9th JANUARY 2017
Answer questions in NOT MORE than 200 words each. Content of the answer is more important than its length.
Links are provided for reference. You can also use the Internet fruitfully to further enhance and strengthen your answers.
GS II: POLITY – INDIAN DIASPORA
1. Indian diaspora has a significant presence in various corners of the world. What are the concerns of Indian diaspora as well as the expectations of India from them?
Pravasi Bhartiya Divas:
- January 9 commemorates the day Mahatma Gandhi returned from South Africa in 1915, after honing satyagraha, or peaceful protest, against the colonial and racist regime there.
- In 2002, the National Democratic Alliance (NDA) government of Prime Minister Atal Bihari Vajpayee decided to celebrate it annually by holding events including bestowing awards on prominent members of the Indian diaspora.
- The 15th edition of Pravasi Divas in 2017 is held in Bengaluru.
- “Diaspora” is an omnibus phrase which brackets people of Indian origin who have emigrated since the 19th century to all corners of the world.
- Roughly it falls into two categories: pre- and post-Independence.
- The latter further subdivides into migration to the West, including Australia and New Zealand, and workers in the West Asian countries — numbering over seven million — who began flocking there following oil cartelisation by the Organisation of the Petroleum Exporting Countries after the Arab-Israel war of 1973 and the steep rise in oil prices.
Diaspora in West Asia
- The earnings bonanza allowed the hereditary rulers of West Asia to unleash a spending and construction boom.
- Despite cycles of economic expansion and contraction, as oil prices rose or fell, the six Gulf Cooperation Council (GCC) states have learnt to live with the perils of single commodity dependent economies.
- Some such as Dubai, with almost depleted oil reserves, have remodelled themselves as entrepôt for regional trade and a destination for tourism and convivial living, besides emerging as a financial centre. Both Abu Dhabi and Qatar are modelling themselves as centres of culture and sports, civil aviation hubs and more spartan living.
- But they face two new challenges.
1. One, the shale oil revolution in the United States combined with slower global growth and environmental concerns may have already pushed the world into a post-OPEC phase and perennial low oil prices.
2. Two, the entire region to the west of India up to the Mediterranean is now swept by Shia-Sunni contestation and the challenge posed by radical Islam. Thus instability may persist for decades.
- Therefore, Indians in GCC countries, ranging from skilled and unskilled workers to those holding executive jobs or running businesses, may have to face more challenging circumstances of economic slowdown, “Arabisation” or more jobs to locals, and threats from terror-related events.
- Indian workers, particularly the vast majority from Kerala, are still the favoured ones of the locals but are under pressure from more skilled workers from countries such as the Philippines or cheaper labour from Nepal, etc.
- India has let its citizens be subjected to local labour rules that are medieval and regressive, such as employer seizing the travel documents of the worker on arrival.
- Similarly, it should not require tweets to the Minister of External Affairs to get simple consular acts performed. Their safety and security as indeed sanctity of their contracts must be addressed by local missions, which should be accountable for any slip-ups.
Diaspora descendent of indentured labourers
- India has a largely positive record dealing with the diaspora that left India as indentured labour in the 19th century — in the period from 1833 to 1917 — particularly for the Caribbean where labour shortages ensued following the abolition of slavery.
- Persons of Indian origin have headed governments in some Caribbean countries such as Guyana and Trinidad and Tobago, the two nations with huge Indo-Caribbean populations.
- The expulsion of Indians from Uganda by Idi Amin in the 1970s tested Indian diplomacy and its ability to protect the diaspora.
- India passed the buck to Britain as the guarantor of their safety as most held British documents.
- Mauritius, with Indians constituting the largest group and 48.5 per cent of the population being Hindus, has seen the community consolidate political power, with strategic support from Indian governments.
- Located strategically in the Indian Ocean, this country has been an asset for India, safeguarding the Southern maritime flank.
- Contrariwise, India was unable to support 49 per cent of Indo-Fijians in their desire for a multi-ethnic government when, in 1987, Lt. Col. S. Rabuka overthrew the elected government. Their numbers have shrunk since then.
- Generally, Indian policy in the past has been to not be seen as meddling in their internal affairs sensing that it may be counterproductive. Two vital links have been religion and cricket. But India has been unable to build on that base by boosting investment and business links and better connectivity.
Diaspora in developed countries:
- The diaspora in the U.S., the United Kingdom and Canada, with rising numbers and greater earnings, are becoming more proactive to rally in support of Indian interests.
- Their lobbying in the U.S. with politicians worked famously to swing the Congressional vote for the U.S.-Indian nuclear deal in 2006.
- While the U.S. leads as the country with the highest number of Indian origin persons numbering around four million, the U.K. and Canada are next with 1.45 million and 1.2 million, respectively.
Comparision with Chinese Diaspora:
- The Wall Street Journal estimates that there are 15.6 million persons born in India living abroad. This number has grown by 17.2 per cent since 2010.
- The Chinese diaspora is 50 million strong, with 32 million settled in Southeast Asia. For China, this community became the bridge to integrate their economy to global supply chains once Deng Xiaoping opened Chinese doors in the 1980s. They also funded investment in Chinese economic zones.
- Undoubtedly, the Indian diaspora’s remittances in the past have been of vital assistance to Indian foreign exchange reserves.
- But the challenge now is to go to the next stage — of harnessing not just their financial but also their intellectual capital.
GS III: ECONOMY
2. What are green bonds? Discuss their growth in India as well as their future potential.
- Green bonds, which finance environmentally friendly businesses and assets, have emerged as one of the key financing mechanisms driving the global economy’s transition to a greener future.
- Since the issuance of the first green bond in 2007 by two multilateral development banks (World Bank and European Investment Bank), the green bond market has grown exponentially and is currently pegged at over $180 billion in cumulative issuance.
- Penetrating markets across developed and emerging economies, green bonds have seen extensive participation from corporates and financial institutions, including sovereign and municipal bodies.
- A groundbreaking year for green bonds was 2015. Global markets witnessed currency green bonds and innovative structuring along with maiden green bond issuance in a number of countries.
- Supported by market-driven state policies and marked by a rapid growth in green bond issuance in India and China, the Asian market has emerged as a frontrunner in the green bonds space.
Green Bond in India
- India’s green bond market has witnessed a number of critical milestones following Yes Bank’s and India’s first green infrastructure bonds issued in February 2015.
- India is now the seventh largest green bond market globally.
- A growing number of corporates and financial institutions have leveraged this innovative mechanism to raise capital, attracting foreign investments and inducing momentum in the market.
- India also witnessed its award-winning first green masala bond (rupee-denominated bond), with the International Financial Corporation raising an off-shore rupee bond on London Stock Exchange for investing in Yes Bank’s green bond, demonstrating how innovations in emerging markets have the potential to capture global attention.
- These green bonds have been crucial in increasing financing to sunrise sectors like renewable energy, thus contributing to India’s sustainable growth.
- The Climate Bond Initiative, in its India update, indicated that about 62 per cent of the green bond proceeds have been allocated to renewable energy projects, followed by the low carbon transport sector and low carbon buildings accounting for 17.5 per cent and 14 per cent of the proceeds, respectively. At 2.2 per cent for each, the allocation of green bond proceeds towards water management and waste management has been somewhat limited owing to perceived sector-specific issues as well as due to projects being smaller in size and geographically dispersed.
Green Bond regulation in India:
- Indian regulators have shown exemplary foresight in recognising green bonds as a key tool towards financing the nation’s climate change targets and in guiding the development of the green bond market through necessary policies and reforms.
- In January 2016, the Securities and Exchange Board (SEBI) of India published its official green bond guidelines and requirements for Indian issuers, placing India amongst a select set of pioneering countries who have developed national level guidelines.
- In addition to SEBI’s guidance on green bonds, the Reserve Bank of India passed regulatory reforms aimed at strengthening and expanding India’s corporate bond market.
- The extent of partial credit enhancement provided by banks has been increased to 50 per cent from 20 per cent of the bond issue size, while also permitting banks to issue masala bonds — key moves that will bolster the Indian green bond market.
The way ahead:
- The full potential of India’s green bond market remains untapped, with only a limited number of issuers so far.
- To the interpretation indicated in SEBI’s green bond guidelines on what classifies as ‘green’, there is a need for developing a formal definition of ‘green’ to ensure understanding across sectors. A more descriptive and exhaustive classification from Indian regulators and policymakers in the coming years would be crucial in expanding the green bond market further.
- While credit enhancement has given an impetus to green bonds and will remain crucial, there is a scope for other innovative mechanisms such as securitisation. Many standalone green projects such as roof top solar, energy efficiency and rural water supply still remain unattractive to institutional investors owing to the smaller scale and vast geographical spread.
- Aggregation and securitisation of such projects could be a welcome move in providing mainstream debt to small-scale green projects.
- Following global trends, the upcoming year is poised to witness the first ‘blue bond’ issuance (bonds used to specifically finance water infrastructure) in India. Globally blue bond issuances have crossed $10 billion, with India yet to enter the market. Given the rising financing gap in India’s water sector, it is imperative to utilise such innovative mechanisms for water infrastructure augmentation as well.
- The recent drive by the Prime Minister to resuscitate the municipal bond market for water supply projects in cities such as Pune and Hyderabad is highly commendable.
- With the formalisation of the Paris accord at the COP22, there is a need to push frontiers of green bonds further, unleashing new opportunities in addressing climate change.