19 May 2023: UPSC Exam Comprehensive News Analysis

C. GS 3 Related

Category: ECONOMY

1. What are RBI regulations on green deposits?

Syllabus: Indian Economy and issues relating to planning, mobilization of resources, growth, and development.

Prelims: About Green Deposits

Mains: RBI’s regulatory framework on green deposits, its significance and associated challenges

Context

The Reserve Bank of India (RBI) in April 2023 issued a regulatory framework for banks to accept green deposits from customers. 

Green Deposits

• Green deposits are similar to the regular deposits that the banks accept from their users. 
• The key difference between regular and green deposits is that banks assure to earmark the money they receive as green deposits towards environment-friendly projects. 
  • Example: A bank that receives green deposits might promise to use such amounts to finance renewable energy projects. 
  • Such a bank might also avoid using green deposits to fund fossil fuel projects.
• A green deposit is said to be another product among the wide array of other financial products that help finance environmentally sustainable projects such as green bonds, green shares, etc.

RBI’s Regulatory Framework on Green Deposits

• Banks are required to formulate a set of rules/policies which are to be adhered to while investing in green deposits. Such rules must be approved by their respective Boards.
• The set of rules/policies must be made public on the banks’ websites and banks are also mandated to disclose regular information about the number of green deposits received, the allocation of such deposits towards various projects, and the impact of such investments on the environment. 
• A third party must verify the information made public by the banks and also verify the sustainability credentials of such business projects.
• The RBI has further compiled a list of sectors that can be classified as sustainable and are eligible to receive green deposits. 
  • The list of the sectors includes afforestation, biodiversity conservation, climate change adaptation, energy efficiency, clean transportation, management of living natural resources, renewable energy, sustainable water, and waste management.
• Banks are not allowed to fund projects involving fossil fuels, gambling, hydropower generation, nuclear power, palm oil, and tobacco using green deposits.

Significance of green deposits and RBI’s regulatory framework

• The green deposits help encourage individuals or depositors who are interested in investing their money in environmentally sustainable investment products.
• According to green investing enthusiasts, funding various green projects is one of the best methods with respect to environmental conservation.
• The regulatory framework issued by the RBI helps prevent greenwashing.
  • Greenwashing involves making misleading claims about the positive environmental impact of an activity. 
  • Example: A bank may claim that their green deposits have had significant positive impacts on the environment, while in reality, such impact has been very minimal. 
  • A bank might also use the green deposits to fund projects that are not environment-friendly to get higher returns, under the guise of green investing.

Read more – RBI Issues Framework for Acceptance of Green Deposits

Associated challenges

• Experts opine that the range of projects in which green funds can be invested by the bank is limited by design.
• Critics argue that such green investment products are to only satisfy the investors or make them feel good about themselves as such investments hardly bring about any significant positive change in the environment.
• A few finance experts regard green investing as “a feel-good scam that enriches only consultants”.
• Furthermore, in reality, it is difficult to determine if a project is really environmentally sustainable as most of the projects have second-order effects which are hard to predict during the initial stages.

Nut graf: Acknowledging the potential of green deposits and the green economy as a whole, the  RBI has come up with a framework that regulates the acceptance and use of green deposits. This framework, apart from ensuring transparency and accountability, also plays a significant role in preventing greenwashing.

E. Editorials

Category: INTERNATIONAL RELATIONS

1. A long-drawn test for India’s diplomatic skills

Syllabus: Bilateral, Regional & Global Groupings & Agreements Involving India and/or Affecting India’s Interests

Mains: Various dimensions of India’s multi-directional foreign policy

Context: Prime Minister Narendra Modi’s visit to Japan, Papua New Guinea and Australia from May 19-24.

Introduction:

• Prime Minister Narendra Modi is starting on a six-day visit to three countries – Japan, Papua New Guinea and Australia, to attend multilateral summits, including that of the Group of Seven (G7).
• PM Modi is visiting Hiroshima in Japan from May 19 to 21 to participate in the annual summit of the G7 advanced economies under the Japanese Presidency. 
  • The Prime Minister will also hold bilateral meetings with some of the participating leaders on the sidelines of the Summit.
• He is attending the summit at the invitation of Japanese Prime Minister Fumio Kishida.
• PM Modi’s visit to Papua New Guinea will be the first visit by an Indian prime minister to the country.
• PM Modi will co-chair the third Summit of the Forum for India-Pacific Islands Cooperation (FIPIC) in Port Moresby, Papua New Guinea.
  • Launched in 2014, the FIPIC involves India and 14 Pacific Island Countries (PICs) – Fiji, Papua New Guinea, Tonga, Tuvalu, Kiribati, Samoa, Vanuatu, Niue, Federated States of Micronesia, Republic of the Marshall Islands, Cook Islands, Palau, Nauru and the Solomon Islands.

Multitude engagements:

• Despite the cancellation of the Quad Summit in Sydney, the leaders of Australia, India, Japan, and the United States are meeting on the sidelines of the G-7, demonstrating their commitment to the Indo-Pacific “coalition of democracies”.
• Mr. Modi is also visiting Washington in June 2023 for a state visit, a rare honour accorded by the U.S. President, that has been reserved for only two Indian leaders in the past, President Sarvepalli Radhakrishnan (1963) and Prime Minister Manmohan Singh (2009).
  • This visit will be marked by many strategic forays to bring India-U.S. ties closer.
• In July, India is hosting the Shanghai Cooperation Organisation (SCO) Summit, in which China’s President Xi Jinping, Russia’s President Vladimir Putin, Pakistan’s Prime Minister Shehbaz Sharif and leaders of Central Asian states are expected to be present.
  • The membership of the SCO, including observer nations like Myanmar, creates an impression of it being predominantly aligned against the West, as it includes almost every country sanctioned by Western nations.
• The recent SCO Council for Foreign Ministers held in Goa witnessed India’s bilateral relations with Pakistan, China, and Russia overshadowing significant multilateral outcomes. 
  • This situation has been a source of frustration for Central Asian countries, as they have consistently emphasised the need to avoid discussing bilateral issues within the SCO, to prevent it from experiencing the same fate as the South Asian Association for Regional Cooperation (SAARC).
• In August, Mr. Modi will attend the BRICS summit in South Africa, engaging with leaders from Russia, China, Brazil, and South Africa to discuss alternative BRICS payment mechanisms and other ideas aimed at creating a counter-narrative to the dominance of the U.S.-European Union alliance. 
• In September, as the host of the G-20 summit in Delhi, Mr. Modi will face a diplomatic challenge as leaders from all permanent members of the UN Security Council gather in Delhi, a unique occurrence since 2010.

Striking a balance:

• India’s strategic engagements and hosting of major summits in 2023 are in line with PM Modi’s version of “multi-directional engagements” instead of traditional non-alignment.
• India’s participation in reviving the Quad and joining the SCO as a full member in 2017 demonstrates its proactive approach to countering China’s assertiveness and expanding its global influence. 
• India, despite security challenges posed by its nuclear-armed neighbours, successfully maintains a delicate equilibrium and attracts the attention of countries from diverse global orientations.
• India has also successfully navigated India’s position in the Ukraine war without taking extreme measures.
• India’s efforts to serve as a “balancing force” are not only visible but also influential, inspiring other countries in Southeast Asia, the Global South to manage their ties with the West without fully aligning with its stance on Ukraine or sanctions.
• The success of India’s autonomous strategy or multi-alignment is evident in the growing recognition and support it receives, including France’s recent reiteration of “Strategic Autonomy” following French President Macron’s visit to Beijing. This highlights the existence of divisions within the Western coalition itself on this matter.

Concerns:

• India’s carefully balanced approach may face significant challenges if certain unexpected events, such as Ukraine’s successful spring offensive or China’s aggression along the Line of Actual Control, occur. 
  • Such incidents would necessitate a reevaluation of India’s policies and relationships, particularly with Russia.
• India’s strategic considerations could also be influenced if Russia becomes more confrontational regarding payment issues or if it withholds defence supplies to India under Chinese pressure. 
• Additionally, any attempt by the United States and Europe to impose unilateral sanctions on India for its increased oil imports from Russia or for acquiring Russian S-400 missile systems could prompt India to reconsider its position.
• These challenges will be intensified if India fails to secure Russia and China’s consensus on a joint communique at the upcoming G-20 summit in September and during the SCO and BRICS summits in July and August, respectively.
• Unless these currently unlikely scenarios materialise, India is expected to continue its efforts to pursue its interests on both sides of the geopolitical spectrum, navigating between various global powers.

Nut Graf: India’s upcoming multilateral engagements in 2023 highlight India’s strategic approach, maintaining a delicate balance while seeking recognition and support globally. Challenges may arise from unexpected events, potentially impacting India’s policies and relationships. However, unless these scenarios occur, India is likely to continue navigating its interests between various global powers.

I. UPSC Mains Practice Questions

1. “India is walking a tightrope diplomatically in the current geopolitics”. Comment. (150 words, 10 marks) (GS-2; International Relations)
2. What are green deposits? What are the RBI regulations with regard to them? (150 words, 10 marks) (GS-3; Economy)