On May 3, the Reserve Bank of India (RBI) released a report on currency and finance (RCF) for financial year (FY) 2022-23. The theme of the report is ‘Towards a Greener Cleaner India.’ he insights of the report can help us understand the future direction of India's economy and the measures that need to be taken to achieve the country's green and sustainable goals.

According to the RBI, the initial step towards a post-pandemic economic strategy is the timely rebalancing of fiscal and monetary policy. It went on to say that the most important thing is to remove the surplus liquidity overhang gradually since average inflation increases by 60 basis points for every percentage increase in the surplus liquidity beyond 1.5% of the Net Demand and Time Liabilities. This step can help in achieving price stability, which is a necessary precondition for strong and sustainable growth.

Structural Reforms:

The report suggests several structural reforms that can help in achieving this goal.

1. Enhancing access to litigation free low-cost land.
2. Use public expenditure on education and health and the Skill India Mission to raise quality of labour.
3. Scaling up R&D activities with an emphasis on innovation and technology.
4. Creating an supportive environment for start-ups and unicorns.
5. Rationalization of subsidies that promote inefficiencies.
6. Encouraging urban agglomerations by improving the housing and physical infrastructure.
7. These structural reforms are necessary to drive sustainable growth in the long term.

India’s Green Financing Requirement And Net-Zero Target

The amount of green funding required in India until 2030 is predicted to reach at least 2.5% of GDP annually. According to the Climate Change Performance Index, 2023, India presently ranks first among G-20 nations and has started a focused and time-bound climate action strategy. India's net-zero target year is 2070; to achieve this, the nation would need to accelerate the reduction of its GDP's energy intensity by about 5% annually and significantly boost the proportion of renewable energy sources in its energy mix to about 80% by 2070–2071.

The Key Pointers In This Report Were

1. Promoting Industrial revolution 4.0: A policy ecosystem that supports the supply of adequate access to risk financing and a globally competitive environment for conducting business is necessary in light of the Industrial Revolution 4.0 and the committed transition to a net-zero emission objective.

2. Better FTA Negotiations: India’s ongoing and future free trade agreement (FTA) negotiations may focus on the transfer of technology and better trade terms for high quality imports from partner countries to improve the outlook for exports and domestic manufacturing.

3. Price Stability: Price stability is a necessary precondition for strong and sustainable growth.

4. Reducing Government Debt: Reducing general government debt to below 66% of GDP over the next five years is important to secure India’s medium-term growth prospects.

The RBI emphasised the necessity of a well-rounded policy intervention to enable India to meet its targets for the green transition by 2030 and, in the future, achieve the net-zero goal by 2070.

The Report Identified The Following Criteria For The Industry Sector :

1. For Mining, rampant illegal mining is a major challenge. A comprehensive energy planning strategy is the need of the hour.

2. For manufacturing, a few capital-intensive businesses have gotten the majority share of physical investment, whereas employment-generating industries and high-demand electronics and computer industries have seen their investment share stagnate or decline over time.

3. For the service sector, the growth lagged because of the slowdown in construction, financial services, and transport and communication services.

4. The difference between the average cost of supply and the average revenue raised must be closed in the electrical sector. It is important to reduce transmission losses because they are high compared to other nations. Deregulation of power pricing must go hand in hand with it.

5. For the telecommunication sector, the lack of an adequate number of players coupled with the lack of available spectrum and minimal broadband penetration are among the major challenges.

In conclusion, the report highlights several key lessons for the future of India's economy. Firstly, we should never find ourselves unprepared for any crisis in the future. Secondly, structural transformation is not a one-off event, but a continuous process to ensure resilience to future shocks. Lastly, recovery from these crises should embrace all, and the path to recovery should be inclusive, strong, resilient, and durable.

India's commitment to a green and sustainable future is commendable, and the measures suggested in the RBI report can go a long way in achieving this goal. However, the road ahead is not without challenges, and a concerted effort from all stakeholders is necessary to overcome these challenges. As a society, we need to prioritize sustainability and ensure that our actions align with our goals for a greener and cleaner India.

Reference
- https://www.drishtiias.com/daily-updates/daily-news-analysis/rbi-s-report-on-currency-and-finance
- https://www.moneycontrol.com/news/business/rbi-releases-report-on-currency-and-finance-for-fy23-10521661.html
- https://factly.in/review-understanding-rbis-2021-22-report-on-currency-finance/
- https://www.gktoday.in/rbi-report-on-currency-and-finance-2/
- https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RCF03052023395FAF37181E40188BAD3AFA59BF3907.PDF