Why the new climate centre for cities matters
Already bearing the impact of the climate crisis, it can help cities bridge gaps
The Union ministry of housing and urban affairs recently set up the Climate Centre for Cities to strengthen responses of cities to the climate crisis. This focus on cities is prudent. India is urbanising fast; by 2030, the urban population is expected to be around 600 million, and cities will account for 70% of India’s GDP. With haphazard and unplanned growth though, cities have already become victims of the climate crisis. In the last few years, they have battled heat waves, floods, and droughts. These climate shocks have had a negative impact on the quality of life of the inhabitants and affected the revenue potential of cities.
India’s cities fail to battle these old and new challenges because of several reasons. The decision-making power is still not decentralised; funds are inadequate; many decisions are politically motivated and do not take into account the negative environmental fallout; there isn’t a mechanism to learn from each other’s best practices; and, often, officials do not have the requisite expertise needed to tackle climate-related challenges.
The climate centre, which will be housed at the National Institute of Urban Affairs, will hopefully bridge some of these gaps; create a synergy across climate actions undertaken by the 500 Class-i cities; help authorities apply a climate lens to policymaking; provide expertise to officials; enable access to funds; and take advantage of several innovative solutions available in the market. And in the process, the centre and cities will hopefully come up with replicable models, which can then act as “lighthouses” to other aspiring cities.
Prime Minister (PM) Narendra Modi, at a recent India-united States (US) business summit, invited global investors to invest in India. He told them that India offered a combination of “openness, opportunities and options”; pointed out that India had undertaken deep structural reforms, improved domestic manufacturing and was committed to diversified international trade; and spoke of merging domestic production and consumption with global supply chains.
PM Modi has never shied away from taking tough decisions. The privatisation of the Indian Railways, public sector disinvestments, reducing corporate tax and opening up coal mining to the private sector are measures which may have been unpopular in certain quarters, but are necessary for the long-term health of our economy, particularly in strengthening our manufacturing base.
To achieve the goal of a politically and economically strong India, the Aatmanirbhar Bharat Abhiyan is a 360-degree initiative to make India an economic superpower. The focus is on five pillars of development: Economy, infrastructure, technology, demography and demand. Our targets are the factors of production. These are land, labour, legislation and liquidity, improving their efficiency and reducing the cost to make our industries globally competitive. This is not restricted to the manufacturing, but targeted at direct benefit transfers to the needy. This has also resulted in demand creation in the economy and helping the vulnerable, particularly farmers, migrant workers and daily wagers.
The campaign for self-reliance has little to do with disengagement with China alone. We discerned the designs of Chinese economic imperialism early on. Our delinking from China began much early than many would like to believe. It began with PM opting out of the Regional Comprehensive Economic Partnership (RCEP). The Chinese leadership tried hard to pressure India to join RCEP or face isolation in the grouping’s 16 countries. But the PM stood firm. In 2010, the United Progressive Alliance (UPA) government signed Free Trade Agreements (FTAS) with 10 Association of South East Asian Nations (Asean) countries, the benefits of which were reaped by China as well. Reduced custom duties from these countries were creating an inverted duty structure in our domestic manufacturing sector, destroying local industries and converting manufacturers into traders.
Therefore, in the Union Budget in 2019, the government increased import duties on over 56 items spread across eight classifications. Items such as toys saw an increase of 60% from 20% earlier. All these efforts were to protect domestic industries from the onslaught of dumping and competition. Without first strengthening domestic manufacturing by providing a level-playing field, and reducing costs and increasing the efficiency of factors of production, we cannot open the floodgates for imports.
The Chinese leadership had almost managed to get the UPA government to accept RCEP. There are reports to suggest this. India’s signing of FTAS with Asean countries, without strengthening India’s domestic industries before opening them to regional and global competition, shows that the country’s interests were compromised. One important question must be asked. Why did India, which was a global leader in the pharma sector, gradually concede Active Pharmaceutical Ingredients (API) production to China? The UPA must answer this.
As of now, with the coronavirus pandemic, the world has realised the risks of over-dependence on supply chains from one nation. We rose to the occasion by identifying this as a risk diversion strategy for global manufacturing companies. It provided India an opportunity to deal domestically with the challenges thrown up by the coronavirus. Further, the Chinese aggression at the Line of Actual Control (LAC) at the Galwan Valley forced the government to immediately impose trade curbs and ban 59 apps from China. This is being hailed as a timely move, though certain economists and industrialists have sounded a note of caution on its long-term impact. But their logic seems based on the line propagated by the Chinese media and China’s government officials.
Fortunately, what we import from China is mostly in areas in which India has the domestic technology to leverage for import substitution. Most of these items do not come under the essential consumption requirements category and are generally non-merit goods. Except in pharma, which China dominates through the supply chain of APIS, it has not been able to penetrate strategic sectors.
India’s manufacturers need to seize this golden opportunity in sectors such as toys, electrical equipment, electronics, minerals, chemicals, iron and steel, plastics, furniture, sports goods, musical instruments, fertilisers and apps. Earlier, the ministry of commerce and industry had identified 12 such sectors; these now constitute 20 sectors. And 371 items have been identified for increasing import duties including non-tariff barriers on some of them.
If you look into the comparative advantage theory domestically, we have to focus on areas such as agriculture, particularly food processing, textiles, affordable housing, health care and education, and increase their contribution to India’s Gross Domestic Product. These sectors can generate largescale employment and are looking up. This will be our path to recovery.
The debate on the future role of China in the economy is now at the forefront of India’s strategic conversation. But the fundamental questions that must inform this assessment have receded into the background. Take the ban on Chinese products. The main impetus was to signal that there are costs for China’s coercion on the border. And if wielded judiciously, this will influence Beijing’s outlook. But, brandishing the economic card cannot be indiscriminate and policymakers must be conscious of the repercussions on domestic livelihoods, India’s modernisation efforts, and geopolitical goals.
More broadly, New Delhi must ask questions around structural trends in the global economy, particularly with respect to the nature of competition between the United States (US) and China, and by implication, on the evolution of globalisation going forward. To what extent will there be Us-china decoupling in the near and medium-term? Should we lean to one side in an age of geo-economic competition? Is there an opportunity for India to absorb the manufacturing Foreign Direct Investment (FDI) as well as assume a major role in global production networks?
If we proceed from the premise that India needs more high-tech industrialisation, more quality manufacturing, more employment-generating supply side capacities, and greater participation in international supply chains, then the disruptions in globalisation need to be leveraged realistically. Added to this is another strategic goal — India’s quest to re-establish its traditional commercial and social networks with Indo-pacific and Eurasia.
In this backdrop, how should we restructure China’s role in the Indian economy? For the past six years, the National Democratic Alliance (NDA) government’s approach has been to rebalance and broaden economic ties from a trade-dominated to an investment-oriented one. This was to manage the trade deficit and attract Chinese investment and technologies to India. Today, India’s dependence on China for its non-consumption economy remains high as inputs, components, industrial equipment and technology all feed India’s growth and exports to the rest of the world.
Decoupling, therefore, should not be pursued until a deeper assessment is undertaken to determine the cost-benefit calculations and impact, across sectors, and for the economy as a whole. Only after this has yielded credible data should policymakers formulate a plan to develop more interdependence with China in select sectors or lessen it in others by import-substitution and sourcing from elsewhere. It must not be a blanket policy. We first need to articulate a sophisticated industrialisation blueprint and identify where Beijing brings value or can be a catalyst in the way the US was for China’s reform process.
The Us-china competition over high technology, particularly in digital sectors, is posing another policy challenge. Here, India’s policymakers need to avoid leaping from one digital superpower to another. After all, both Chinese and US companies bring the same baggage to the table — the risk of compromising data sovereignty, dependence on imported software and hardware, and impact on domestic capabilities. Before handing over the family silver, India needs to support a framework for domestic innovation that promotes a competitive digital ecosystem and one that moves India up the value chain.
India’s future connection with the Indopacific is another theme. The decision on the Regional Comprehensive Economic Partnership (RCEP) suggests India is in no hurry to lock into a trading bloc while its domestic economy remains mired in structural problems. While India gets its domestic act together, the broader regional geoeconomic landscape will not necessarily move in tandem with the Us-china decoupling, whose contours are still in flux. A slowdown in the China-us economic ties will not undermine the China-asia interdependence. China is already emerging as a key pillar of the Asian political economy. Last year, the Association of South East Asian Nations (Asean) overtook the US to emerge as China’s second-largest trading partner with $644 billion in two-way commerce. So far, in 2020, Asean has overtaken the European Union (EU) to become China’s largest trading partner. The investment flows that support such commerce are less visible but nevertheless real.
The scenario of China’s economic links with its continental and maritime neighbours deepening is more probable if the US does not re-engage Asia with a more pragmatic economic blueprint. The “America First” impulse is, however, part of the domestic political discourse across both parties. It is unclear how the next president would reconcile the dualism of renewing the US and simultaneously engaging Asia by offering superior terms to states than what China could. In essence, this is what the next great game will be about.
India can benefit from this competition if it plays its cards skillfully. Rather than being tethered to an unpredictable US political dynamic, India should start thinking of more proactive strategies where we keep a foot in the door in the various geo-economic networks and linkages that develop around our region. While the China relationship is likely to remain competitive and complex, if the grand strategic goal is to deepen ties with Asia, then India will have to acquire the ability to conceive geo-economic strategies in the neighbourhood and beyond while recognising that states will not deprive themselves of economic ties with mainland China. Many Asian states, including India’s neighbours, will adopt eclectic strategies of leveraging the US, Chinese, Japanese, and European technologies and capital. By attempting something different, we only risk reducing our competitive advantages and future position in Asia.