9 minute read 25 Nov 2021
India climate change policy

India is playing a key role in shaping global growth and economic policy

By D. K. Srivastava

EY India Chief Policy Advisor

A noted economist, D.K. Srivastava is an Honorary Professor at Madras School of Economics and Member of the Advisory Council to the 15th Finance Commission.

9 minute read 25 Nov 2021

With a prominent role in G20 and COP26 summits, India to drive the global economic agenda.

In brief

  • India’s growth projected at 9.5% in FY22 is the highest among all major economies.
  • In the two international summits namely, G20 and COP26, India came up with innovative initiatives such as “One Earth One Health” and “One Sun One World One Grid”.
  • At the G20 summit, India committed to producing 5 billion COVID vaccines for the country and the world by end-2022

The recently concluded G20 and COP26 summits in Rome and Glasgow respectively have shaped the global economic policy in the immediate and long-term horizons. India showed impressive initiatives to take a leading role in participating in the global economic agenda pertaining to the G20 theme of People, planet and prosperity and the COP26 theme of containing global warming to within 1.5 degree Celsius above the pre-industrial levels by 2100[1].

Role of G-20 countries in global growth

The members of the G20 group accounted for nearly 81% of the global GDP in PPP terms in 2020 (Table 1). This share is expected to remain unchanged in the next five years. In fact, the overall share of G20 countries in world GDP has broadly remained stable in the range of 79.6% to 81.8% between 2000 to 2020, but the share of some individual countries has undergone significant changes. The share of China increased from 7.3% in 2000 to 18.3% in 2020 and that of India increased from 4.0% to 6.8% during this period. This happened at the cost of a fall in the share of European Union (EU) from 20.3% to 15.0% and that of the US from 20.4% to 15.8% over the same period. Going forward, as per the IMF’s forecasts, China and India are expected to show maximum gains in their shares between 2020 and 2025 of 1.5% points and 1.1% points respectively. By 2025, four countries/ country groups namely, China, US, EU and India would account for 57.2% of the global output.

Share in world GDP at current prices, PPP (%)

Measured in current prices at the market exchange rate, the share of G20 countries is even higher in global output ranging from 85.8% in 2015 to 89.1% in 2000. Clearly, the decisions of the G-20 countries are going to be critical for the three-welfare oriented themes of the Rome summit 2021.

In terms of the impact of COVID on real GDP growth in 2020, Chart 1 shows that the maximum erosion in growth in 2020 happened for Argentina ((-)9.9%), the UK ((-)9.8%), Mexico ((-)8.3%), India ((-)7.3%), South Africa ((-)6.6%) and the EU ((-)5.9%). In 2021, these economies are projected to show positive growth rates with India leading the global growth at 9.5%.

Controlling COVID: highlighting India’s role

The G20’s agenda included considerations of various SDGs including elimination of poverty and achieving better outcomes for health and education, food security, better nutrition and removal of hunger. With regard to health, we consider how different G-20 countries got affected by COVID as an immediate challenge to the health dimension of people’s welfare. 

Chart 2 shows the cumulative incidence of COVID cases per 1000 of population until 9 November 2021. The highest incidence is reported for the US at 138 cases per 1000 population, followed by the UK at 135 cases. At the lower end, the least incidence is reported for countries like Australia, Saudi Arabia and Japan. India at 25 cases per 1000 population, is towards the lower end of this comparative position. The average for the G-20 countries is 39 cases per 1000 population.

As per the United Nations[2], “the pandemic has halted or reversed progress in health and shortened life expectancy”. Further, “90% of countries are still reporting one or more disruptions to essential health services”.

In this context, in the G20 theme relating to people, the main focus was on dealing with COVID vaccination. The G20 nations agreed to progress towards achieving the global goals of vaccinating at least 40% of the population in all countries by end-2021 and 70% by mid-2022, as recommended by the World Health Organization's (WHO) global vaccination strategy. It is notable that in India, as of 21 November 2021, the entire eligible population, that is population aged 18 years and above, has been administered at least one dose with 21% having received both the doses. Further, in the G20 summit, India committed to producing and supplying five billion vaccine doses domestically and to the rest of the world by end-2022.

Achieving climate change targets: India’s promises and prospects

While recognizing the availability of resources in the planet as the key to people’s prosperity and welfare, the G20 group recognized the key challenges for the planet as relating to climate change, land degradation and biodiversity loss. The climate challenges were also discussed in the COP26 summit held in Glasgow. India played a prominent and leading role in proposing significant and innovative initiatives such as One Earth One Health, Green Grids Initiative (GGI), and One Sun One World One Grid (OSOWOG). EY is proud to have worked closely on the OSOWOG initiative as the knowledge partner, right from its conceptualization to evolution[3].

The ‘Advance Version’ of the Glasgow climate pact emerging out of COP26 deliberations was published on 13 November 2021[4]. This pact calls on countries to ‘revisit and strengthen’ climate goals in order to limit global warming to 1.5 degree Celsius above pre-industrial levels by 2100 in line with the target set out in the Paris Agreement. It recognized that achieving this target requires reducing global emissions by 45% by 2030 relative to the 2010 level and to net zero around mid-century. It was noted that the current Nationally Determined Contributions (NDCs)[5] of individual countries were inadequate to stay within 1.5 degree Celsius and would lead to an increase in temperature of about 2.4 degree Celsius until 2030. The proposal urged nations to submit their updated pledges by the end of 2022, ‘stressing the urgency of increased action in relation to mitigation, adaptation and finance in this critical decade to address the gaps in the implementation of the long-term goals of the Paris Agreement’.

With respect to climate financing, the developed countries committed to providing US$100 billion annually to developing countries. The idea of doubling finance for adaptation was also discussed. Further, a process to define the new global goal on finance was launched.

In the COP26 deliberations, an agreement was reached on the fundamental norms related to Article 6 on carbon markets, making the Paris Agreement fully operational. This would give certainty and predictability to both market and non-market approaches in support of mitigation as well as adaptation. Further, negotiations on the Enhanced Transparency Framework were also concluded, providing for agreed tables and formats to account and report for targets and emissions by the countries[6].

At the COP26 summit, India announced a five-point agenda to deal with the challenge of climate change. This five-point agenda is a verbal declaration of India’s updated NDCs. These points are as follows:

  1. Increasing India’s non-fossil energy capacity to 500 GW by 2030.
  2. Meeting 50% of India’s energy requirements from renewable energy by 2030.
  3. Reducing total projected carbon emissions by one billion tonnes from now till 2030.
  4. Reducing the carbon intensity to less than 45% by 2030.
  5. Achieving the target of net zero emissions by 2070.

India supported major economies like China and the US[7] in their endeavour to replace the phrase “phase out” by “phase down” of ‘unabated coal power and inefficient fossil fuel subsidies, recognizing the need for support towards just transition’[4]. India emphasised the need for climate justice and exhorted the developed countries to transfer finance as well as technology that is necessary for the developing countries to meet their climate targets.

The G20 summit for 2023 is proposed to be held in New Delhi with the chairmanship of the G20 group passing on to India from December 2022[8]. It will thus be India’s responsibility to follow up on the progress of the G-20 priorities for People, planet and prosperity. By that time, COVID-19 may well be brought under control in India as well as in the rest of the world with India playing a significant role in vaccine production and distribution across a large number of countries.

Summary

With the G20 chairmanship passing on to India from December 2022, it will be India’s responsibility to follow up on the progress of the G20 priorities for people, planet and prosperity.

About this article

By D. K. Srivastava

EY India Chief Policy Advisor

A noted economist, D.K. Srivastava is an Honorary Professor at Madras School of Economics and Member of the Advisory Council to the 15th Finance Commission.