Can India become competitive while pursuing climate resilient development? Difficult but possible

The recently released report of the Intergovernmental Panel on Climate Change (IPCC) in February, 2022 has made it clear that the future lies in climate resilient development, or nothing. Following on the heels of COP26 it has suggested serious and urgent attention to adaptation of climate risk management and mitigation policies, so that the goal of 1.5 degree temperature is met. One might think this means substantial investment in renewable energy, clean technology, infrastructure, and linked sectors, perhaps at the expense of others, and sacrificing competitiveness.

Given the abundance of traditional energy sources like coal, and their dependence on linked industries, some of our states like UP, MP and Odisha may not be naturally competitive in these areas. They may lose out in this race of attracting investment. This may exacerbate inequalities, unemployment and poverty, while simultaneously compromising their revenue generating capacity and competitiveness. Moreover, employment generation due to this shift might also be concentrated in the more developed states of India, resulting in regional disparities and also livelihood losses. Thus, the question is, can competitiveness and our jobs agenda and climate resilient investment go hand in hand?

The IPCC report also cautions about risks of mal-adaptations in design and implementation of policies. This can have adverse consequences for the society, particularly for the vulnerable groups. It suggests some enabling conditions to ensure optimal design and implementation of such policies. In a recently released
White Paper on Improving India’s Competitiveness for Inclusive Economic Growth, jointly curated by CUTS International, Institute for Competitiveness and Institute for Studies in Industrial Development, we review the enabling conditions for improving and sustaining India’s competitiveness and found substantial similarity with the conditions mentioned in the IPCC report. These are:

Investment in intangible assets: Competitiveness for inclusive growth is underlined by strengthening of social and economic infrastructures in education and health. The IPCC report also highlights that the feasibility and effectiveness of climate mitigation policies is dependent not just on physical infrastructure development but also on social infrastructure. This would enhance the adaptive capacity of the vulnerable groups through their livelihood diversification and employment, as well as access to basic services and infrastructure. Thus, investment in health and education will be critical for building competitiveness and human capital, as well as climate resilient development.

Better convergence among policies and actors: For competitiveness, it is essential to ensure convergence among different policies and actors, both within and outside government and at various levels. As per the IPCC report, if policies focus on sectors in isolation, it would lead to mal-adaptation. It emphasises on multi-sectoral, multi-actor approach and inclusive planning, to minimise adaptation failures. This means that public sector firms, private players, trade unions as well as civil society organisations all must participate in policy designing, as it would ensure that all interests of stakeholders, especially the vulnerable, like local and poorer communities, are taken into account.

Modernising and Enhancing Capacities of Public Institutions: Building institutional ability, strength and credibility, is the backbone for competitiveness of an economy. The IPCC report also acknowledges that effective adaptation may be constrained by institutional and technological capacity. It notes that effective implementation of adaptations through financial and technological resources is possible only when supported by institutions with capacity to understand the requirements.

Cooperative Federalism: This principle is at the core of all the factors. Notably, the IPCC report, in multiple instances highlights the importance of coordinated action at all governance levels. Our White Paper on competitiveness also lays sufficient emphasis on coordination among three levels of governance and between departments. This is especially relevant in a country like India with existing inertia and economic disparity which adversely impacts competitiveness.

India is already on a clear policy pathway towards climate resilient development, as evidenced by its ambitious commitments at COP26. This would require infrastructure development, for which the government is promoting foreign and domestic investments, through schemes such as Production Linked Incentives. The private sector is also making sufficient strides by investing heavily in renewable energy, electric mobility and non-fossil fuel sources, towards its own decarbonisation goals. These investments will propel India’s competitive growth, generate employment and contribute to climate change mitigation.

However, such transition for climate change adaptations need to happen in a just, fair and equitable manner, taking into account existing competencies and competitiveness of different regions. Investments must serve both developmental and adaptation objectives. Only when climate resilient development occurs with inclusive growth, and equity and justice are prioritised, can it lead to sustainable outcomes.

India must seek to achieve the dual objectives of economic growth and achieving its own climate goals, through carefully curated and implemented policies for attracting public and private sector investments. Given the extreme inequalities in India, the policies for achieving these objectives, must prioritise sustainability (for future generations), inclusivity (for vulnerable groups) and equity (to reduce economic disparity). This can only happen when the fundamental building blocks of a competitive climate resilient economy, as discussed above, are in place. The future of India as a competitive economy, contributing to global climate change goals with equitable domestic growth, lies in this integration.

The authors work for CUTS International, a global public policy research and advocacy group.