and outside BRICS and therefore is one of the most significant actionable outcomes. It is evident that such a multilateral institution is not meant to compete with existing ones, but rather, to enhance lending and investment to create sustainable development trajectories. Contrary to expectations several high ranking Chinese policymakers, including the Assistant Foreign Minister, Ma Zhaoxu, have supported the idea.

The BRICS members have clearly outlined that the purpose and nature of Bretton Woods Institutions such as the World Bank, must shift from being essentially a mediation instrument to enable North-South cooperation, to one which can actually prioritise “development issues” and overcome the “donor-recipient dichotomy”. They have also called upon the World Bank to mobilize greater directed resources and enable development financing at reduced costs through financial innovations and improved lending practices. Indeed for BRICS, the focus on World Bank and IMF reforms has remained constant through the years, yet the Delhi Declaration articulates these concerns more lucidly than ever before.

Given that intra-BRICS trade has been consistently on the rise over the past decade, BRICS Leaders have endorsed the conclusion of the Master Agreement on Extending Credit Facility in Local Currency under the BRICS Interbank Cooperation Mechanism and the Multilateral Letter of Credit Confirmation Facility Agreement between their respective EXIM/Development Banks. Such steps to mitigate market risks and enable local currency transactions will only add to the existing momentum and build resilience in BRICS economies to global business cycle fluctuations and exchange rate volatilities. Notably, BRICS have also endorsed the market led efforts to set up a BRICS Exchange Alliance between the major stock exchanges of BRICS, which will enable investors to efficiently allocate capital across BRICS economies and invest in the BRICS growth story.

The unity and purpose of BRICS has been the target of speculation and scepticism from various quarters. With the Delhi Declaration, BRICS members have been able to assuage such doubts as they have begun to create a credible hedge against traditional global narratives of security and development. They have simultaneously been able to project that there is resolution within the group to deal with issues that are not only of immediate concern but even those that will need attention in the future. The Delhi Declaration paves the way for the institutionalisation of BRICS cooperation, making BRICS a significant transcontinental and politically united force. In Sanya BRICS spread wide to include South Africa; in Delhi they went deep to include substance.

Samir Saran is Vice-President and Vivan Sharan an Associate Fellow at Observer Research Foundation. The Foundation hosted the BRICS Academic Forum in March this year.

BRICS, Columns/Op-Eds

Column in The Hindu: “Banking on BRICS to deliver”

New Delhi, 27th of March 2012
Please find here the link to the original article

If conceptualised carefully, the Bank can help rebalance the global economy leading to equitable and resilient growth.

Even as New Delhi prepares for the arrival of BRICS Heads of States towards the later part of the week, media and experts across the world continue to debate the relevance, capacity and cohesiveness of the grouping. The common refrain in the western press is that it is a ‘motley crew’ with little in common and therefore with little capability to create institutions and multilateral platforms of substance. Well, they may be in for a surprise. In fact, BRICS may also surprise itself.

Besides the usual declarations on cooperation on political matters, social challenges, climate and energy, food and water, health and education, industry and trade, BRICS is likely to make two significant announcements this time, which will, in many ways, mark its coming of age. First — the formal launch of the “BRICS Exchange Alliance” in which the major stock exchanges of BRICS countries will offer investors index-based derivatives trading options of exchanges in domestic currency. This will allow investors within BRICS to invest in each other’s progress, expand the offerings of the individual exchanges, facilitate greater liquidity, while simultaneously strengthening efforts to deepen financial integration through market-determined mechanisms. From talking to people in the know, this alliance is good to go, and the operational modalities around currency, settlement cycles and inter-exchange regulatory coordination are all issues that have been thought through and resolved.

‘South-South bank’

The second announcement that has people most interested is on the much discussed “BRICS Bank” or the “South-South Bank” that many consider to be an Indian proposal for creating an institution that can serve the development needs and aspirations of the emerging and developing world. This proposal saw much debate (some heated) at the recent BRICS Academic Forum and surely was a key issue for deliberations at the recently concluded BRICS Finance Ministers Meeting. There are many complex and some contested issues that need to be discussed and thought through, but due to the growing support for such an institution among BRICS it is almost certain that the leaders will, at the very least, announce a working group to study the feasibility and operational modalities of such a multilateral bank. Whether they are bold enough to suggest a time line for its establishment remains to be seen but in the opinion of many, it is an idea whose time has come.

Foremost amongst the reasons for the creation of the institution is the need for BRICS to assume pole position in global financial governance. BRICS nations represent nearly half the world’s population. Two of them are already among the top five economies in purchasing power parity terms, and four are in the top 10. If conceptualised carefully, such an institution will have the potential to reshape and realign the global development agenda positively. It can also help to efficiently redistribute and redirect savings available with the emerging economies to infrastructure and social development in the same regions and, therefore, contribute to the rebalancing of the global economy.

Several multilateral banks already exist, that serve as templates for creating a new institution. The World Bank, which is deeply embedded in the global development narratives, serves as a particularly relevant example. If a multilateral BRICS bank is instituted, its functions would not supplant the role of existing multilateral banks that support development, but rather, supplement them. And this supplementary instrument is needed as multilateral banks such as the World Bank, ADB, etc., have not been growing significantly in terms of the total amount of loans disbursed. While there was a jump in disbursals following the financial crisis, the normalisation process is already under way. On the other hand, demand for funds for infrastructure and social transformation grows unabated in BRICS and the developing world.

But how would the BRICS Bank work? There are doubts expressed in some quarters on the process of capitalisation itself. The Bank would have to raise capital from open market operations; floating debt to finance lending operations. While the reliance on markets for raising capital would make the fiscal asymmetries within BRICS nations irrelevant, the sovereign ratings of some of the members, who will collectively be the shareholders of a BRICS Bank, are barely investment grade. This would limit the amount of capital that could be raised from the financial markets and also affect the cost of capital and therefore the cost of lending. One suggested solution is the sequestration of a proportion of foreign reserves of BRICS members into a trust fund that would back-stop the borrowed capital. In the case of the World Bank, the total paid-up capital is around 10 per cent while the rest is AAA rated ‘callable capital’, which has never been requisitioned. To enhance the creditworthiness further, existing multilateral banks, and other western countries could also be given minority stakes.

China’s role

The second element that is always embedded in the discussions around the bank is the role of China. An impression is sought to be created that with its massive monetary reserves and political clout, China may exert undue influence in this bank. This is unlikely. Such a bank will not require too much paid-up capital (relative to the average size of respective sovereign reserves) if intelligent financial engineering can help sequester foreign reserves. This would mean that the smallest BRICS economy, South Africa, could easily commit an amount similar to that of China in the capital structure. Such doubts could be further allayed with the institution of a rotating Presidency of, say, a two-year term that could initially be restricted to the BRICS countries alone. In any case, the charter of any modern day banking institution with sovereign stakeholders would need to include the mandates of transparency and independence, which would make the institution as viable as any.

The third aspect that remains central to the viability of such a bank is the currency of business. There would be expectations that such a bank would transact in local currencies where possible and in international currency when needed. The bank would need to work with the right currency mix to mitigate credit risk while simultaneously balancing intricate political dynamics within BRICS. For instance, being a current account deficit country, India would not be averse to the U.S. dollar being the currency of disbursal while Brazil with its appreciating “Real’ may prefer local currency. The Chinese may see this bank as a platform for promoting the Renminbi as the currency of choice, especially among the emerging and developing countries. Ultimately, the right mix would need to take into account monetary policy and exchange rate imperatives of each of the primary sovereign stakeholders and in a manner that makes this venture uncomplicated and attractive to other stakeholders as well.

The fourth aspect is the business mandate of such a bank. An effective development bank would have to integrate the multiple economic priorities. Key areas such as infrastructure and the medium and small scale enterprises sector could be natural starting points. The Brazilian Development Bank (BNDES) could be considered an exemplar. The BNDES disbursed close to $140 billion in 2011, with around 30 per cent going to the medium to small enterprises sector (MSME) and about 40 per cent going to large infrastructure projects. The BNDES also played a crucial role in stabilising the Brazilian economy after the financial crisis by stepping up development assistance. Similarly, a BRICS Bank could also assume the role of a financial support mechanism which appropriately responds to the variabilities in the global economy.

Corporations are the primary growth drivers of BRICS economies. They create economic momentum, new business opportunities and, most importantly, in the context of BRICS, employment. The creation of SPVs to cater to the investment and insurance needs of corporations would therefore complement the development agenda. The World Bank’s International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) provide readymade frameworks. The IFC provides investment solutions for the private sector through services such as equity finance and structured finance, while the MIGA provides non commercial risk insurance guarantees. Guarantees against political risk — which is a significant investment constraint in emerging markets — could facilitate a spurt of new business activity within BRICS, and lest we imagine this instrument to be risk-laden, MIGA has paid only six insurance claims since it was set up in 1988 and needs no counter guarantees.

Need for consensus

BRICS is in transition and cannot afford to lose growth momentum. Multilateral institutions such as a BRICS Bank can aid in sustaining directed, equitable and resilient growth. A consensus on the creation of such an institution would be a very real expression of intent by BRICS to craft alternative development trajectories to those passed down by the OECD countries. And it is also time to Bank with BRICS.

Samir Saran is Vice-President and Vivan Sharan an Associate Fellow at the Observer Research Foundation. The foundation hosted the BRICS Academic Forum in March this year.

BRICS, Columns/Op-Eds

Column in The Economic Times: “Building a new world”

Economic Times of India
14th of March 2012
Please find here the PDF version of Article – Building a new world1

The 4^th BRICS Academic Forum recently concluded in New Delhi. Over 60 delegates representing academic institutions, think tanks and expert community from the member countries participated in substantial debates that covered virtually every challenge and opportunity of contemporary times. The debates were intense, sometimes combative but almost always conducted among friends. This was the key takeaway from this meeting. The community is strong, it is aware of the differences, eager to resolve those and is comfortable with the irresolvables. The skeptics of BRICS for four years, would now need to rethink, this group has evolved, this group sees potential in greater and deeper engagement, and this group is capable of proposing bold and visionary ideas at the New Delhi Summit later this month and in the other interactions before and after.

This was not always the case and we only have to recall the early days of the relationship. To anyone witnessing one of the early Track 2 interactions on a cold day in Moscow in 2008, it would have seemed improbable that the grouping would come this far. There was early hesitance and unformed agendas among each of the experts gathered from the four countries (at that time BRIC). The Brazilian experts were unsure of their being there in the first place. A very prominent diplomat from Brazil saying, “why are we here, why do you need us, you are all neighbours and should talk amongst yourselves”. The Russians at that time, and who must be credited for the inception of the BRIC idea, saw in it a political opportunity to create a grouping of that could counter the Atlantic alliance and the Western economic and political weight. They were to be dissappointed, India and China were already deeply integrated with the US and EU in the arena of trade and economics and would not play ball. The experts from China liked the BRIC idea, which could be another instrument for projecting their growing pole position in world affairs and India was beginning to manage the nuances of diverse relationships in multi-polar world. It had also learnt from the SCO experience and this time it would not demur.

However, the early days of the conversations amongst experts and indeed among the policy makers from these countries lacked detail. This has changed, from the macro discussions on global governance, financial architecture, security and greater coordination, the discussions today focus on the substantive, on experince sharing, on creating institutions and linking up existing ones. In the fourth year of the BRICS (South Africa joined last year), the group has come of age. This is attested to by two facts. First, the experts from the four countries have signed an agreement to step up their interactions which till now have been sporadic and on the sidelines of the Leaders Summit and two, the wide ranging recommendations that the experts forum has submitted for the consideration of the Leaders at the summit in New Delhi demonstrate the limitless possibilities for the grouping.

The Forum’s recommendations to the 4^th BRICS Leaders Summit to be held in New Delhi on March 29^th are relevant and actionable. They are the result of intense discussions, debates and negotiations between the delegates on common challenges and opportunities faced by BRICS members, as they seek to set the global agendas for governance and development going forward. The theme for this year’s Academic Forum was “Stability, Security and Growth” – all common imperatives for the emerging and developing BRICS nations.

17 policy recommendations were carefully crafted by the Forum and are centred on key priorities for BRICS within the aegis of governance, socio-economic development, security and growth. The mandate of the Forum was to provide concrete policy alternatives to BRICS Leaders and to the credit of the delegates this year, the recommendations may have lived up to the mandate. The Forum deliberated context specific micro debates embedded within larger narratives. Varied and significant themes were addressed including the articulation of a common vision for the future; a framework to respond to regional and global crises; climate change and sustainable resource use; urbanization and its associated challenges; improving access to healthcare at all levels; scaling up and implementing new education and skilling initiatives; the conceptualization of financial mechanisms to support and drive economic growth; and finally sharing technologies, innovations and improving the cooperation across industrial sectors and geographies.

The Forum deliberated upon two distinct sets of engagement. One set of engagements is through research and initiatives that are “Intra-BRICS” in nature. These involve experience sharing across social policy, resource efficiency, poverty alleviation programmes, sustainable development ideas, innovation and growth. Each of these themes can be effectively mapped to help tailor policy within BRICS. The recommendations highlight the possibilities for enhancing such engagements through exchange of institutional experiences and processes, free flow of scholars and students, joint policy research, capacity and capability building for facilitating such interactions.

The second set of engagements and outcomes pertain to interaction of BRICS with other nations, external actors and groupings at various multi-lateral forums and institutions. These are reflected in the recommendations pertaining to climate policies, Rio +20, financial crisis management, traditional security threats, terrorism and other new threats and global challenges around health, IPR and development.

The Forum provided a valuable platform for exchange of perspectives between delegates without adhering to national positions or party loyalties. There were heated debates on issues such as the possible institutionalisation of a BRICS Development Bank and an Infrastructure Investment Fund that could assist in the development aspirations of the BRICS and other developing countries. The discussions on the setting up on new, credible institutions to initially supplement and eventually substitute existing financial institutions such as the World Bank and IMF reflect the strong desire of BRICS to move ahead and away from the traditional development agendas of 20^th century institutions that are today incapable of empathising with some of the realities and aspirations of the 21^st century. This is perhaps a reflection on the way Bretton Woods Institutions are managed and governed and indeed to their legitimacy itself.

The recommendations reveal that BRICS view the sustainable development agenda through the lens of inclusive growth and equitable development primarily. The recommendations have also clarified that BRICS will continue to focus on achieving efficiency gains in resource use. Both these outcomes point towards resolute and far sighted policy guidance by the Forum. Climate change mitigation debates which have become a proxy for “Promoting Green Technology” and indeed are an outcome of “re-industrialisation policy” of some EU countries were conspicuous by their absence from the debates. Instead, with “plurality in prosperity” as a common ideal, the outcomes also signify that the research community within BRICS want the sustainability discourse to shift from one that emphasises common responsibility to one that emphasises common prosperity. This means that BRICS must attempt to reorient consumption patterns and energy use globally, towards sustainable trajectories. The BRICS Leaders would do well to replicate the cohesiveness of the BRICS academics in the articulation of their vision for creating sustainable economies, ecologies and societies. Similarly the promotion of cultural cooperation, establishing innovation linkages, sharing pathways to universal healthcare and medicine for all, strenghthening indigenous knowledge are all recommendations that are timely and appropriate.

The gradual transition process of BRICS becoming the global agenda setters has been one of the more exciting developments to watch and study. While sceptics may still dismiss the possibility of BRICS being “rule-makers”, it is unlikely that they will not influence “rule-making” processes. The experts at the forum were unambiguous in their vision for the grouping. While recognising that in many instances BRICS might eventually yield to sub optimal policy formulations due to national agendas and geo-political constraints, they were determined that the incubation period is over and now the bar must always be set high and the leaders must be ambitious. In the words of one of the delegates at the 4^th BRICS Academic Forum, BRICS have indeed created a “new geography of cooperation” and opportunities are boundless.

Samir Saran is Vice-President and Vivan Sharan an Associate Fellow at the Observer Research Foundation. The foundation hosted the 4^th BRICS Academic Forum.