GS Paper 3
Syllabus: Resource Mobilization, Environment Conservation
Source: RBI, MoneyControl
Context: The Reserve Bank of India (RBI) released a report on currency and finance for the financial year (FY) 2022-23. The theme of the report is ‘Towards a Greener Cleaner India’.
Major points in the Report are:
| Topic | Summary |
| CBDC and Environment | CBDC can be more environment-friendly compared to alternative cashless methods. Payments effected through CBDC would be instantaneous and final, and reduced reliance on clearing corporations and other settlement infrastructure could cut down energy consumption. |
| Climate stress test | Public sector banks (PSBs) may be more vulnerable than private sector banks (PVBs) in India on the basis of Climate stress tests (loss to the financial system due to climate-related risks) |
| Financing requirements by India | An additional annual investment of about 2.5 per cent of GDP by 2030 would be required to fill the infrastructure gap due to Climate change. |
| Macroeconomic Impact of Climate Change in India | India could lose anywhere around 3 to 10% of its GDP annually by 2100 due to climate change.
Job loss: 34 million job losses from heat stress associated with productivity decline by 2030. |
| RBI and Climate Change | RBI joined Network for Greening the Financial System (NGFS) which aims to strengthen the global response to meeting Paris Agreement goals. It issued sovereign green bonds (SGBs) for green infrastructural investments and released a framework for mobilizing green deposits by regulated entities. |
| Policy Options to Mitigate Climate Risks | Fiscal Policy Initiatives: Carbon pricing using carbon taxes, Emission Trading System; green taxonomy to identify sustainable green assets and activities, etc. Technology adoption: targeted R&D investments by Governments; addressing variability in wind and solar power supply, developing an indigenous renewables supply chain, etc.
Monetary Policy: Higher use of Central Bank Digital Currency (CBDCs) can help lower carbon footprint, Lower margin requirements for SGBs when used as collateral, etc. |
Related news:
Previously, RBI released a report on currency and Finance with the theme “Revive and Reconstruct” in the context of nurturing a durable recovery post-Covid-19.
Major concerns highlighted in the report are:
- The Covid-19 pandemic is one of the worst health crises in history, with India suffering significant losses in output, lives, and livelihoods.
- The Russia-Ukraine conflict has also negatively impacted the recovery momentum.
- India is expected to recover from Covid-19 losses by 2034-35, assuming a growth rate of 7.2% for 2022-23 and 7.5% beyond that.
Reforms suggested:
- Achieve medium-term steady-state GDP growth of 6.5-8.5%. (RBI has suggested seven wheels of economic progress)
- Rebalancing of monetary and fiscal policies, achieving price stability
- Promote IR 4.0
- Transition to new zero-emission
- Reducing government debt
- Implementing structural reforms such as improving access to low-cost land, raising the quality of labour, promoting innovation and technology, and rationalizing subsidies
Insta Links:
Report on Trends and Progress of Banking in India 2021-22
Prelims Links:
- Consider the following statements:
- The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.
- Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.
- The Governor of the RBI draws his power from the RBI Act.
Which of the above statements are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Ans: C
