India hits out at US on linking climate issues to economic recovery

Says imposing stringent climate conditionalities unfair

India-US relations seems to have been hit by some hiccups lately. Close on the heels of India registering a protest against a US Navy ship’s passage through its exclusive economic zone without prior permission, New Delhi has strongly criticised Washington’s attempt to link climate issues with economic recovery in the wake of the Covid-19 pandemic at the forthcoming G20 talks.

US treasury secretary Janet Yellen has been championing the linkage, and India feels that this is uncalled for.

P Harish, additional secretary (economic relations), ministry of external affairs, said India has been the best performer in the G20 group when it comes to fulfilling the Paris climate agreement. He slammed efforts to “establish a new goal post outside the Paris framework in the G20 for which there was no need”. 

He added, moreover, that there was no consensus within the bloc on bringing in climate and related issues over and above the Paris agreement at the G20 discussions.

Sanjeev Sanyal, principal economic advisor in the finance ministry, said there was a risk of a ‘Green Colonialism’ spreading across the world. Describing it as an attempt to push for a ‘green recovery’ with stringent conditionalities, Sanyal said that this was unnecessary when the developing world was particularly vulnerable on account of a global health crisis and was trying to recover from it.  

Harish and Sanyal made the comments at a seminar organised by RIS, a Delhi-based think tank which examines trade and global financial issues. The seminar was meant to examine the priorities for growth in the post- Covid world, which the G20 framework working groups could adopt.

Both countered the assertion by Federico Bonaglia, deputy director of OECD Development Centre, that avenues for providing relief to the developing world should be linked to their climate policies.

India is also on the other side of the table from the US at the IMF on the proposed expansion of the Special Drawing Rights (SDR). The IMF provides the SDR to member countries, which they can convert against currencies like the US dollar, the euro, the Chinese yuan or the Japanese yen, for a small price.

While India has in the past pushed for the expansion of voting rights of developing countries at the IMF — this would expand their SDR allocation as well —  it fears that this is not the suitable moment for it. Countries would be happy to draw on the Chinese renminbi, strengthening Beijing's hold on the global currency market, it feels.

Instead, India has suggested extending the G20’s debt service suspension initiative. So far, the initiative has garnered only $5 billion of liquidity support. The US, however, estimates that the SDR window will open $21 billion  worth of liquidity support for the poor countries. 

Finance minister Nirmala Sitharaman attended the plenary meeting of the International Monetary and Financial Committee of the Board of Governors of the IMF, last week. There is no information on whether the SDR issue was flagged at that meeting. 

In recent weeks, the US administration of Joe Biden has pushed for a strong climate agenda as part of the process of recovery from the pandemic. The  European Union has also supported the idea.  

Yellen has linked the IMF’s expanded SDR support with the rider that the recovery programmes should have a strong climate agenda. Separately, in meetings in India, Biden’s special envoy on climate change, John Kerry, is learnt to have urged India to set a net zero emission goal in the next couple of decades, similar to what China and other countries have done. 

Sanyal said that climate change was a serious issue, but that it should not be confused with the immediate objective of economic revival post the pandemic. He said the link between climate change and the pandemic was far from established since pandemics happen from time to time irrespective of climate change. He added that the response to the pandemic should be science-based, and not one filled with rhetorical flourishes. 

Harish said even if carbon emissions peaked in 2050, the net total of emissions of India will be less than that of China, the US or the European Union. “It would not be correct to ignore the historic case load and the developmental situation, where India’s per capita GDP is 5 per cent of that of the G7 countries, and a fraction of the overall G20 per capita,” he pointed out. 

Constraining India’s options at this point through extra conditionalities will impose a huge financial and developmental cost, Harish added.