SDG INVESTOR MAP FOR INDIA
WHY IN NEWS?
- The United Nations Development Programme (UNDP) in partnership with Invest India has developed the Sustainable Development Group (SDG) Investor Map for India.
ABOUT:
- SDG Investor Map identifies Investment Opportunity Areas (IOAs), and White Spaces (Areas of Potential) aimed at aiding India’s journey at fulfilling the SDG.
- 18 IOAs and 8 White Spaces are identified across 6 Priority Sectors:
o Education,
o Healthcare,
o Agriculture and Allied Services,
o Financial Services,
o Renewable Energy and Alternatives,
o Sustainable Environment.
- These sectors are identified on basis of Enhanced productivity, technology adoption and increased inclusion.
- 8 ‘white spaces’ have seen investor interest and have the potential to grow into IOAs in 5 to 6 years with policy support and private sector participation.
- The Map will help public and private sector stake-holders direct capital towards these IOA’s and White Spaces that can contribute to the nationally determined sustainable development needs of the country.
- The map also highlights SDG financing gap. With the emergence of the Covid-19 pandemic, SDG financing gap has widened by an estimated $400 billion in developing countries, adding to the preCOVID shortfall of $2-2.5 trillion per annum.
Need for SDG financing
- Increasing Environmental Shocks: Greenhouse gas emissions continue to rise, posing risks to sustainable development.
- Growing Financial Risks: Short-term financial market volatility has increased due to COVID-19. Prior to that, an extended period of low interest rates had incentivized riskier behaviour through- out the financial system. Financial intermediation has steadily migrated to non-bank financial intermediaries (who hold over 30 per cent of global financial assets).
- Declining Assistance: Official development assistance (ODA) fell by 4.3% in 2018, and ODA to least developed countries (LDCs) fell by 2.1%.
- High Debt Risk: Debt risks will likely rise further in the most vulnerable countries.
o Governments of Low-Income Developing Countries (LIDCs) will require a substantial increase in fiscal (budget) revenues, far beyond what they can achieve by their own fiscal reforms.
o For this reason, SDG financing will require substantial international cooperation to enable the LIDCs to finance their SDG fiscal outlays.
Issues in SDG financing
- Heightened geopolitical tensions around trade and technology: In recent years, the world has witnessed a rise in unilateral actions, trade tensions and protectionist measures that largely circumvent multilateral processes.
- Growing external debt amidst unresolved systemic issues: Global debt levels have continued to set new records and grew to 247 trillion US dollars in July 2019, up from 168 trillion US dollars in 2008 at the start of financial crisis.
- Unmet expectations about public-private collaboration for development finance: In particular investments in LDCs have been insufficient to meet their SDG financing needs. Only 7% of 81 billion US dollars in private finance mobilized for development went to LDCs (2012-15).
- Constraints to finance SDGs in India include:
o Inefficiency of tax systems,
o Lack of incentives driving private sector participation,
o Lack of business models supporting SDGs.
Addressing SDG financing Gap
- Address trade issues: To put trade back on track, there is need to put sustainable development at the heart of the multilateral trade regime, building on existing experience from the investment regime and regional trade agreements.
- Deal rising debt vulnerabilities: There is need to promote the UNCTAD Principles for Responsible Sovereign Lending and borrowing, explore Sovereign Debt Restructuring Mechanisms for countries in default, and create a well-endowed global climate disaster fund and decarburization bank.
- Public-private collaboration for development finance:
o There is need for increased knowledge-sharing and evidence to improve blended finance practices and to speed up documentation of the type of financing/ funding that is best suited by sector and type of country so as to ensure that the countries that need it the most are not completely left behind.
- Public sector role: Remove inefficiencies in tax system, allocation of tax to implement SDGs, augment new sources such as sovereign bonds for SDGs, reducing illicit financial flows, infrastructure finance and capital market development, Foreign Direct Investment promotion etc.
o Private sector role: Incentivize private sector investment, Crowd in private investment through innovative facilities and business models etc.
- Maximize investment impact: increasing the sustainable development benefits and minimizing the risks of investment in SDG sectors.
- Channel investment: promoting and facilitating investment into SDG sectors.