The Reserve Bank of India (RBI) recently released its Report on Currency and Finance 2022-23, revealing critical insights into India’s adaptation to climate change. This annual publication focuses on the state of the economy and the financial system. The report discloses that the cumulative total expenditure for India’s climate change adaptation could reach a staggering 85.6 lakh crore by 2030.
What is the Report on Currency and Finance?
The Report on Currency and Finance is an annual publication produced by the RBI. The report investigates various facets of the Indian economy and financial system. The theme for the 2022-23 report is ‘Towards a Greener Cleaner India’, emphasizing the challenges and opportunities related to India’s climate change initiatives and the role of the financial sector in developing a low-carbon, climate-resilient path.
Aims and Dimensions
The primary objective of the report is to provide a comprehensive analysis of macroeconomic and financial developments in India and their policy implications. It covers four major aspects of climate change: the unprecedented scale and pace, its macroeconomic effects, implications for financial stability, and policy options to manage climate risks.
Renewable Energy Target
The report highlights the necessity for India to substantially increase its use of renewable energy to achieve its net-zero emissions goal by 2070. To this end, the report recommends that India should target renewables to constitute 80% of its energy mix by 2070-71. This implies an accelerated reduction in the energy intensity of GDP by approximately 5% annually.
Green Financing Requirement
India’s green financing requirement is estimated to be a minimum of 2.5% of GDP annually until 2030 to address the infrastructure gap brought about by climate events. Thus, the financial system may need to mobilize adequate resources and reallocate existing resources to effectively contribute to India’s net-zero target.
Policy Intervention
The report underscores the need for balanced policy interventions to ensure progress across all policy levers. Such an approach would facilitate India’s transition to green targets by 2030 and make the net-zero goal by 2070 achievable.
Financial Risks due to Climate Change
According to the report, public sector banks in India might be more susceptible to climate-related financial risks compared to private sector banks.
Policy Instruments
Central banks possess several policy tools to influence investment decisions and resource and credit allocation to achieve sustainability targets. This includes compelling banks and other financial institutions to factor in climate and environmental risks in their regulations.
UPSC Civil Services Examination Previous Year Questions (PYQs)
One of the examination questions pertains to the appointment and authority of the RBI Governor. The correct answer reveals that the Governor is appointed by the Central Government, and he derives his power from the RBI Act.
Also, it’s important to note that the Reserve Bank of India was established on April 1, 1935, according to the RBI Act, 1934. Initially privately owned, the bank was nationalized in 1949 and is now fully owned by the Government of India. The RBI’s affairs are overseen by a central board of directors appointed by the Government of India, as stipulated by the Reserve Bank of India Act.