FInancial and Investment Strategy for Emerging Markets and Developing Economics

1. FINAL PROJECT- INDIA: Country of Evaluation
Introduction
The Sustainable Development Goals (SDGs) are comprehensive, complex and interrelated. Because of
their synergistic nature, implementation of the 2030 Agenda for Sustainable Development has revived
interest in national development strategies. However, most national strategies do not spell out in detail
how they will be financed. Mobilizing sufficient resources remains a key challenge.
Indian Scenario
The Indian economy is forecast to grow at seven to eight percent in 2018-19, the fastest rate of growth
amongst the G20 countries. India is still amongst the lowest quartile of nations in terms of per-capita
income. People’s quality of life is held back by, amongst others, the country’s inadequate infrastructure.
India’s infrastructure challenge is different to that of most other G20 countries. Instead of an
infrastructure transition, India’s journey is one of infrastructure creation. It has the option to skip the
growth trajectory adopted by many other countries and move straight to an economy fit for the 21st
century. The old model can be avoided—that of growth replacing cheap labour with fossil fuels, a
predominantly primary economy with low value manufacture, and services and rural agrarian
development with an uncontrolled urban sprawl. India can move directly to the 21st
century paradigm
of renewable energy sources, circular-economy materials flows, and high-density planned cities with
mass-transport systems.
India’s Nationally Determined Contributions (NDCs) includes pledges to reduce the emissions intensity
of GDP by 33 percent–35 percent by 2030 below 2005 levels and to increase the share of non-fossil-
based energy resources to 40 percent of installed electric power capacity by 2030, with the help of
transfer of technology and low-cost international finance. These are ambitious promises and are
recognised by analysts as being broadly consistent with a 2°C world.
The Scale of Finance Required
Building climate-responsive infrastructure at this scale and speed is an unprecedented challenge. There
have been a range of different short and medium-term assessments made about the investment needed.
A few of these are given below to show the relative magnitudes. These estimates are largely based on
investing in more of the same sorts of infrastructure that have already been built.
The Government of India has estimated that US$ 4.5 trillion is needed to meet India’s ambitious targets
for renewable energy and urban sustainability over the next ten years – around US$ 450 million per
year. The Government of India has estimated that US$ 4.5 trillion is needed to meet India’s ambitious
targets for renewable energy and urban sustainability over the next ten years – around US$ 450 million
per year.
Major Impediments to Investment
The major impediments to investment that span multiple sectors have been identified as:
➢ Investment restrictions and/ or entry route barriers in several sectors of significant investment
potential/ investor interest
➢ Absence of long-term policies, non-implementation / reversal of policy and breach of contract
➢ Lack of level playing field - especially in sectors with PSU dominance
➢ Inflexible labour laws
➢ Many agencies engaged in doing the same or similar activities relating to FDI
➢ Bureaucratic delays, discretionary interpretation, vested interest, bias and subjective practices
(In particular, approvals from Ministry of Environment & Forests seen as a major impediment
in terms of inordinate delay).

2. ➢ Centre-State divergence on investment related policies
➢ High cost of entry, transactions and exit; ineffective dispute resolution
➢ Poor infrastructure
➢ Priority Sectors are not clearly identified/ specified
Strategy and Recommendations
Based on the investment goals and the identified impediments, a set of broad recommendations have
been made which could facilitate and improve the investment climate. These are listed below:
➢ Remove/ reduce restrictions on sector caps and entry route on all sectors other than those
considered “strategic”. Permit “automatic route” for all investments within the sector cap.
➢ Provide labour flexibility by removing the requirement of State Government approval from
Chapter V-B and permitting Contract Labour in all areas
➢ Promote SEZs for key sectors. Redefine norms on the basis of scale, investment quantum/ levels
and sector focus. Separate the Developer of the SEZ from the Occupants
➢ Provide a level playing field in sectors with PSU dominance - establish an Independent Central
Regulatory Commission headed by a Chief Commissioner appointed by the President or the
Prime Minister with independent Regulators for each regulated sector
➢ Provide long term visibility and consistency of policy
➢ Improve business environment – reduce number of procedures and approvals; make all
approvals time bound and non-discretionary
➢ Eliminate scope for discretionary interpretation to stem corruption – update key laws and
statutes using Study Groups or Committees (with Government and Industry participation) to
reflect this
➢ Establish effective mechanisms to resolve centre-state issues – establish an Empowered
Committee framework (as done for VAT implementation) for implementation of key policies
that require Centre-State cooperation such as Power sector reform, Labour law reform, Urban
Land reforms (including ULC Act), APMC amendment
➢ Other Recommendations:
• Create a special high-level fast track mechanism for priority sector projects
• Enhance availability of skilled manpower for sectors like Biotechnology, Automotive
Engineering, Textile Engineering, IT – establish new private educational institutes with
international collaborators
• Facilitate upgradation of Urban infrastructure by having a directly elected Mayor in key
cities - as is the case with major cities in China and the USA.

3. • Establish a single point contact at the Centre to implement policies and procedures to
enhance investment as well as facilitate high value projects across Ministries and
Departments
An analysis above is of Industrial Enterprise Memoranda (IEMs), shows that overall only 14% of the
approvals translate into investments. Implementation of investment is lower in sectors that are heavily
regulated or have many procedures or approvals.
➢ FDI predominantly in Services where infrastructure (telecom bandwidth) is available and
Factories Act and ID Act do not apply
➢ Most of the remaining FDI is in skill and/ or capital intensive sectors like Engineering,
Computers and Pharma
➢ No investment in unskilled labour intensive sectors like textiles, despite natural advantages like
cotton availability.

4. India’s approach towards working with multilateral development banks
Climate financing by the world’s largest multilateral development banks (MDBs) in developing
countries and emerging economies rose to an all-time high of $43.1 billion in 2018, boosting projects
that help developing countries cut emissions and address climate risks. This represents an increase of
more than 22 percent from the previous year, where climate finance totalled $35.2 billion. This is also
a 60 percent increase since the adoption of the Paris agreement in response to the ever more pressing
challenge of climate change, which disproportionately affects the poorest and most vulnerable. The
latest MDB climate finance figures are detailed in the 2018 Joint Report on Multilateral Development
Banks’ Climate Finance, which combines data from the African Development Bank (AfDB), the Asian
Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the
European Investment Bank (EIB), the Inter-American Development Bank Group (IDBG) and the World
Bank Group (WBG). These banks account for the vast majority of multilateral development finance
globally. The 2018 report also summarizes information on climate finance from the Islamic
Development Bank (IsDB), which joined the MDB climate finance tracking groups in October 2017.